MANAGING FINANCIAL RESOURCES AND DECISIONS

Managing Financial Resources and Decisions



Managing Financial Resources and Decision

Part A

Introduction

The business we have selected is the parking plaza. The name of our project is “Car-In Parking Plaza”. The place at which we are going to launch these services will be located at Westminster, London. The legal status of the business is registered partnership between the two partners.

Cash Budget

The cash budget provides information of financing activities; specifically it gives a broad perspective on the occurrence of inflows and outflows in a given period, helping finance managers to make the right decisions about their use and handling.

Purpose of Cash Budget

Cash budget sets out in detail all anticipated cash inflows from all sources and expenditures (expenses), thus giving a projected cash balance. Budget funds provide information about the amount and time needed loans. Purpose of budgeting includes following:

It coordinates the different centers of cost to ensure the progress of the company as a whole.

Planning the results of the organization money and volumes

Control the management of revenues and expenditures of the company.

Coordinate and link the activities of the organization.

Achieving the results of regular operations.

Importance

The cash budget results in large time savings and better financial management. Budget items will serve as guides during the execution of programs for personnel in a given period of time, and serve as a standard for comparison once managers have completed plans and programs. The cash budget or forecasting cash allows the company to schedule its short term needs, the company's financial department in most cases pay attention to the planning of cash surplus as to planning of their deficits, as to get these remnants can be reversed, but otherwise if missing plan how to find short-term financing.

Limitation

Budgeting can fail for several reasons:

When only studies the numbers and conventional chart showing the time without taking into account the background and causes of the results.

When not clearly defined management responsibility for each area of ??the organization and its leaders do not understand their role in achieving the goals.

When there is adequate coordination between various hierarchical levels of the organization.

When there is good communication and therefore, there are misgivings that disrupt and prevent the contribution of partners towards the attainment of budgeted goals.

When there is an accounting system that builds trust and credibility. Cash Budget for six month trading

Cash Budget

Jan

Feb

Mar

Apr

May

June

Total

Beginning cash balance

261,000,000

259,075,333

257,185,993

255,332,392

253,514,947

251,734,079

261,000,000

Cash from operations (Sales Revenue)

2,004,000

2,004,000

2,004,000

2,004,000

2,004,000

2,004,000

12,024,000

Total Available Cash

263,004,000

261,079,333

259,189,993

257,336,392

255,518,947

253,738,079

273,024,000

Less:

Total Expenses

883,667

883,667

883,667

883,667

883,667

883,667

5,302,002

Interest

3,045,000

3,009,673

2,973,934

2,937,778

2,901,201

2,864,196

17,731,782

Total Disbursements

3,928,667

3,893,340

3,857,601

3,821,445

3,784,868

3,747,863

23,033,784

Cash Balance (Deficit)

259,075,333

257,185,993

255,332,392

£253,514,947

251,734,079

249,990,216

249,990,216

Add:

Long-term loans

Total Additions

Ending Cash Balance

259,075,333

257,185,993

255,332,392

253,514,947

251,734,079

249,990,216

249,990,216

Interpretation of the cash budget

The cash budget figures supplied by the company indicating the final balance in cash, which can be analyzed to determine whether a company expect a deficit or surplus cash during each period of the forecast. In the first month, the opening cash is taken from the loan amount which is 40% of the total finance. It can be used for the different purposes of business operations, thus we use it as opening cash balance. The cash inflows include all cash receipts in any period, the most common are cash ...