Transcription of CHAPTER 3 The Cash Budget
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CHAPTER 3 The Cash Budget
69 CHAPTER 3 The Cash BudgetOf all the topics covered in this book, perhaps no other task benefits so much from the use ofspreadsheets as the cash Budget . As we ll see, the cash Budget can be a complex documentwith many interrelated entries. Manually updating a cash Budget , especially for a large firm,is not a chore for which one volunteers. However, once the initial cash Budget is set up in aspreadsheet, updating and playing what if becomes very easy. A cash Budget is simply a listing of the firm s anticipated cash inflows and outflows over aspecified period. Unlike a pro forma income statement (discussed in CHAPTER 5), the cashbudget includes only actual cash flows. For example, depreciation expense (a noncashexpense) does not appear on the cash Budget , but principal payments on debt obligationsAfter studying this CHAPTER , you should be able the purpose of the cash Budget and how it differs from an income a firm s expected total cash collections and disbursements for a particular a firm s expected ending cash balance and short-term borrowing
We are simplifying things somewhat. In reality, many of the given variables in this chapter would come from other budgets. For example, a firm would usually have at least a sales budget from which the sales forecasts are taken, a salary budget, a capital expenditure budget, and so on. All of these different budgets would be created before the ...
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