Cash Management Modeling

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Cash Management Modeling, Excel Assignment 3

Cash Management Modeling, Excel Assignment 3
Cash flow forecasts are a powerful management tool to help identify future deficits or surpluses in liquidity. The cash flow forecast shows the total expected outflows and inflows during a given period; i.e. a year. It is vitally important that this budget is prepared so the organization is aware of shortages and surpluses during the year. These can help the business spot cash problems and cash opportunities. A known cash shortage can be planned for and resolved proactively verses reactively. It would be wrong to assume that if the organization is in surplus that it does not have a problem. Idle cash means the opportunity to earn interest or
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When showing data for different periods of time, such as the quarterly sales forecasts, it’s horizontal rather than vertical. Other data, such as the list of raw materials needed for a product, will be easier to use when it’s set up vertically. Doing this simply works better as we use Excel 2013.
Borrowing Effects; Cash Budgets. When the company pays the balance of short term borrowing this will decrease available cash used for investing. “Determining the amount of current borrowing and current investing is the most complex part of this cash budget. We have already calculated current borrowing, but because we are now considering investments and interest, the formula will need to be changed. For current borrowing, the logic can be explained this way; if the unadjusted cash balance is less than the minimum acceptable cash, then borrow enough to bring this balance to the minimum. However, if the firm has some investments, reduce the amount of borrowing by an equal amount of the investments. If the adjusted cash balance is greater than the minimum and the firm has pervious borrowing, then use the cash above minimum to reduce the outstanding balance. Writing a formula for this requires the use of the nested “IF” statement” (Mayes, 2012, p. 89).
Conclusion. The cash flow forecast is produced by reference to the income and expenditure budget, which serve as a basis for adjusting

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