CASH FORECASTING AND BUDGETING

Jun 21st, 2015
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A cash budget is a summary statement of the firms expected cash inflows and outflows over a projected time period. It helps the financial manager to determine the future cash needs, to arrange for it and to maintain a control over the cash and liquidity of the firm.

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BUSINESS FINANCE 1.a) Explain how efficient management of cash, debtors and inventories affect the liquidity of a business. b) What factors influence the length of credit period granted for debtors.c) Justify why business allow debtors in their transactions. d) e) Cash : All of us know that the basic input to start any business is cash. Cash is initially required for acquiring fixed assets like plants and machinery which enables a firm to produce products and generate cash by selling them. Cash is also required and invested in working capital. Investments in working capital is required, as firms have to store certain quantity of raw materials and finished goods and also for providing credit terms to the customers. f) A minimum level of cash helps in the conduct of everyday ordinary business such as making of purchases and sales as well as for meeting the unexpected payments, developments and other contingencies. As discussed earlier cash invested at the beginning of-the operating cycle gets released at the end of the cycle to fund fresh investments. However, additional cash is required by the firm when it needs to buy more fixed assets, increase the level of operations or for bringing out change in working capital cycle such as extending credit period to the customers. g) The demand for cash is affected by several factors, some of them are within the control of the managers and some are outside their control. It is not possible to operate the business without holdin

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