D076 Unit 5 Study Questions

Company ABC would like to continue to grow, but in order to maintain control of all decisions and ownership, it wants to avoid issuing new stock. Which calculation will show the company's leadership the fastest that ABC can grow? - Sustainable growth rate How can you use the envelope method of budgeting to monitor cash flows? - Put the amount of money budgeted for each category of your expenses into labeled envelopes and then spend the money in each envelope on expenses in that category. How do the benefits of knowing the cash position for each period differ between businesses and individuals? - Knowing the cash position allows businesses to recognize when short-term loans are needed, while it allows individuals to analyze progress toward their personal financial goals. How should you go about making changes to your budget? - Prioritize the changes you want to make and then implement them gradually one by one to make sure they work. In which situation would a firm need to borrow cash? - When the beginning cash balance plus the net cash is less than the minimum cash balance required for the month W&H Company wants to create a cash budget to better manage its cash flows. The financial manager knows that the firm's labor costs and materials costs are too high for the level of sales each month. The firm also needs to keep better track of its cash flows to assess its need for additional financing through short-term loans. After W&H Inc. has developed a cash budget, what should the company do in the following months? - It should monitor its actual cash flows and then revise the cash budget if needed. W&H Company wants to create a cash budget to better manage its cash flows. The financial manager knows that the firm's labor costs and materials costs are too high for the level of sales each month. The firm also needs to keep better track of its cash flows to assess its need for additional financing through short-term loans.