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Chapter 10

Cash budgets and cash flow forecasts

A cash forecast is an estimate of cash receipts and payments for a
future period under existing conditions.

A cash budget is a commitment to a plan for cash receipts and
payments for a future period after taking any action necessary to bring
the forecast into line with the overall business plan.

Cash budgets are used to:

 assess and integrate operating budgets

 plan for cash shortages and surpluses

 compare with actual spending.

Cash forecasts can be prepared based on:

 A receipts and payments forecast.

 A statement of financial position forecast.

 Working capital ratios.

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