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 how Excel can be used to determine the optimal timing of majorcash the Scenario Manager to evaluate different assumptions in a
Sales and Collections The starting point for a cash budget is the sales forecast. Many of the other forecasts in the cash budget are driven (at least indirectly) by this forecast. The sales forecast has been provided for us by Bithlo’s marketing department in Table 3 …
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