A firm's management wants toimprove its cash flows with regard toworking capital and wants to reflectthis priority in its annual budget.What is an appropriate plan ofaction?O A. Stock up on inventory in orderto never run out of stockB. Extend credit terms tocustomers in order to gain moresalesO C. Pay all bills and payables whendueD. Speeding up collection ofaccounts receivable from customers

Working capital is very important in smooth operations of company and maintain the adequate…

Answered: A firm's management wants to improve…

A firm's management wants to improve its cash flows with regard to working capital and wants to reflect this priority in its annual budget. What is an appropriate plan of

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments

Section: Chapter Questions

Problem 19CYBK

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Concept explainers

Cash budget

A cash budget is an estimate of an organization's cash flow for the future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future. If cash receipts are insufficient to cover future expenses, an organization may plan to obtain funds from other sources. After estimating the sales, purchase, and capital expenditure budgets for the year, management develops a cash budget. These budgets are created to ensure that an organization's cash flow is managed. It is important to note that only cash transactions are recorded when actual cash enters and exits an organization.

Question

A firm's management wants to
improve its cash flows with regard to
working capital and wants to reflect
this priority in its annual budget.
What is an appropriate plan of
action?
O A. Stock up on inventory in order
to never run out of stock
B. Extend credit terms to
customers in order to gain more
sales
O C. Pay all bills and payables when
due
D. Speeding up collection of
accounts receivable from customers

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