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Unit 5 Ip for Financial Management Word Document

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Submitted By suburbanmomma
Words 344
Pages 2
American InterContinental University
FINA310-1301A-02: Professor Michael James
March 14, 2013

Answers to questions
1. Will the company need any outside financing?
Based on the calculations from the Excel spreadsheet, there is a need for external financing since the cash inflows are less than the cash outflows in March, April, May, June, and August.
2. What is the minimum line of credit that CBM will need?
The minimum line of credit should cover the maximum requirements for the period which occurs in June and is equal to $541,250.
3. What do you think CBM’s cash position during the budget period? Do you see any concerns for the company in this regard?
The cash position for CBM seems to be okay, except for March through June, and again in August, where we see a cash deficit. A deficit like this is a short-term deficit in the fact that in July and again in September through November would begin to have a surplus in cash, and they could use this cash money to pay back money that they had to borrow. With that being said, I don’t feel that CBM would have any issues in this regard.
4. If you were a bank manager, would you want CBM as your client? Why or why not?
If I were a bank manager, I think I would take interest in the short-term liquidity of CBM because CBM’s needs to borrow are all on a short-term basis. The reason that they had a shortage in cash from March through June was primarily because of the lump sums of income taxes and the investments in the new plant. However, in July, and again from September to November, they saw an increase in sales which resulted in a large surplus of cash flow, and the extra money could pay off any short-term loans that CBM had. This goes to show that CBM would be a good customer for the bank, so, I would want CBM as my client if I were the bank

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