Page 161 - P1 Integrated Workbook STUDENT 2018

Budgeting

2.4 Interpreting cash budgets

Factors to consider when interpreting a cash budget are:

 Is the balance at the end of the period acceptable/matching expectations?

 Does the cash balance become a deficit at any time in the period?

 Is there sufficient finance (e.g. an overdraft) to cover any cash deficits?

 Should new sources of finance be sought in advance?

 What are the key causes of cash deficits?

 Can/should discretionary expenditure (such as asset purchases) be made in
another period in order to stabilise the pattern of cash flows?

 Is there a plan for dealing with cash surpluses (such as reinvesting them
elsewhere)?

Illustrations and further practice

Now try example 3 from Chapter 11.

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