• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Cash Budget for Stoddard Ltd

Extracts from this document...


Foundation Degree in Accounting & Finance Subject: Financial Planning Tutor: Linda Jordon Title of work: Cash Budget for Stoddard Ltd Name: Daisy So Cash Budget for Stoddard Ltd for six months to 1 November 2001 Jun Jul Aug Sep Oct Nov £ £ £ £ £ £ Cash inflows Credit Sales 7350 8750 10150 11550 Cash Sales 3150 3750 4350 4950 6000 6000 3150 3750 11700 13700 16150 17550 Cash Outflows Freehold Property 60000 Equipment 8000 20000 Vehicle 4000 Purchases 34375 10875 12375 13875 16500 Wages & Salaries 1000 1000 1000 1000 1000 1000 Overheads 400 400 400 400 800 800 Commission to salesmen 525 625 725 825 1000 73400 36300 12900 14500 16500 39300 Cash flow (70250) (32550) (1200) (800) (350) (21750) Opening Balance 80000 9750 (22800) (24000) (24800) (25150) Closing Balance 9750 (22800) (24000) (24800) (25150) (46900) Financial Position of Stoddard Ltd Based on the cash budget which I prepared on previous page, we can see Stoddard Ltd is having problem with their cash situation. It is mainly due to the long credit terms for their debtors, overstocking and the initial cash payment for the freehold property and equipment. The management should use the economic order quantity (EOQ) method to carry out their stock control. Other methods such as just-in-time and optimised production technology are also available but since Stoddard is worry about the interruption towards the end of the accounting year, just-in-time method is not the best solution to this situation. ...read more.


We can argue that it is true that behavioural problems can lead to lack of objectivity in budgetary information, lack of motivation and consequent dysfunctional effects. However this should not be seen as a reason for not budgeting but as a reason to budget in such a way as to minimise the behavioural impacts. The first stage in doing so is recognising the existence of the possibility of such impacts. Measures can then be taken to minimise their effects. Discuss how budgeting may be harmful to the achievement of business objectives By involving managers in budget preparation we can create a communication channel, and managers at all levels are more likely to understand the justification for any changes in operations. In such case, instead of complaining, they might well become more constructive, and even innovative in their responses. However, there are advantages and disadvantages of budgeting in the dynamic business environment. P Atrill & E McLaney (2002:132) suggested that budgets are seen as having five main benefits to the business - promote forward thinking and the possible identification of short-term problems, motivate managers to better performance, provide a basis for a system of control, help co-ordinate the various sections of the business and provide a system of authorisation. The advantages of budgeting are to help to control income and expenditure, helping to draw attention to waste, losses and inefficiency. ...read more.


For example, just think of the consequences of this: a manager may add 10% to the proposed budget expenditure in anticipation of being cut down later, senior management cuts it down by only 5%. It takes only a few budget managers to do this and the company will soon be suffering. If four managers require £100 000 each but bid for £110 000 each and receive £105 000 each, the company will be wasting £20 000. In conclusion, the intention of budgeting is to provide budget managers with a powerful incentive to make company priorities their own, to seek out and deliver economies, driving down costs while maintaining or boosting performance. By rewarding relatively objective budgetary performance, organisational performance can be improved. This may work to some extent, but it can also produce a further twist in the spiral of distrust, self-protection, deception and cynicism. When pressure to achieve budgetary targets frequently requires managers to make false economies, to withhold co-operation from other department, and to avoid expenditures by imposing even greater costs on other people's budgets, then clearly something has gone wrong. Furthermore, there is the issue of information and uncertainty. Senior managers do not know what sorts of saving are possible, or what levels of service would be associated with different levels of expenditure. They may have hunches and rough ideas, but they cannot be certain, perhaps by spending considerable time or resources finding out themselves. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Finance essays

  1. BAAF Accounting & Finance/ ACCA Professional Accountancy Course

    However, if a trend shows an incline over the years, this may not be positive in its entirety, as a high current ratio often indicates that a company may be typing up an increasing proportion of its resources in stock, debtors and bank, etc, instead of utilising them to expand the business by investing in fixed assets.

  2. This group assignment of Financial Management will assess the positions financial performances for six ...

    While for Grand Capital, they use more on owner fund instead of credit fund. They focus more on minimizing the long term debt. By taking a look at the graph, the gearing ratio for the past five years is very low.

  1. Is there a future for one global set of generally accepted accounting principles ?

    all countries of financial significance, for application in their jurisdiction by law or regulation. Factors affecting IFRS adoption We have learned that there are various factors that can influence the action of regulators, and various theoretical perspectives can be applied when making a judgment about the factors that will be

  2. OUTLINE OF BUSINESS PLAN - opening a caf.

    This would be an advantage to my café as, I will have an opportunity to attract students through my special offers which in return will increase my potential customers. TRANSPORT LINKS IN GREENWICH Greenwich has one of the best transport links in London.


    E1 = E0 *(1+g) = $ 2.16 *(1 + 13.1%) = $ 2.44 P0 = $ 42.09 Hence, cost of equity is estimated at: $2.44/$42.09 = 5.80%. Advantages of ECM 1. It is easy to use and calculate the cost of equity and fewer inputs are required.

  2. Evaluate the relevance and the effectiveness of the 'Balanced Scorecard' approach to performance measurement ...

    To facilitate measurement, the Balanced Scorecard adopts the following approach. Within each elements it specifies: * Critical success factors (CSFs). These represent the things the organisation has to achieve in order to successfully implement its strategy * Measures for each CSF * Targets to be reached for each measure *

  1. Organisational and Managerial Performance - How, when, where and by whom should organisational, managerial, ...

    Continuing feasibility is further likely when concerns and interests of each individual party are recognised, reconciled, and satisfied successfully. . (a) The Company It is important, when identifying specific measures, to remember that this performance can only be measured against previously set aims and objectives, which differ on different levels within the company.

  2. A Comprehensive Study of Credit Control in Banking Industries With Special Reference to ICICI ...

    This is commensurate with our focus on increasing funding through low-cost deposits and retail deposits. The cost of deposits increased by 133 basis points to 7.5% in fiscal 2009 from 6.2% in fiscal 2008 consequent to general increase in interest rates in the system, and in particular the tight systemic

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work