Cash Budgeting Flashcards
Does profit equal cash
No regardless of profitability a business needs cash to survive
What are the possible sources of cash coming into business
- Sale of goods or services for cash
- Receipts from customers who have bought goods or services on credit
- Bank loan
- Issuing shares
- Income from investments for example interest
Why might cash go out of the business
- Buying inventory for cash
- Paying trade payables
- Buying non-current assets
- Paying wages and salaries
- Paying rent and other expenses
- Paying tax
- Repaying loans
- Paying interest on borrowings
What does the cash budget show
The projected inflows and outflows of cash to and from a business
What does a cash budget deal with
With movement of cash so figure is very different from profit calculations
Will formats vary between businesses
Yes
What is a cashbudget broken down into
Sub periods
How is the cash budget set out
In columns
What estimates can A cash budget tell us
- Where the cash will come from
- Where the cash will go to
- How much there will be at the end of the month
- If inflows exceed outflows or vice versa
- If additional funding is required
- If there is surplus funds
Is cash budgeting a key budget
Yes
What is it an important tool for
Planning and control
Will even the smallest of businesses require a cash budget
Yes
What do cash budgets enable managers to see
How planned activities will impact on the cash balance of the business
If a surplus is expected how can manages decide to use the Spartans
Invest, expand the business, offer more credit to customers, pay suppliers more quickly, repair interest-bearing borrowings
How can a deficit be. Covered
Loan, overdraft, offer less credit, take longer to pay suppliers
