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Cyrus Brown Manufacturing

Vineet you posted a response on March 5 2006 pertaining to short Term Financial Management (see below). One of the questions asked was: will the company need any outside financing? and the response was as follows:

There is a cash shortfall and a need for outside financing

Could you please expound on this response as I truly don't see where there is a cash shortfall looking at the file in the attachment and why they would need outside financing. Could you also provide a reference for this response. I am in need of having a response by tomorrow evening at 6:00 pm EST. Please help me so that I can have a greater understanding of what is being presented.


Solution by: Vineet Swarup, MBA, OTA ID#: 104722
Submitted on: March 5, 2006, 10:36 am EST
Business, Finance
Year 2
Short-Term Financial Management Decisions

a. Prepare a monthly cash budget for Cyrus Brown Manufacturing for the nine month period, March through November.

Please see the attached file. Depreciation is not to be considered as it is a non cash item

b. Based on your findings in part b, will the company need any outside financing?

There is a cash shortfall and a need for outside financing


Solution Preview

If you look at the the file, we have prepared a cash budget, which lists the cash inflows and the outflows. The cash inflows are the cash collected by the firm for the sales that it makes and the cash outflows are the cash that is has to pay for the serives and the purchases it makes.

The cash inflows are shown as collections and cash outflows are shown as payments. If you look at the file, row 14 gives the total inflow for each month row 25 gives the total outflow. The difference between the two is the net ...

Solution Summary

The solution explains the cash budget and the need for external financing for Cyrus Brown