fm13 - Farm Management Chapter 13 Cash Flow Budgeting...

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Farm Management Chapter 13 Cash Flow Budgeting
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farm management chapter 13 2 Chapter Outline Features of a Cash Flow Budget Constructing a Cash Flow Budget Uses for a Cash Flow Budget Monitoring Actual Cash Flows Investment Analysis Using a Cash Flow Budget Summary
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farm management chapter 13 3 Chapter Objectives 1. To identify cash flow budgeting as a tool for decision making and analysis 2. To understand the structure and components of a cash flow budget 3. To illustrate the procedure for completing a cash flow budget 4. To describe similarities and differences between a cash flow budget and an income statement 5. To discuss the uses of a cash flow budget 6. To show the use of cash flow budgeting in investment analysis
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farm management chapter 13 4 Features of a Cash Flow Budget A cash flow budget is a summary of the projected cash inflows and outflows for a business over a period of time. The time period is usually a future accounting period and is divided into quarters or months. As a forward planning tool, its primary purpose is to estimate the amount and timing of future borrowing needs and the ability of the business to repay loans.
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farm management chapter 13 5 Figure 13-1 Illustration of cash flows
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farm management chapter 13 6 Actual versus Estimated Cash Flows A cash flow budget contains estimates of cash flows for a future time period. It is possible to record and organize actual cash flows for some past time period into a Statement of Cash Flows . The actual values can be compared against the budgeted values. Also, this statement can provide insight into the financial structure of the business.
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farm management chapter 13 7 Table 13-1 Simplified Cash Flow Budget Time Period 1 Time Period 2 1 Beginning cash balance $1,000 $500 2 Farm product sales 2,000 12,000 3 Capital sales 0 5,000 4 Miscellaneous cash income 0 500 5 Total cash inflow 3,000 18,000 6 Farm operating expenses 3,500 1,800 7 Capital purchases 10,000 0 8 Miscellaneous expenses 500 200 9 Total cash outflow 14,000 2,000 10 Cash balance -11,000 16,000 (line 5 - line 9) 11 Borrowed funds needed 11,500 0 12 Loan repayments 0 11,700 (principal and interest) 13 Ending cash balance $500 $4,300 (line 10 + line 11 - line 12) 14 Debt outstanding $11,500 $0 Cash inflow: Cash outflow:
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This note was uploaded on 11/15/2011 for the course AGEC 7100 taught by Professor Duffy,p during the Fall '08 term at Auburn University.

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fm13 - Farm Management Chapter 13 Cash Flow Budgeting...

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