Genesis energy cash position analysis
DUE WEDNESDAY MARCH 2
The Genesis Energy operations management team is now preparing to implement the operating expansion plan. Previously, the firm’s 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 Energy’s 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 Energy’s 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 long-term, 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 Energy’s senior executives.
Working over a weekend, the management team developed realistic assumptions to construct a working capital budget.
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:
- 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 |
Maximum Points |
|
Calculation of a detailed company cash budget for the upcoming year is complete and correct. |
48 |
| 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 dividend-decision making. |
32 |
|
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. |
44 |
| 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. |
48 |
| 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. |
28 |
| Total: |
200 |
