1. A firm's peak borrowing needs will probably be overstated if it bases its monthly cash budget on the assumption that both cash receipts and cash payments occur uniformly over the month but in reality payments are concentrated at the beginning of each month at each and every time. * O True O False

1. A firm's peak borrowing needs will probably be overstated if it bases its monthly cash budget on the assumption that both cash receipts and cash payments occur uniformly over the month but in reality payments are concentrated at the beginning of each month at each and every time. * O True O False

Accounting

27th Edition

ISBN:9781337272094

Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Chapter22: Budgeting

Section: Chapter Questions

Problem 22.9DQ: a. Discuss the purpose of the cash budget. b. If the cash for the first quarter of the fiscal year...

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Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1 30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects.
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