The Last Principle Is To Invest Idle Cash In Marketable Securities Which Offer A Case Study Example

1 See the attached excel sheet
2The three sections of the cash budget are the receipts section in which all the cash receipts and all the credit receipts which are to be collected in a particular month are to be grope together. Then there can be other inflows of cash resulting from sale of assets or issuing new stock. Together these form the total receipts section. The second section comprises of the cash disbursements section. In this section any outlays of cash are recorded from operating activities and non operating activities and a total cash outflow number is calculated. The final section is the financing section which deals with any borrowings and repayments the company might encounter to cover up cash shortfalls.
3 The cash budget is very vital for the company from a cash perspective. Cash is the bloodline of the company and no company can survive without adequate cash flow in the long run. It is possible for a company to be making a profit but at the same time its cash position is very weak. Cash is needed for the day to day activities of the company and a cash budget can serve as an early warning system if the company is going to have cash troubles.
4 The first basic principle is to shorten the average collection period of your credit sales by offering early payment discounts to customers.
The second basic principle is to keep inventory levels low so that the there is less risk of obsolescence and less money is tied to the inventory.
The third principle is to take advantage of the favorable payment of your liabilities. This would mean not paying them late but taking full advantage of the payment period.
The fourth principle is to time the major expenditures in such a way so that they are incurred when sufficient cash is available such as buying of property, plant and equipment.