8 Cash Management

Managing Finance
Cash Management

Learning Objectives
1. Describe the various receipts and payment
2. Explain the difference between cash flow and profit
4. Explain the difference between cash flow accounting and accruals accounting
5. Understand why a company holds cash.
6. Explain various cash management objectives and decisions.

BM059-3-2-MF Managing Finance

Cash Management

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Learning Objectives
6. Describe the role of treasury function
7. Understand management of surplus cash 8. Prepare a cash budget
9. Understand the difference between a cash budget and a budgeted profit and loss account.
10. Prepare a balance sheet forecast
BM059-3-2-MF Managing Finance

Cash Management

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Key Terms

BM059-3-2-MF Managing Finance

Cash Management

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Slide Contents
1. Cash Flow
2. The Main Types of Cash Receipts and
Payments
3. Cash Flow and Profit
4. Why a Company Holds Cash?
5. Cash management
6. Objectives of a Cash Budget
7. Types of Cash Budget
8. Format of Receipts and Payments Budget
9. Preparing a Receipts and Payments Budget
10. Balance Sheet Forecast
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Cash Management

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1. Cash Flow
• Cash – mainly money in bank account, but also includes notes and coins
• Cash flow – a term for receipts and payments of cash
• Net cash flow – the difference between the cash received in a period and the cash paid out in the same period.

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Cash Management

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2. The Main Types of Cash
Receipts and Payments
•
•
•
•

Revenue receipts and payments
Capital receipts and payments
Drawings/dividends and disbursements
Exceptional receipts and payments

BM059-3-2-MF Managing Finance

Cash Management

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Revenue Receipts and Payments
• Cash receipts and payments arising from normal course of business.
• Revenue receipts are cash receipts from:
– Cash sales, and
– Payment by trade debtors.

• Revenue payments includes payment:
– To trade creditors
– To