Users of a Cash Budget

Question 1

What decision does the employee make with an cash budget?

Answer 1

The employee is interested in the Business’s estimated cash surplus to decide if it is high enough to ensure they will be paid their wages on time or to decide if sufficient surplus cash and can ask for a pay rise

Question 2

What decision does the IRD make with an cash budget?

Answer 2

The IRD is interested in making sure the business has enough estimated cash surplus so it will receive the amount of tax calculated on the date it is due for payment.

Question 3

What decision does the owner make with an cash budget?

Answer 3

The owner is interested in the estimated surplus cash of the business to decide

• Whether the business is worth keeping or selling
• To expand the business by buying more assets
• Can he borrow more money and pay the loan instalments off
• Can he take the family away on a holiday
• Should he try to boost cash sales or lower cash expenses to increase cash surpluses

Question 4

What decision does the competitors make with an cash budget?

Answer 4

The Competitor is interested in the business budget to see if it is higher or lower than theirs. They will want to compare estimated cash received and estimated cash paid of the business to theirs to decide if they can make improvements to their business performance. Eg lower their cash distribution costs by cutting delivery expenses.

Question 5

What decision does the bank managers make with an cash budget?

Answer 5

The bank manager wants to decide if the business can repay new or existing loans out of by checking there is a surplus cash flow budgeted after the loan repayments are made.