The ABC Company Is Preparing Its Cash Budget for the Upcoming

Essay

The ABC Company is preparing its cash budget for the upcoming year. ABC ended the previous year with cash of $20,000. Collections from customers are expected to total $105,000 for the year and payments for inventory are expected to be $87,000. Operating expense payments are budgeted at $26,000. During the year, May expects to purchase $41,000 in new equipment, sell old equipment for $5,000 and receive dividends of $4,000. ABC needs to have a cash balance of $33,000 at the end of the year.
Required:
1. What is the advantage of a company preparing a cash budget?
2 Prepare the cash budget for the ABC Company, including the amount of excess cash or the amount needed to be financed.