1) Required: establish the cash budget of the firm.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
You are hired as a
You gathered the following information.
The firm receives all income from sales
•Sales estimates (in millions)
* Quarter1 = 1,000; Quarter2 = 1,250; Quarter3 = 1,500; Quarter4 = 2,000; Quarter1 next year = 1,200
• Accounts receivable
* Beginning receivables = $3000
* Average collection period = 45 days
• Accounts payable
* Purchases = 60% of next quarter’s sales
* Beginning payables = 1,200
* Accounts payable period is 45 days
• Other expenses
*Wages, taxes, and other expense are 25% of sales
*Interest and dividend payments are $100
*A major capital expenditure of $500 is expected in the second quarter
•The initial cash balance is $100 and the company maintains a minimum balance of $50
1) Required: establish the cash budget of the firm.
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