Ch 4, Module 6

Question 1

cash budget

Answer 1

represent projections of cash receipts and disbursements

derived from other budgets based on cash collection and disbursement assumptions

consider:

• cash available
• cash disbursement
• financing

Question 2

cash available

Answer 2

balances available at the beginning of the period

+ cash collections

Question 3

define cash balance

Answer 3

amounts of cash on hand

cash balance available for use may be limited by mgt policies

Question 4

cash collection budget

Answer 4

specify the amounts of cash that will be received from sales (based on sales budget) and from anticipated loan proceeds

Question 5

cash disbursements budgets

Answer 5

represent the cash outlays associated with purchases and with operating expenses

Question 6

financing budget

Answer 6

considers the manner in which operating (line of credit) financing will be used to maintain minimum cash balances or the manner in which excess or idle cash will be invested to ensure liquidity and adequate returns

Question 7

cash budget

Answer 7

represents the statements of planned cash recepts and disbursements

beg cash
+ cash collections from sales
- cash disbursements for purchases and operating expenses
=ending cash
- cash requirements to sustain ops (borrowings)
=real ending balance

Question 8

pro forma income statement key components

Answer 8

sales budget
cost of goods sold budget (from production budget)
sellin and admin expense budget
interest expense budget (from cash budget)

Question 9

pro forma B/S

Answer 9

budgeted balance sheets display the balances of each balance sheet account in a manner consistent with the I/S and cash budget plans developed

Question 10

capital budgets

Answer 10

identify and allow mgt to evaluate the capital additions of the org, often over a multi year period

detail the planned expendiuture for capital items (facilities, equipment, new products, etc)

highly dependent on the availability of cash or credit

Question 11

flexible budgeting

Answer 11

a flexible budget is a financial plan prepared in a manner that allows for adjustments for changes in production or sales and accurately reflects expected costs for the adjusted output

consideration of revenue per unit, VC per unit, and FC over the relevant range (within which the relationship between revenues and VCs will remain unchanged and fixed costs stable)

Question 12

benefits of flexible budget

Answer 12

can display different volume levels within the relevant range to pin point areas in which efficiencies have been achieved or waste has occurred

Question 13

limitations of flexible budget

Answer 13

highly dependent on the accurate identification of fixed and variable costs and the determination of the relevant range