Finance - Cash Budgeting

Question 1

Purpose of cash budgeting

Answer 1

• predict negative cash-flow situation
• predict a positive cash-flow situation
• compared with actual figures to measure performance
• secure borrowing, show to potential investors

Question 2

Cash flow problems and solutions

Answer 2

• too many credit sales, make cash discount
• cash tied up in inventory, special offers to sell more
• not enough credit purchases, switch to supplier with more generous credit terms