Learning Journal 6 - BUS 3301

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University of the People *

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3301

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Business

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Nov 24, 2024

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docx

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Uploaded by fakos4

Learning Journal 6 – BUS 3301- University of the People One of a company’s manager's jobs is to make various projections for the company in form of budgets. All the projections or budgets in question are important. However, one of them seems to be particularly important to the manager: the cash budget. And the question here is “why do the cash flow budgets seem to be so useful to business leaders?” This is the question I am going to try to answer in this journal assignment before concluding. But first, what is a cash budget? A cash budget is a budget that shows how much a company will probably generate in a business year, as well as all the expenses (fixed and variable) a company will be making during that year. But, and again, why do business leaders find cash flow budgets so useful? They find them so useful because they tell them if the companies will have enough money to face their obligations like paying fixed costs, rent, taxes on property, and salaries. It is the cash projections that also inform business leaders about their company's capacity to pay back its creditors for loans taken and invested in the company. It would then be on basis of a well-enough cash budget a company manager would plan new investments as well. The cash flow budgets are built in consideration of the company's former activities years. And if a cash flow budget is for the company's internal governance, its achievement that is the cash statement is actually destined for the company’s investors. For, it helps them know if the company generates enough money to face its financial obligations (Walther, 2012) as well as to pay dividends to its shareholders. After all, why would it not be so useful? Is it not said that a business’ social responsibility is ultimately to make profits ? (Tepper, 2020, September 16). And who says profits also says enough cash generation.

Thus, cash flow budgets even before they are turned into reality are very useful to business leaders as they help them know if their company is going to make enough profit to satisfy its financial obligation toward all those it owns money to, from workers to lenders, as well as to pay fixed costs, variable costs, and even to pay dividends to shareholders. A poor cash flow budget is proof that for some reasons a company is not doing well. References Tepper, T. (2020, September 16). Milton Friedman On The Social Responsibility of Business, 50 Years Later. Forbes. https://www.forbes.com/advisor/investing/milton-friedman-social- responsibility-of-business/ Walther, L. M. (2012). Principles of accounting . Utah State University. https://www.principlesofaccounting.com/chapter-21/components/

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