Cash planning, Managerial Accounting

Assignment Help:

Firms need cash to invest in inventory, receivables and fixed assets and to create payments for operating expenses, so as to increase earnings and sales and make sure the smooth running of business.

In the absence of appropriate planning the firm may face two types of conditions:

i)  Cash deficit, and

ii) Cash Surplus.

In the former condition the usual working of the firm may be hampered and in excessive cases this kind of situation may cause liquidation of the firm. In the last case the firm having surplus cash might be losing out on chances of earning good returns, like the cash is remaining as idle. So as to ignore these types of conditions the firms must resort to cash planning. Cash planning is a method to control and plan the use of cash. This involves anticipating future cash flows and cash requirements of the firm. The major goal of cash planning is to decrease the possibility of idle cash that lowers the firm's profitability and also cash deficits that can cause the firms failure. Cash planning includes developing a projected cash statement from a forecast of cash outflows and inflows for a specified period. Such forecasts are depends on anticipated present or future operations. The frequency of cash planning would base on the nature and complexity of the firms operations. Generally large firms prepare weekly and daily forecasts while medium and small firms prepare per month forecasts.


Related Discussions:- Cash planning

Characterize the short run production function of a firm, Question 1: (...

Question 1: (a) ‘The car industry is characterized by broad products differentiation' Analyse the long run situation of a car producer, commenting on profitability and efficien

prepare an income statement, Adm2341 manufactures and sells four different...

Adm2341 manufactures and sells four different products. The following data are extracted from the most recent financial statements:   Products

Cyclic chains-recurrent state, Cyclic Chains: In Markov Chains the cur...

Cyclic Chains: In Markov Chains the current state of the system depends on all previous states. It is a stochastic process.  Sometimes transition probability matrices are diff

Cost behavior, Echeverria SA is an Argentinian manufacturing company whose ...

Echeverria SA is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to year according to the number of machine-hours worked in its

Amount of working capital, Number of Operating Cycles: The number of opera...

Number of Operating Cycles: The number of operating cycles in a period is determined by dividing the number of days in a year i.e.365 by the length of net operating cycle. Express

Distinguish between advertising and public relation, Question 1: a. Dis...

Question 1: a. Distinguish between Advertising and Public Relation? b. Discuss the methods adopted by a Public Relation company in promoting the image of a destination in th

Moore company uses process costing, Moore Company uses process costing.  Th...

Moore Company uses process costing.  The following information was available for October: During October, 1,000 units were started, and costs incurred during the month were

Case law & study, You are charged with describing the important considerati...

You are charged with describing the important considerations in the decision-making process to upper management. In your response, be sure to include the following: • A descript

Prepare two tables showing net profit, Prepare two tables showing net profi...

Prepare two tables showing net profit, residual income and return on investment for each year of the project and also net present value (NPV) for: (i) The BEST OUTCOME; (ii) The

The securities and exchange commission (sec), Explain:- Q.1 As a potent...

Explain:- Q.1 As a potential investor, what is the problem with different countries having different accounting standards? As the president of a multinational company, what is

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd