CASH BUDGET (FORECAST).ppt
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1、CASH BUDGET (FORECAST),a plan for the cash inflows and outflows over a certain period of time.,THE CASH BUDGET IS A TOOL FOR FINANCIAL PLANNING,The cash budget helps the firm to plan for the actual receipt and disbursement of cash.,PREPARING THE CASH BUDGET,1. The company estimates the sales for eac
2、h period during the planning period,Month Sales for 2005 Projected Sales for 2006,January 2514 2706 February 3628 3788 March 5059 5410 April 5998 6492 May 9452 9654 June 10657 11241 July 3452 3652 August 4148 4620 September 2003 2050 October 1876 1930 November 1640 1750 December 1573 1582 Total 5200
3、0 54875 Monthly Distribution of sales for Happiness Plc. (thousands of Euros),.,2. When will the sales actually generate cash? (Sales made for credit do not produce immediate cash inflows, and the cash budget must take these delays into account.) Customers payment habits tend to remain in the same o
4、ver time.,Payment Month Percentage Paid,Month of sale 15% Month after sale 35% Second month after sale 50%,Month Collected CashAmount ,November 2005 15% 246000 December 2005 35% 574000 January 2006 50% 820000 Cash Receipts for November 2005 (Sales were 1640000),3. The company use the projected sales
5、 and payment pattern to prepare the cash inflows for 2006.,.,Projected cash inflows of sales from 2006 for Happiness plc. *The Cash budget must reflect all cash inflows. These items should also inlcude cash receipts for rent, interest, dividends.,4. The firm makes a schedule of disbursements,.,Proje
6、cted Cash Disbursements for Happiness plc. 2006 (thousand of euros),5. Finally we prepare the cash budget, the projected cash inflows and disbursements will be brought together with the cash available at the beginning of the period.,.,CASH BUDGET FOR HAPPINESS PLC.,(thousand of euros),Short explanat
7、ions,The first line shows the beginning cash. For January is simply from the balance sheet for 2005. The second line shows the cash inflows the company expects in each month. Line 3 is the sum of the first and the second line, the available cash. Line 4 is for the projected cash disbursements To get
8、 line 5 we have to subtract from the available cash the cash disbursements. So will we get the amount of cash the company expects to have at the end of the month. (This ending cash figure would be carried forward as the beginning amount of cash for the next month.),In the line 6 we have the minimum
9、cash balance that the company like to have as a precaution against planning errors or to be sure not run out of cash Line 7 shows any excess or shortfall of cash. A positive number (excess cash) indicates the company can invest it to a return. A negative number (needed cash) indicates the companyy m
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