However, the planned foreign expansion requires Genesis Energy to have a reliable source of funds for both short-term and long-term needs

Genesis Energy Cash Position Analysis
The Genesis Energy operations management team is now
preparing to implement the operating expansion plan.
Previously, the firms cash position did not pose a challenge.
However, the planned foreign expansion requires Genesis
Energy to have a reliable source of funds for both short-term
and long-term needs.
One of Genesis Energys potential lenders tells the team that in
order to be considered as a viable customer, Genesis Energy
must prepare and submit a monthly cash budget for the current
year and a quarterly budget for the subsequent year. The lender
will review the cash budget and determine whether or not
Genesis Energy can meet the loan repayment terms. Genesis
Energys ability to repay the loan depends not only on sales and
expenses but also on how quickly the company can collect
payment from customers and how well it manages its supplier
terms and other operating expenses. The Genesis Energy team
members agreed that being fully prepared with factual data
would allow them to maximize their position as well as negotiate
favorable financing terms.
The Genesis Energy management team held a brainstorming
session to chart a plan of action, which is detailed here.
Evaluate historical data and prepare assumptions that will drive
the planning process.
Produce a detailed cash budget that summarizes cash inflow,
outflow, and financing needs.
Identify and compare interest rates, both short-term and longterm, using debt and equity.
Analyze the financing mix (short/long) and the cost associated
with the recommendation.
Since this expansion is critical to Genesis Energy expanding
into new overseas markets, the operations management team
has been asked to prepare an executive summary with
supporting details for Genesis Energys senior executives.
Working over a weekend, the management team developed
realistic assumptions to construct a working capital budget.
Sales: The marketing expert and the newly created customer
service personnel developed sales projections based on
historical data and forecast research

Other cash receipt: Rental income $15,000 per month
Production material: The production manager forecasted
material cost based on cost quotes from reliable vendors, the
average of which is 50 percent of sales
Other production cost: Based on historical cost data, this cost
on an average is 30 percent of the material cost and occurs in
the month after material purchase
Selling and marketing expense: Five percent of sales
General and administrative expense: Twenty percent of sales
Interest payments: $75,000Payable in December
Tax payments: $15,000Quarterly due on 15th of April, July,
October, and January
Minimum cash balance desired: $25,000 per month
Cash balance start of month (December): $15,000
Available short-term annual interest rate is 8 percent, long-term
debt rate is 9 percent, and long-term equity is 10 percent. All
funds would be available the first month when the firm
encounters a deficit
Dividend payment: None
Based on this information, do the following:
Using the Cash Budget spreadsheet, calculate detailed
company cash budgets for the forthcoming and subsequent
years. Summarize the sources and uses of cash, and identify
the external financing needs for both the forthcoming and
subsequent years.
Download (See Help (a)) this Excel spreadsheet to view the
companys cash budget. You will calculate the companys
monthly cash budget for the forthcoming year and quarterly
budget for the subsequent year using this information.
In an executive-level report, summarize the company’s
financing needs for the forecast period and provide your
recommendations for financing the planned activities. Be sure
to comment on the following:
Your recommended financing solution and cost to the firm: If
Genesis Energy needs operating cash, how should it fund this
need? Are there internal policy changes with regard to
collections or payables management you would recommend?
What types of external financing are available?
Your concerns associated with the firm’s cash budget. Is this a

sign of weak sales performance or poor cost control? Why or
why not?
Write a 7-page paper in Word format. Apply APA standards to
citation of sources.
Assignment 2 Grading Criteria
Calculation of a detailed company cash budget for the upcoming
year is complete and correct.
All inflow and outflow calculations are correct.
Summary of the sources and uses of cash, and identification of
the external financing needs for the upcoming year is complete
and correct.
Explanation how the assumed budget of this project will effect
dividends for shareholders is clear, specific, and complete. The
explanation includes all factors that the firm considers in dividenddecision making.
Recommended financing solution and cost to the firm are clear,
complete, and correct. Financing solution includes short-term
debt, long-term debt, or even equity.
Explanation of concerns associated with the firm’s cash budget
and if it is a sign of weak sales performance or poor cost control
is clear, complete, and correct.
Wrote in a clear, concise, and organized manner; demonstrated
ethical scholarship in accurate representation and attribution of
sources; and displayed accurate spelling, grammar, and
punctuation.