Most of these have balance sheet impact and several

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Unformatted text preview: ng out. Sales and profits are out of the picture (although sales influences money in, and costs and expenses influence money out). BASIC CASH PLAN This sample shows examples of incoming cash and expenditures for our sample company. In this very simple model, your sources of money are cash sales, payments received (for sales on credit, also called accounts receivable), new loan money, and new investment. Your expenditures include buying widgets in cash, paying interest, paying bills as they come due (i.e., paying accounts payable), and paying off loans. Even at this basic level, you can see the potential complications and the need for linking up the numbers using a computer. Your estimated receipts from accounts receivable must have a logical relationship to sales and the balance of accounts receivable. Likewise, your payments of accounts payable have to relate to the balances of payables and the costs and expenses that created the payables. Vital as this is to business survival, it is not nearly as intuitive as the sales forecast, personnel plan, or income statement. The mathematics and the financials are more complex. HURDLE: THE BOOK 16.2 ON BUSINESS PLANNING A More Realistic Example The cash plan can get complicated quickly when you deal with a more realistic business example. In the following illustrations, we’re going to look at the cash planning for the company whose cash balances were described in Chapter 14: About Business Numbers. This was the company whose cash flow varied widely, depending on cash assumptions. Beginning Assumptions With the next illustrations we set the starting points, which are the projected income and the starting balances. We see a simple example of business income, which we’ll use as a first step for planning cash. The example already divides sales between cash sales and sales on credit. We also have a simplified version of wages and operating expenses so that we can focus on the cash plan instead of the income statement. SAMPLE CASE STARTING INCOME STATEMENT SAMPLE CASE STARTING BALANCE In these two projected...
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This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.

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