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

Managerial decision, Explain the practical application of differential cost...

Explain the practical application of differential costing with examples

Breakeven analysis, I am part of a marketing group, and we are working on a...

I am part of a marketing group, and we are working on a project for a local cable company,they currently serve 3,200 customers and sell 50 wireless boxes a month,what I need to do

Explain prerequisites of a sound variances analysis system, Prerequisites o...

Prerequisites of a sound variances analysis system A variance analysis system would be good enough in controlling costs and evaluation performances if the following requirement

Budget, advantage and disadvantage of incremental budget

advantage and disadvantage of incremental budget

Explain variable cost and fixed cost, Explain variable cost and fixed cost ...

Explain variable cost and fixed cost Variable costs: costs that vary almost in the direct proportion to the volume of production are known as variable costs. The examples of

ACCT II, 1. Common-size analysis of company''s income statement, Balance sh...

1. Common-size analysis of company''s income statement, Balance sheet 2. Horizontal analysis of company''s income and balance sheet : for the last two years for both 3.perform rati

Definition of cost reduction, Definition of Cost reduction Cost reducti...

Definition of Cost reduction Cost reduction is planned positive approach to reducing expenditure. Cost reduction exercises are planned campaigns to cut expenditure. It is a con

Types of costs, Types of Costs In short run, costs can be of three gene...

Types of Costs In short run, costs can be of three general kinds: Fixed Cost: Total fixed costs stay constant as volume differs in the relevant range of production. Fixe

cost per equivalent unit was determined , The Ragan Corporation uses a pro...

The Ragan Corporation uses a process cost system. The company started March with 2,300 units in Work in Process-Dept. A. During the month 4,000 units were started. At the end of th

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