Toy World Inc

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TOY WORLD INC. Cash Budgeting Analysis Kendrick Tan Dr. Richard Constand Constand Consulting February 27, 2013 Executive Summary This report has been prepared on behalf of Toy World Inc., manufacturer of specialty toys, to provide a representation of the estimated cash flows of the corporation on a monthly and daily basis. The resulting budget is analyzed to assess the need for loan requirements and in consideration of possible surplus cash investing. In addition, the risks associated with cash management are addressed, and recommendations are provided based on this analysis. Section I contains the introduction explaining the background of Toy World’s current financial situation. The holiday season is when the company earns the most gains compared to months outside of the holiday season. Grace Jones, the treasurer of Toy World, describes the purpose of the report as performing cash budgeting analysis of the company to offer recommendations in the company’s financial situation. Section II contains the monthly cash budget as prepared. Grace expects that a $500,000 line of credit will be sufficient to cover any cash shortfalls. After reviewing the monthly cash budget, it appears that this line of credit will suffice to adequately cover the cash shortfalls predicted to occur in May and June of $48,035 and $480,035, respectively. Section III presents the daily cash budget for January 1996. The method of collections and payments has been considered in determining the cash surplus or shortfall in day-to-day operations. The flow of cash produces cash shortages up to $142,065 following planned payments on the 1st and the 15th. The majority of the month sees a cash surplus of up to $289,100. Section IV discusses various topics associated with cash management techniques. Altering the target cash balance is assessed with scenarios such as decreasing the

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