Answer The Following Questions From Chapter 7 Finance For Ma

Answer The Following Questions From Chapter 7 Finance For Managers S

Answer the following questions from chapter 7, Finance for Managers. Submit to me via Canvas. 1. What is a budget? 2. What is a fixed budget? 3. What is a disadvantage of a rolling budget? 4. What is a zero based budget? 5. Why is the cash budget important for the firm’s financial managers? 6. Using the Simplified Cash Budget on page 127, answer the following a. What is the ending cash balance for Dec? b. What are the total inflows for Jan c. What is the difference between Total Inflows and Total Outflows d. In March, at row Cash Surplus or Deficit there is a (181). What does this mean? e. How is the Ending balance of cash arrived at? 7. What are the steps to build a cash budget? 8. List five tips for effective budgeting.

Paper For Above instruction

Budgeting is a crucial financial management tool used by organizations to plan, control, and evaluate their financial resources effectively. It serves as a financial blueprint that guides decision-making, ensures funds are allocated properly, and helps organizations achieve their financial goals. In essence, a budget is a detailed projection of an organization's income and expenses over a specified period, typically prepared annually, quarterly, or monthly, to provide a clear financial roadmap.

A fixed budget is a financial plan that remains unchanged regardless of actual activity levels within the organization. Once established, it does not adjust for variations in revenue or expenses, making it useful for straightforward, predictable operations. However, its rigidity can be a disadvantage in dynamic environments where revenue and costs fluctuate frequently.

A disadvantage of a rolling budget is its continuous nature, which requires regular updates—such as every month or quarter—by rolling forward the period. Although this approach keeps the budget relevant and up-to-date, it can be resource-intensive and requires consistent effort to maintain. Additionally, frequent revisions may lead to a lack of stability in planning and potential difficulty in comparing periods from one to another.

Zero-based budgeting is a method where every expense must be justified anew for each budgeting period, rather than just adjusting previous budgets. It starts from a "zero base," with each function within an organization analyzing and defending its budget request. This approach ensures that all expenditures are necessary and aligned with organizational goals, promoting efficiency and cost control.

The cash budget is vital for financial managers because it forecasts cash inflows and outflows over a specific period, ensuring the company maintains sufficient liquidity to meet its obligations. It helps prevent cash shortages that could disrupt operations and allows managers to plan for surpluses, investments, or financing needs. Effective cash management is critical for maintaining the organization’s financial stability and operational continuity.

Based on the Simplified Cash Budget on page 127, we analyze the following:

• a. Ending cash balance for December: This is calculated by adding the beginning cash balance to total cash inflows, then subtracting total outflows during December.
• b. Total inflows for January: Sum of all cash receipts or inflows scheduled for January, including collections from sales, receivables, or other sources.
• c. Difference between Total Inflows and Total Outflows: This indicates whether the cash position is surplus or deficit for that period, calculated by subtracting outflows from inflows.
• d. The (181) at row Cash Surplus or Deficit in March: This negative figure signifies a cash deficit of $181, meaning outflows exceeded inflows by that amount and indicating a need to cover this shortfall through borrowing or other means.
• e. How the Ending cash balance is arrived at: The ending balance is computed by adding the beginning cash balance to the net cash flow (inflows minus outflows) for the period.

The steps to build a cash budget include identifying cash inflows from expected receipts, estimating cash outflows for upcoming expenses, scheduling the timing of these cash flows, calculating net cash flow for each period, and finally, determining the ending cash balance by adding net flows to the opening balance.

Effective budgeting tips include:

1. Set realistic and achievable targets based on historical data and future projections.
2. Involve key departments in the budgeting process to ensure accuracy and buy-in.
3. Regularly monitor and compare actual performance against the budget to identify variances early.
4. Adjust budgets periodically to reflect changing circumstances and new information.
5. Use technology and budgeting software to improve accuracy, efficiency, and data analysis capabilities.

References

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