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
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
Want to see the full answer?
Check out a sample textbook solutionChapter 21 Solutions
Intermediate Financial Management (MindTap Course List)
- Label each item below with a “B” if it describes a benefit of budgeting or a “Not B” if it describes a potential negative outcome of budgeting.arrow_forwardAnswer this question İn some organizations (firms, universities, government agencies), spending appears to increase as the end of the budgeting period approaches, even if there are no seasonal differences. What might cause this? (A). "Our cash budget shows a surplus for the quarter, so we do not have to think about arranging any bank financing." Comment on this statement. (B). Accrual accounting is preferable to cash flow accounting because the information is more relevant to all users of financial statements. Discuss and answer the questionarrow_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_forwardThe previous cash balance is important when beginning work on the cash budget because O The beginning cash can be used in periods of cash flow issues. We can use this number to decide what terms to offer our customers. Jm OIf we started without this information, we may show cash flow issues in error.arrow_forwardMatthew 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_forward
- Which 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_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_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_forward
- We discuss how to prepare the cash budget and understand therelationships among the operating budgets, cash budget, andbudgeted balance sheet. The cash budget helps managersdetermine whether they need to borrow money to fund operations,or whether they can make repayments toward their borrowings orinvest excess cash to earn interest. The cash budget and thebudgeted balance sheet are forward-looking versions of thestatement of cash flows and the balance sheet. Soup Inc. has the following budgeted sales: January $60,000, February$80,000, and March $90,000. 40% of the sales are for cash and 60% are oncredit. For the credit sales, 75% are collected in the month of sale, and 25% thenext month. The total budgeted cash receipts for March are:arrow_forwardPLEASE ANSWER ALL TRUE OR FALSE 6. The principal reason for using budgets is to avoid running out of cash or borrowing too much money.7. Financing decisions related to budgeting involve acquisition and use of scarce resources.arrow_forwardAnswer quickly plsarrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College