Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Question
Chapter 15, Problem 4Q
Summary Introduction
To explain: The cash budget and its use in reduction of cash and in negotiating a loan and advantage and disadvantage of daily cash budgets over monthly cash budget.
Introduction:
Cash:
Cash is always reported under the head of current assets in the balance sheet of a company. It is treated as current asset because any asset which can be report in the form of cash within a period of 1 financial year is classified as current asset and cash is already presented in the form of cash.
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A cash budget is usually thought of as a means of planning for future financing needs. Why would a cash budget also be important for a firm that has excess cash on hand? Explain.
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Chapter 15 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 15 - What are some pros and cons of holding high levels...Ch. 15 - Prob. 2QCh. 15 - Prob. 3QCh. 15 - Prob. 4QCh. 15 - What are the four key factors in a firms credit...Ch. 15 - Prob. 6QCh. 15 - Why is some trade credit called free while other...Ch. 15 - Prob. 9QCh. 15 - Indicate using a (+), (), or (0) whether each of...Ch. 15 - Prob. 1P
Ch. 15 - Prob. 2PCh. 15 - COST OF TRADE CREDIT AND BANK LOAM Lancaster...Ch. 15 - CASH CONVERSION CYCLE Zane Corporation has an...Ch. 15 - RECEIVABLES INVESTMENT McEwan Industries sells on...Ch. 15 - WORKING CAPITAL INVESTMENT Pasha Corporation...Ch. 15 - Prob. 7PCh. 15 - CURRENT ASSETS INVESTMENT POLICY Rentz Corporation...Ch. 15 - LOCKBOX SYSTEM Fisher-Gardner Corporation (FGC)...Ch. 15 - CASH BUDGETING Helen Bowers, owner of Helens...Ch. 15 - Prob. 12IC
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- If management is being evaluated on their ability to manage a budget, what can they do to decrease cash outflow?arrow_forwardShould a firm's cash budget relate back to its accounting profits? Do the two need to remain in sync?arrow_forwardHow cash budget statement can be used to invest the amount of cash that a firm carries and to negotiate bank loan .arrow_forward
- What is a cash budget, and how is this statementused by a business? How is the cash budget affected by the CCC? By credit policy?arrow_forwardHow could the cash budget be used when the terms of a bank loan are negotiated?arrow_forwardWhich of the following statements is NOT CORRECT? a. The cash budget is useful for estimating potential funding needs, especially for short-term working capital loans. b. Working capital management is critical because it affects financing decisions and the firm's profitability. c. Credit policy affects working capital because it impacts both sales and the time it takes for receivables to be obtained. d. If a company needs to increase its cash flow from operations in the next month or two, it can change its credit policy from 2/10 net 30 to net 60. e. f a company is unsure about the volume of sales, profits, and cash flows for the coming year, it will retain a relatively large amount of cash and marketable securities.arrow_forward
- Why is the cash budget regarded as a primary tool in short-run financial planning? Discuss.arrow_forwardHow could the cash budget be used when negotiating the terms ofa bank loan?arrow_forwardA very important role of the cash budget is to   a. Determine how to finance dividend payments b. Plan for appropriate financing needs c. Determine the optimal source of financing for the organization’s operations d. Help identify credit customers who might not payarrow_forward
- A very important role of the cash budget is to  Determine how to finance dividend payments Plan for appropriate financing needs Determine the optimal source of financing for the organization’s operations Help identify credit customers who might not payarrow_forwardWhat role does the pro forma cash budget play in financial forecasting.arrow_forwardWhich statement about the cash budget is correct? It is also called the statement of cash flows. It can show managers when the company will experience a net loss. It can indicate when sales are insufficient. It can show managers when additional financing will be necessary.arrow_forward
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