Day 7-Cash Budgets-TVM

Day 7-Cash Budgets-TVM - BusinessManagement201 Day7

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Business Management 201 Day  7 Chapter 4: Part 3—Financial Forecasting Chapter 5: Part 1—Time Value of Money September 21, 2011
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Day 7 Agenda 2) New TA Schedule: Three TA Open Lab Sessions—Tuesday 2:00 PM-3:00 PM   in 251 TNRB; Thursday 11:00 AM- 12:00 PM in 3108 JKB;  Friday 11:00 AM-1:00 PM 184 TNRB Two TA POW Review Session—Tuesday 7:00 PM -8:00 PM  1) POW Quiz #3: Due Friday at 11:59 PM 2) Chapter 4: Part 3 Discussion—Cash Budgets 3) Chapter 5: Time Value of Money
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Budgets Budgets Budget:   a forecast of future events.
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Budgets: Three Key Uses 1) Budgets indicate the amount and  intra-year  timing of  future  financing needs. 2) Budgets provide a basis for  taking  corrective action  if  budgeted and actual figures do  not match. 3) Budgets provide the basis for  performance evaluation .
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Cash Budget: Three Steps FIRST: DETERMINE CASH RECEIPTS This usually involves sales projections and historical data  on the collection of receivables (cash vs. credit sales). SECOND: ESTIMATE OUTFLOWS This requires careful analysis of production process (level  or demand-based), logistics, etc.  THIRD: CREATE THE CASH BUDGET Net CF + Beginning Cash Borrowing vs. Repayment 
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Cash Budget: Receipts Assume that  all sales are on credit  and that  half  are  collected in the month of sale and  half  the following  month. Actual sales for December were  $120,000 . Projected sales for January and February are  $60,000  and  $80,000 , respectively. Estimate the cash receipts  for January and February.
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January February Collections (50% Last Month) $60,000 $30,000 Collections (50% Current Month) $30,000 $40,000 Total Cash Receipts $90,000 $70,000 Cash Budget: Receipts Recall: Dec = $120,000, Jan = $60,000, Feb = $80,000 January Receipts Calculation : $120,000 in December x 0.50 = $60,000 $60,000 in January  x 0.50 = $30,000 Total January Collections:  $90,000 February Receipts Calculation : $60,000 in January  x 0.50 = $30,000 $80,000 in February x 0.50 = $40,000 Total February Collections:  $70,000
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Cash Budget: Disbursements Monthly Labor = $50,000 Paid in month incurred (level production) Monthly Materials Purchases = $35,000 Paid one month after purchase (level production) Estimate Total Monthly Outflows
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January February Labor Payments $50,000 $50,000 Material Purchases $35,000 $35,000 Total Cash Outflows $85,000 $85,000 Monthly Labor = $50,000 paid in month incurred level production Monthly Materials Purchases = $35,000 paid one month after purchase  level production (every month the same) Cash Budget: Disbursements
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This note was uploaded on 01/06/2012 for the course BUS M 201-1 taught by Professor Jennlarson during the Fall '11 term at BYU.

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Day 7-Cash Budgets-TVM - BusinessManagement201 Day7

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