Management and Organizational Studies 2310A/B Chapter Notes - Chapter 20: Cash Flow, Capital Market, Libor

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Danny Morrison

Document Summary

The first step in short term financial planning is to forecast the company"s future cash flows. Occasionally, firm"s will encounter a period of time where cash flows are temporarily negative for an unexpected reason. This can still create a demand for short term financing. Although the opportunity to grow more rapidly is positive, it results in a negative cash flow during the first quarter. Because the company will be even more profitable in subsequent quarters, financing need is temporary. When sales are concentrated during a few months, sources and uses of cash are also likely to be seasonal. Firm"s in this position may find themselves with a surplus of cash during some months that is sufficient to cover shortfalls in other months. But because of timing issues some short term financing may be required for slow months. Cash budget: a forecast of the cash inflows and outflows on a quarterly or sometimes monthly basis.