BIS3589_ch03 - Chapter3 CashBudget Cashbudget

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Chapter 3 Cash Budget
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Cash budget    Listing of firm s anticipated cash inflows and outflows  over a specific period    Use to plan the short-term borrowing and the timing of  expenditure 
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Cash budget    Worksheet area    Details of cash collection and disbursement    Cash balance and borrowing needs 
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Worksheet area     Sales and collection       Sometimes, sales are on-credit    We need to focus on actual cash inflow or cash collection     Purchase and payment       Usually, inventory purchasing is based on the following month  anticipated sales    Also, we can purchase on-credit    We will focus on actual cash outflow or payment
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Example     40% of sales are for cash. Of the remaining sales, 75% are collected  in the following month and 25% are collected two months after the sale    Inventory purchases are equal to 50% of the following month s sales    60% of purchases are paid for in the month following the purchase  and remainder are pied in the following month
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Details of cash collection and disbursement      Cash collection       From the sales, but focusing only on actual inflow     Disbursement    Inventory purchase but focusing only on payment
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This note was uploaded on 01/11/2012 for the course FINANCE fin 3701 taught by Professor Tengihla during the Spring '11 term at Assumption College.

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BIS3589_ch03 - Chapter3 CashBudget Cashbudget

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