Required:

1. Prepare a cash budget by quarter for 2016 using the provided template. Will Manchester keep their projected borrowing needs in line with the $1 million line of credit they are asking the bank for?

2. As we see in the budgeted assumptions, Manchester wants to improve its cash flow by concentrating on collecting receivables sooner in the second half of 2016. What else can Manchester do to improve its cash flow?

3. Prepare a projected income statement and balance sheet for 2016.

4. Manchester’s goal is to have return on sales of 8% in 2016. Based on the projected income statement calculated for 2016 will Manchester achieve this goal? What are some things Manchester can do to improve its return on sales?

5. Based on the cash budget and projected financial statements, do you recommend that the company keep growing and spend money on capital expenditures? Why?