CASE STUDY 3 - Cash Budget Template

SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS: Credit Sales July August September Total Cash Collections

August 12,000 14,400 26,400

SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY Inventory purchases July August September Total Payments for Inventory Purchases

August 32,500 22,500 55,000

Oxford Company Cash Budget For the Two Months of August and September Cash balance Add: Receipts Collections from customers Sale of plant assets Sale of new common stock Cash sales Total receipts Total Available Cash Less: Disbursements Purchases of inventory Operating expenses Selling and administrative expenses Dividends Equipment purchase Total disbursements Excess (deficiency of available cash over disbursements) Financing Borrowings Repayments Ending cash balance Please answer the 3 qualitative questions on the next tab called Qualitative Questions. August $10,000 26,400 12,350 51,000 89,750 99,750 55,000 6,750 12,500 19,000 93,250 6,500

3,500 $10,000

September 9,600 10,800 20,400

September 22,500 10,500 33,000

September $10,000 20,400 16,850 39,000 76,250 86,250 33,000 6,750 12,500 6,000 58,250 28,000

(3,570) 24,430

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What are the three sections of a Cash Budget, and what is included in each section? Cash receipts section: This section includes cash that is expected to be recieved from company activity and customer payments. This includes money coming in from the sale of Cash disbursements section: This section includes cash payments expected to be made for the company to function. This includes payments for materials, labor, overhead, taxes, Financing section: This section shows the money the company is borrowing and the

Why is a Cash Budget so vital to a company? Properly managing cash is essential for any and every business. By utilizing a cash budget, a company can estimate their incoming and outgoing cash over a period of time and plan accordingly. Using cash without first preparing a budget and establishing the needs can be

What are the five basic principles of cash management that a company can follow in order to Reduce receivables or average collection period: The sooner a company recieves the money they are owed, the sooner they can put the money back to work. However, customers may be turned off by terms that require very quick or immediate payments depending on their Increase payables or average payment period: Using current liabilities is an effective source of cash management. By delaying the payment of liabilities or negotiating higher credit period with suppliers, the company can use the resultant cash for intermediate gains. This must Manage inventory levels: Keeping higher level of inventory can be costly, however having inventory levels that are too low can hinder the ability to deliver quickly on orders. Finding the Plan major / capital expenditures: Major revenue and capital expenditures must be planned to avoid strain on cash management. These could either be pushed to periods when the company is expected to generate excess cash or financing is readily available at favorable Invest idle cash: If cash is sitting idle, it is not benefiting the company in any way. By immediately investing idle cash either for the short or long term, the company can grow the