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Industrial Finance

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ASSIGNMENT OF CORPORATE
FINANCE
Submitted By
SONAL SRIVASTAVA
201211994

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1. Discuss the utility of cash budget as a tool of cash management. What are the steps
involved in the construction of cash budget. Give an example.
A cash budget is important for a variety of reasons. For one, it allows you to make management
decisions regarding your cash position (or cash reserve). Without the type of monitoring imposed
by the budgeting process, you may be unaware of the cash flow through your business. At the
end of a year or a business cycle, a series of monthly cash budgets will show you just how much
cash is coming into your company and the way it is being used. Seasonal fluctuations will be
made clear.
Following are the utility of cash budget as a tool of cash management.
1. Helpful in Planning. Cash budget helps planning for the most efficient use of cash. It
points out cash surplus, or deficiency at selected point of time and enables the management
to arrange for the deficiency before time or to plan for investing the surplus money as
profitable as possible without any threat to the liquidity.
2. Forecasting the Future needs. Cash budget forecasts the future needs of funds, its time
and the amount well in advance. It, thus, helps planning for raising the funds through the
most profitable sources at reasonable terms and costs.
3. Maintenance of Ample cash Balance. Cash is the basis of liquidity of the enterprise. Cash
budget helps in maintaining the liquidity. It suggests adequate cash balance for expected
requirements and a fair margin for the contingencies.
4. Controlling Cash Expenditure. Cash budget acts as a controlling device. The expenses of
various departments in the firm can best be controlled so as not to exceed the budgeted
limit.
5. Evaluation of Performance. Cash budget acts as a standard for evaluating the financial
performance.
6. Testing the Influence of proposed Expansion Programme. Cash budget forecasts the
inflows from a proposed expansion or investment programme and testify its impact on cash
position.
7. Sound Dividend Policy. Cash budget plans for cash dividend to shareholders, consistent
with the liquid position of the firm. It helps in following a sound consistent dividend policy.
8. Basis of Long-term Planning and Co-ordination. Cash budget helps in co-ordinating the
various finance functions, such as sales, credit, investment, working capital etc. it is an
important basis of long term financial planning and helpful in the study of long term financing
with respect to probable amount, timing, forms of security and methods of repayment.

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qwertyuiopasdfghjklzxcvbnmqwertyui opasdfghjklzxcvbnmqwertyuiopasdfgh jklzxcvbnmqwertyuiopasdfghjklzxcvb nmqwertyuiopasdfghjklzxcvbnmqwer ASSIGNMENT OF CORPORATE FINANCE tyuiopasdfghjklzxcvbnmqwertyuiopas Submitted By dfghjklzxcvbnmqwertyuiopasdfghjklzx SONAL SRIVASTAVA 201211994 cvbnmqwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqwertyuio pasdfghjklzxcvbnmqwertyuiopasdfghj klzxcvbnmqwertyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnmqwerty uiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmrty uiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxc 1. Discuss the utility of cash budget as a tool of cash management. What are the steps involved in the construction of cash budget. Give an example. A cash budget is important for a variety of reasons. For one, it allows you to make management decisions regarding your cash position (or cash reserve). Without the type of monitoring imposed by the budgeting process, you may be unaware of the cash flow through your business. At the end of a year or a business cycle, a series of monthly cash budgets will show you just how much cash is coming into your company and the way it is being used. Seasonal fluctuations will be made clear.  Following are the utility of cash budget as a tool of cash management. 1. Helpful in Planning. Cash budget helps planning for the most efficient use of cash. It points out cash surplus, or deficiency at selected point of time and ...
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