Case Study 3 Cash Budget Essay

745 Words May 25th, 2012 3 Pages
Case Study 3 - Cash Budget

SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS:
Credit Sales August September
July ($30,000 x 40%) 12,000
August ($24,000 x 60%), September ($24,000 x 40%) 14,400 9,600
September ($18,000 x 60%) 10,800
Total Cash Collections 26,400 20,400

SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY
Inventory purchases August September
July ($65,000 x 50%) 32,500
August ($45,000 x 50%), September ($45,000 x 50%) 22,500 22,500
September ($21,000 x 50%) 10,500
Total Payments for Inventory Purchases 55,000 33,000

Oxford Company Cash Budget For the Two Months of August and September
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This section also includes expected payments of income tax, investments, and plant assets. The financing section shows the funds that we expect to borrow and repay, plus the interest. This part is included when the cash balance isn't what is required, and the financing is necessary to add to the cash balance.

Why is a Cash Budget so vital to a company?
2)
A cash budget is important to a company because it allows for effective cash management. It can show when the company needs additional financing before the need arises, and lets the company prepare for future expenses. Also, if the cash budget shows that the company will have excess funds, they can use this cash to plan on making investments such as acquiring plant assets. Cash is vital to keep a company running, and by making a cash budget, you can forecast cash coming in and cash coming out, and then make plans based on this information.

What are the five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash?
3)
A company can improve chances of having adequate cash by: 1) Increasing the speed of receivables collection - receiving cash quicker means they can use it quicker for their needs. However, you do not want to lose business because anyone felt they had excess pressure on them. A friendlier approach would be to include incentives such as discounts for paying a bill within a certain amount of

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