Sullivan University **We aren't endorsed by this school
HCA-2020 401
Oct 23, 2023
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16.2 a. What is cash budget and how it is used? A cash budget is a company's estimation of cash inflows and outflows over a specific period, which can be weekly, monthly, quarterly, or annually. A company will use a cash budget to determine whether it has sufficient cash to continue operating over the given time frame. b. Should depreciation expense appear on a cash budget. Explain your answer A cash budget estimates future cash flows for a business for a period of time. Depreciation expense is a non-cash item and would never appear on a cash budget 16.7 a. what is the difference between free trade credit and costly trade credit Free trade credit will refer to firms that make payment within the discount period. Costly trade credit refers to firms that pay after the end of the discount period thereby foregoing discounts and incurring substantial financing costs . b. Should business use all the free trade credit that they can get? Explain your answer. Yes, the actual price of supplies is the discounted price-- the price that would be paid on a cash purchase. Any credit that can be taken without an increase in price is free credit that should be taken c. Should businesses use all the costly trade credit they can get? Explain your answer. No, if the discounted price is the actual price, the added amount that must be paid if the discount is not taken is, in reality a finance charge for granting additional credit.
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