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Cash Budgeting for Genesis Firm Essay

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Updated: May 10th, 2022


Budgeting is a very important concept of every business in the world. Budgeting allows the businesses to stick to their objectives while at the same time giving the potential investor the chance to evaluate whether the business is realistic in the formulation of these objectives. It is therefore very vital for all these businesses to ensure that they have a budget estimate that is comprehensive, idealistic as well as realistic and one that truly matches with objectives of the company while at the same time offering comprehensive information to parties interested in investing in the company.

Genesis company

This company is faced with the task of attracting new investors so that they can avert making losses in succeeding years. This is because the company wants to establish an expansion policy. To this end, the company has to prepare a comprehensive budget to show its potential investors how it intends to meet its financial as well as other obligations in the subsequent years. This budget is formulated as shown in the excel file attached alongside this paper (AUO_B6022_M3_A2_Cash_Budget).

The firm’s financing needs

Every firm that seeks to expand its business or scope of operation must ensure that its financing needs to take care of this expansion objective are well in check. In so doing, the firm is able to understand the avenues from which the expected financing would devolve. The firm also needs to understand the urgency of the financial need as this will definitely shape the direction from which the firms will source out these funds. The company needs to break down the funds need into short-term debt, long-term debt and long-term equity. From the cash budget of the company in the case study here, Genesis, a number of financing options for the expansion objective of this company can be identified. These options are outlined in the following discourse.

As a financial executive, I would recommend that the company consider the possibility of utilizing external financing options to cover this intended expansion or the shareholders could also be asked to chip in and ensure they fund the expansion operations of the company. A number of external financing options could be identified here. For instance, the company could source loans from banks and other financing institutions. Another area where the company could go for assistance would be from the individual investors who wish to invest some money into the operations of this company.

However, external financing as Burstein (1960) puts it, does not occur without costs.

One of the obvious costs associated with the external is the payment of these funds with an interest rate that is considered high by the company’s financial standards. The recognized interest rates in this company are short-term annual interest rate of 8 percent, long-term debt rate of 9 percent, and long-term equity of 10 percent as stipulated here. These costs will put more pressure on the company’s financial position.

Loss of management stronghold could also result if the company decides to obtain external funding. In other words, the investors would want to have close monitoring of the operations of the company. This will imply that the company would be obliged to make sure that the books of accounting and the financial records are open for scrutiny by the outsiders who have a stake in the company. sometimes, these investors could come up with conditions that the company would have to meet before they agree to release the cash to them. For instance, the investors could demand that the company adheres to certain conditions such as bequeathing some posts or a number of shares to the investors. The sale of equity of the company somehow neutralizes the management. This reduces the powers and control of the company’s management.

The financial needs of the company as it expands into foreign markets are diverse. Some of these financial needs are identified in the discourse that follows. The firm will need cash to hire new personnel for the new offices and market it expands into these foreign territories. Then cash for buying new equipment as well as looking for new premises and buildings to host the new offices and the personnel.

Since the company will be exploring new grounds and new territories, it is highly probable that the company would not be in a position to make any profits for the first few months of operation. To cushion itself against this, the company needs to have a fallback policy. The company needs to have enough operating cash to ensure that it takes care of its operations while awaiting business to pick up. The company can decide to fund this working capital from its own reserves or even from the resources that the external investors bring into the company.

Other costs and financial needs that the company could consider would be the overheads, production as well as administrative costs. The overhead costs involve the costs associated with the running of the premises that house the operations of this company. examples of these costs include the electricity bills. The administrative costs are the cost of hiring the employees and the person who shall work for this company. these costs are default and they have to be present irrespective of whether the company has already engaged itself in the production process or not. the production costs however are pre-determined. These costs are subjected to the variance of the quantity of production the company has. If the company decides to produce more, then it definitely incurs more costs.

Genesis budget concerns

From the projected budget of this company developed in the separate attached excel sheet, a number of concerns can be identified.

The sales projections of the company need to be revamped so that the revenues can be increased. The company also needs to find a way to regulate the cash outflows from the company to prevent operating on a deficit or loss. The $25,000 dollar retention monthly objective should be well structured. Otherwise, it will become very hard for the company to realize this objective.

The external funding could also be another source of concern for the company. The company should make sure that it does not put itself into much debt to avoid putting itself under much financial pressure.


From the above discussion and the cash budget that has been developed for this company, Genesis company has been observed to be in a good position to expand into the foreign territories as it wishes. If the financial concerns that have been discussed here are adhered to, the company could be well in the way of achieving its objectives.


Burstein, M. L., (1960). The Economics of Tie-in Sales, Review of Economics and Statistics journal. 42. 68-73

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IvyPanda. 2022. "Cash Budgeting for Genesis Firm." May 10, 2022. https://ivypanda.com/essays/cash-budgeting-for-genesis-firm/.


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