Chapter 18 - Working Capital Management - Cash Control

Question 1

What are the key principles of cash management?

Answer 1

Collect debts as quickly as possible
Pay suppliers as late as possible
Bank cash takings promptly

Question 2

What is a tool that accountants have to manage cash?

Answer 2

Cash budget and cash flow forecast

Question 3

What is a cash forecast and what are they used for?

Answer 3

Estimate of cash receipts and payments for a future period under existing conditions

They are used for:
Assess and integrate operating budgets
Plan for cash shortages and surpluses
Compare with actual spending

Question 4

What is a cash budget and what are they used for?

Answer 4

Commitment to plan for cash receipts and payments for a future period after taking any action necessary to bring the forecast into line with the overall business plan.

It is used to:
Identify cash surpluses
Identify cash deficits
Planning tool
Control tool

Question 5

What are the two different techniques that can be used to create a cash forecast?

Answer 5

A receipt and payments forecast
A statement of financial position forecast