COMMERCE 1E03 Chapter Notes -Cash Flow Statement, Inventory Turnover, Financial Statement
16 Sep 2013
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Budget: sets forth management"s expectations, allocates use of specific resources throughout firm, balance sheet, income statement, cash flow statement help this process. Operating (master) budget: projection of dollar allocations to costs/expenses need to run business given projected revenues, how much firm will spend on supplies, travel, rent, ads, research, etc. Capital budget: highlights firm"s spending plans for major asset purchases, buying property, buildings, equipment. Cash budget: estimates projected cash inflows and outflows, firm can plan for cash shortages/surpluses, want to maintain minimum cash balance (safety level) Financial control: firm periodically compares actual revenues, costs, expenses with projected ones. Show what people/departments are varying from financial plans. Money is a time value (good to have now not later so can invest) Interest gained on firm"s investments is important in maximizing profit company will gain. Firms should keep cash expenditures at a minimum. Want to free up funds for investment and interest-bearing accounts.
