Discuss and Evaluate a Cash Budget

Discuss and Evaluate a Cash BudgetThis assignment requires you to evaluate a cash budget for a startup bakery on Georgia Hwy 400 near Dawsonville, GA which is located near the mountains in Georgia. You will need to have a basic understanding of MS Excel, but nothing advanced. You will be doing what is called sensitivity or ″what if″ analysis. This assignment takes advantage of cell references in MS Excel. In a formula in one worksheet, I can reference a cell from another worksheet rather than typing the number from that cell. By doing that, the calculation will change if I change the value in the referenced cell in the other worksheet. As an example, the formula for Sales in February in the ProForma Cash Budget Worksheet is as follows: = B3*(1+Assumptions!B30), where B3 is the value of Sales in January and Assumptions!B30 is the assumed monthly growth rate for sales. If I change the number in Assumptions!B30 from the Assumptions worksheet, then the formula in the ProForma Cash Budget Worksheet will automatically change. SCENARIO: This assignment asks you to help your friend Ashley. Ashley makes incredible baked goods. While she was in college she would bake cookies, cakes, and other baked items and take them to parties. Since college, she has prepared them and sold them at fairs and festivals for three years. She has decided to create a new Bakery in Dawsonville, GA because the area has experienced growth. Dawsonville is a small town, but it has had growth near the intersection of GA Hwy 53 nd GA Hwy 400, a four-lane highway that intersects with I-85 and I-285 in Atlanta. After putting together the pro forma cash budget, Ashley is disappointed that the net income for the first year is less than $19,000 (Cell O35 in Worksheet ″ProForma″). Help Ashley out. She really needs to earn at least $35,000 in the first year because she has personal expenses that cannot be reduced anymore (e.g., rent, car payment, etc.). She also has to buy her own health insurance because she is no longer eligible for her parents′ health insurance policy (she is 27). She will be the only owner of the business and the bakery will be her only source of income. Ashley doesn′t have a degree in business, but thinks the business will succeed based on consultations with both a Mentor at a SCORE Chapter and a consultant with the University of Georgia′s Small Business Development Center located in nearby Gainesville, GA. Unfortunately, her proforma cash budget does not forecast very good net cash flow. Your job is to help her make reasonable changes to her forecast (proforma cash budget) to help her improve the forecasted profitability of the bakery. Please ignore things like depreciation and interest expense because we are focusing on cash flow which is literally the flow of money through the business. Be careful that what you propose creates a ripple affect that you do not account for. Several of the monthly costs are fixed in the short run (e.g., rent, loan, etc.). By fixed I mean you can′t change them anytime soon. So, don’t recommend doing that. Use the attached MS Excel Workbook to complete the assignment. Submit the assignment using MS Excel. The Questions worksheet has the four questions you must answer for this assignment. However, you need to review ALL of the other four worksheets to answer the 4 questions in the assignment. The Assumptions worksheet will be especially important. It will be the basis for the changes you recommend to help Ashley improve cash flow in the first year of business. You don′t need to get too creative. There is sufficient information in the Assumptions Worksheet to make different recommendations. IMPORTANT: Each recommended change needs to be distinctly different from the other one. HINT: Assumptions are just that. They are a ″guess″ into the future. They describe the world as Ashley sees it when the business is actually opened. Right now, her forecast (Pro forma cash budget) doesn′t look promising. However, she has never created a forecast and might have been a little to inexperienced to do so very well. She also thinks too much like the college student making baked goods as a hobby for friends rather than as a business woman selling baked goods to eager and willing customers. Please thoroughly read each question before you provide a response. You need to show the math to demonstrate that each recommendation will help Ashley reach her goal: Net Cash Flow of $35,000 in Year 1.

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