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

What is standard costing, What is Standard costing Standard cost is a p...

What is Standard costing Standard cost is a predetermined cost. It is a determination in advance of production of what should be the cost. When standard costs are used for the

Describe the method of drawing a break even chart, Describe the method of d...

Describe the method of drawing a break even chart. 1) volume of production/output or sales is plotted on horizontal axis , i. e y - axis . the volume of sales or production ma

Illustrate the concept of cost, Illustrate the concept of Cost The term...

Illustrate the concept of Cost The term cost indicates the amount of expenditure (actual or national) incurred on, or attributable to, a specified thing or thing or cost unit.

Explain the external factors of pricing decisions, Explain the External fac...

Explain the External factors of pricing decisions 1) Demand: the market demand for a product or service obviously has big impact on pricing. Since demand is affected by fact

Determine interest expense for company, Answer each of the following indepe...

Answer each of the following independent questions in the space provided on page 11. Round all computations to the nearest dollar. a) Company A deposited $15,000 in a savings ac

Managerial accounting, As an MBA Managerial Accounting Student, John has as...

As an MBA Managerial Accounting Student, John has asked you to evaluate the alternatives available and make recommendations as to the best course of action, and present it in a Rep

Gather data about alternatives, Gather Data about Alternatives When pot...

Gather Data about Alternatives When potential areas of activity are specified, management must assess the potential growth rate of the activities, the capability of the company

State overhead expenses, State overhead expenses It is to be noted tha...

State overhead expenses It is to be noted that the term overheard has a wider meaning than the term indirect expanses. Overheads include the cost of the indirect material and

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