Explain the purpose of creating budgets

Assignment Help Financial Management

Reference no: EM13941434

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.

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

Explain the purpose of creating budgets.

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

Reference no: EM13941434

Questions Cloud

Difference in the moral practices of different societies : In your own opinion and thoughts, how much do you think moral thinking is simply the product of our society - Are there any widely accepted beliefs and practices in our society that you think might actually be mistaken?

Create the java source code files for the classes listed in : Create an abstract base class, Animal. The single constructor requires a String to indicate the type of animal, which then is stored in an instance variable.

Post a brief summary of the main claims of the article : After you read your article, post a brief summary of the main claims of the article, What were your first impressions of the science used to support the claim? Is the evidence convincing in the article, or is there something that seems troubling t..

Explain the purpose of creating budgets : 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 approxima..

Concepts of marketing for a relevant services industry : 1. Discuss concepts of marketing for a relevant services industry 2. Assess the impact of the marketing environment on the industry

Compute the EPS for both Plan : Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 795,000 shares of stock outstanding. Compute the EPS for both Plan

Aftertax salvage value : An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,020,000 and will be sold for $1,220,000 at the end of the project. If the tax rate is 35 percent, what is the aftertax s..

Property management department : How important is it to have strong processes and procedures in your Property Management department? Why and what are some processes relating to reception and tenants needs and briefly describe them?

User Account

All Pages