The paper "Amazon Cash Flow and Cash Budget" is a perfect example of a finance and accounting case study. From the cash budget Analysis, the closing balances for the month of May are growing evident. This is a result of the growth in cash received, that tax rebate, as well as the grants, received. The closing for the month of June declined because of the part payment of new equipotent bought in May. Recommendation To better, ensure that the closing balance is growing each year. The company must focus on ensuring that it has an effective cash flow management to finance its daily operations.
The company should as well reconsider its debts and creditors control policy to make sure that the debts collection period takes the shortest time possible while creditor’ s payment period takes the longest time possible. In doing so, the company will be guaranteed of effective working capital management and hence, there shall be a deficit of cash flow to finance the company’ s daily business operations. With regards to a capital investment like an Acquisition of equipment, the company must first ascertain the visibility studies of the new equipment and whether the equipment will realize positive returns within the shortest time possible.
If the equation of new equipment is viable, then the company must consider incurring that huge capital investment since it will guarantee that the invested capital will realize returns within the shortest time possible. The bank loan should be reduced since using the bank loan as a source of fiancé will be deem costly to the business since the bank repayment will comprise of principal amount and interest which is considered costly to the business.
To better finance the business operations, the company must ensure that it is having effective capital management, which depicts the least cost of capital and high value to the firm. The best source of capital for the business is the use of debt and equity capital. The main function of the cash budget Short-Term Budgets This budget is important in forecasting the payment that requires immediate finance allotment a well as identification that might help in offsetting this requirement. The short-term budget as well is important in determining the short-term venture that might realize interest whilst the finance is being used. Interim-Term Budgets On the basis of the estimation from the interim budget, the manager makes the verdict concerning the annual borrowing need as well as accumulating the accountable plans.
Interim budget as well provides for the yearly increment to workers, principal loan as well as an insurance payment. It takes the inventory interest accumulation; sales income accrued forward from the past year as well as deposit renewal. Long-Term Budgets These budget support strategic verdict making like capital investment in equipment, business diversification plans as well as the labor forecast costing.
On the basis of long-range prediction, the business creates a sustainable cash reserve that aid in executing the plans. The management budgets are derived for the relevant timeframes. These are afterwards managed effectively with the support of the experts.
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