For the Two Months of May and June
Cash balance $20,000 $20,000
Collections from customers 92,650 85,150
Sale of plant assets 33,000
Sale of new common stock 50,000
Cash sales 75,000 57,000
Total receipts 200,650 192,150
Total Available Cash220,650 212,150
Purchases of inventory 171,000 106,200
Operating expenses 15,000 15,000
Selling and administrative expenses10,150 10,150
Equipment purchase 19,000
Total disbursements 196,150 170,350
Excess (deficiency of available cash over disbursements) 24,500 41,800
Ending cash balance $24,500 41,800
Please answer the 3 qualitative questions on the next tab called Qualitative Questions.
What are the three sections of a Cash Budget, and what is included in each section? The three sections of a Cash Budget are cash receipts, cash disbursements and financing. The cash recipt section includes: collected amounts from credit sales, cash sales, as well as expected interest and dividends. As well as Sale of plant assets and common stock. The cash disbursement section includes: Purchases of inventory, operating expenses, selling and administrative expenses, dividends, and equipment purchases. The financing section includes: expected borrowing amounts, repayments of loans plus interest.
Why is a Cash Budget so vital to a company?
A cash budget is vital to a company to forecast their flow of cash and make sure that they can cover expected costs against projected cash received.
What are the five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash? Plan for major expenditures, Keep inventory levels as low as possible, Invest excess cash, Pay payables as late as possible, and Collect receivables as quickly as possible.