Topic_7_Cash_Budgeting_Flashcards
(10 cards)
What is the purpose of a cash budget?
To forecast and manage cash inflows/outflows to ensure liquidity.
What are the two main parts of a cash budget?
Budgeted cash receipts and budgeted cash disbursements.
Why is cash budgeting critical even if a company is profitable?
Because profits don’t always align with cash availability.
What is the typical cash collection pattern used in budgeting?
20% cash, 30% collected in current month, 50% next month, 18% two months later, 2% uncollectible.
What is the sequence of budgets in a master budget?
Sales → Production → Direct Materials → Labor → Overhead → Cash.
What tools help identify when a company needs a short-term loan?
Cash flow forecast and cash disbursement budget.
How does budgeting support control?
By comparing actual results to planned amounts and identifying variances.
What is a variance in budgeting?
The difference between planned and actual outcomes.
What can be done if a cash shortfall is forecasted?
Delay purchases, negotiate with vendors, or secure short-term financing.
How is a cash surplus handled in a cash budget?
May be used for investing, early debt repayment, or expansion planning.
