Concept explainers
p)
1)
Case summary:
Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.
The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.
Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.
To discuss: Facts revealed by cash budget regarding the target cash level.
2)
To discuss: Whether depreciation expenses be explicitly included in company’s cash budget or not.
3)
To discuss: Other potential
4)
To discuss: The way of incorporating interest earned or paid on loans or short term securities into cash budget.
5)
To discuss: Opinions of person J on
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Intermediate Financial Management
- we recognize that cash and profits are different and, by extension, a cash budget, though similar, is different than an income statement in many ways. Write a essay to explain the purpose of a cash budget and an income statement, and compare and contrast both financial statements. You may supplement your response with research from outside sources.arrow_forwardFrom the above given information, I am to construct a tabular form of cash budget, however, I don't really understand the question, so I think my answer is wrong, can you try it for me so I can check with my answer?arrow_forwardWhich of the following statements is false? Select one: a. According to responsibility accounting, all managers should be held responsible for all asbects of the master budget. o b. Budgets helps uncover potential bottlenecks. c. Budgeting forces managers to think about and plan for the future. o d. One benefit of following a well-designed budgeting process is Improved performance evaluations. e. Budgeted cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period. Which of the following activities would be classified as a batch-level activity? Select one: a. none of the given answer. b. Designing a new product. c. Milling a part required for the final product. d. Setting up equipment. e. Training employees.arrow_forward
- explain to me how would a cash budget relate to the breakeven analysis. What would a banker or investor look for in these documents.arrow_forward1. What is the difference between strategic and operational plans?2. What is the purpose of financial plans?3. What are the component of an operations plans?4. What are the pro forma financial statements?5. What is the percentage of sales forecasting method? What are some of the limitations financial analysis should be aware of in applying this method?6. What is a cash budget? What are the usual steps involved in preparing a cash budget?7. Explain the difference between deterministic and probabilistic financial planning models.arrow_forwardWhich of the following statements is not correct? The revenue budget is the starting point in preparing the master budget. The revenue budget is constructed by multiplying the expected sales in units by the sales price. The production budget is not based on the revenue budget. The cash budget is used to determine whether the firm will have enough cash on hand.arrow_forward
- Matthew is concerned about his ability to save money regularly and has prepared a budget. Which of the following budget classifications would be most appropriate for Matthew's budget? a. Savings as a variable expenditure b. Savings as a fixed expenditure c. Saving whatever may be left over d. Savings withheld from income and deposited directly to savingsarrow_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_forwardIf management is being evaluated on their ability to manage a budget, what can they do to decrease cash outflow?arrow_forward
- In an attempt to better understand RR’s cash position, Johnson developed a cash budget for the first 2 months of the year. She has the figures for the other months, but they are not shown. After looking at the cash budget, answer the following questions: What does the cash budget show regarding the target cash level? Should depreciation expense be explicitly included in the cash budget? Why or why not? What are some other potential cash inflows besides collections? How can interest earned or paid on short-term securities or loans be incorporated in the cash budget? In her preliminary cash budget, Johnson has assumed that all sales are collected and thus that RR has no bad debts. Is this realistic? If not, how would bad debts be dealt with in a cash budgeting sense? (Hint: Bad debts will affect collections but not purchases.)arrow_forwardWhat are the major objectives of budgeting? Briefly describe the type of human behavior problems that might arise if budget goals are set too tightly. What behavioral problems are associated with setting a budget too loosely? Why should the production requirements set forth in the production budget be carefully coordinated with the sales budget?arrow_forward?Which of the following statements is false about budgeted income statement and budgeted balance sheet .None of the given answers .a O The cash budget must be prepared first before preparing both the budgeted income statement and the .b O .budgeted balance sheet The ending finished goods inventory will be included in the budgeted balance sheet .c O .The budgeted balance sheet must be prepared first before preparing the budgeted income statement .d O .Credit purchases will be included in the accounts payable in the budgeted balance sheet .e Oarrow_forward
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