Cash Budgeting

Question 1

What are the purposes of producing a cash budget?

Answer 1

-used to predict future cash situation which allows appropriate finance to be arranged
-helps with decision making
-used to monitor and control which can allow corrective action
-set targets which gives managers/departments targets to focus on

Question 2

What are the benefits of preparing a cash budget?

Answer 2

-identify times where there may be short cash which allows the business to plan ahead
-show to potential lenders/investors which can help to secure borrowing
-motivating for employees as they have goals to achieve

Question 3

How can finding a cheaper supplier solve cash flow problems?

Answer 3

Solution:finding a cheaper supplier
Impact: will reduce the cost of purchasers meaning more cash available for each sale

Question 4

how can lease machinery or equipment solve cash flow problems?

Answer 4

Solution:lease machinery or equipment
Impact:allows a business to spread the cost of the purchase over many months

Question 5

how applying for a loan or overdraft solve cash flow problems?

Answer 5

Solution:apply for loan or overdraft from bank
Impact:help cover immediate cash flow problems but will need to be payed back overtime with interest

Question 6

How can arranging extra time to pay bills from supplier solve cash flow problems?

Answer 6

Solution:arrange extra time to pay bills from supplier
Impact:give the business time to raise the cash they need to pay bills

Question 7

How can increase advertising or sales promotion solve cash flow problems?

Answer 7

Solution:increase advertising or sales promotion
Impact:sales will increase meaning more cash coming into the business