Creating budget-will you need additional funds at some point

Assignment Help Financial Management

Reference no: EM131194758

Assume you are thinking about starting a business and would like to forecast your cash needs for the next six months. You expect sales to be approximately $30,000 per month for the first 12 months and your purchases to support sales will be approximately 60% of sales. You anticipate about 20% of your sales will be cash and 80% collected the following month. Your supplier has agreed to extend credit for 70 days at no cost (i.e. you will pay your bills on a two month lag). Your monthly expenses for rent, wages, utilities, and so forth will be approximately $3,500 per month. You have deposited $15,000 in a checking account to begin your operations and would like to maintain a minimum balance of $5,000 in that account.

Step 2: Create a simple monthly cash budget.

Create a spreadsheet file that contains a simple monthly cash budget for the next year for the business described in the above scenario.

Step 3: Answer the questions.

Use the scenario information to help you answer these questions:

Explain the purpose of creating budgets.

Will you need additional funds at some point? Justify your answer.

Reference no: EM131194758

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