Case Study 3 - Cash Budget

342 Words2 Pages
1) What are the three sections of a Cash Budget, and what is included in each section? A cash budget is composed of three sections: Cash Receipts, Cash Disbursements and Financing. " Cash Receipts: This secton contains the expected receipts from the companies primary sources of revenue. This section includes cash sales, collections, interest, and the sale of assets and stock." " Cash Dispersments: This section shows the expected and projected payments. This section includes expected payments such as inventory and equipment purchases, administrative and selling cost, as well as projected payments such as income taxes and dividens." Financing: Shows the expected funds to be borrowed and their repayment. 2) Why is a Cash Budget so vital to a company? Cash budgets are very important to a company due to the fact that they help management plan ahead. This can help identify and possibly avoid cash shortfalls. It can also help determine the proper timing for financing or investment activities. It allows a company to apply strategic thinking to its cash budget, where and when to spend and of course how much. 3) What are the five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash? The five principles that a company can follow in order to improve its chances of having adequate cash are: Increase the speed of recceivables collacetion The sooner you get paid the sooner that your cash can begin working for you. One option is to offer incentives for early payment. Keep Inventory levels low By maintaining an accurate inventory a company can keep inventory lows, thus freeing cash up for other

More about Case Study 3 - Cash Budget

Open Document