Report on cash budget, Financial Management

Assignment Help:

The number of properties sold every month indicates that Thorne Co experiences seasonal trends in its business. There is an sign that property sales are at a low level in winter and increase as spring approaches. A proportion of any cash excess is consequently likely to be short-term in nature since some cash will be required when sales are at a low level. Even though net cash flow is predict to be positive in the January the month with the lowest level of property sales the negative opening cash balance indicates that there may be months prior to December when sales are even lower.

Short-term cash excesses should be invested with no risk of capital loss. This limitation signifies that appropriate investments include short-dated gilts, treasury bills, public authority bonds and certificates of deposit and bank deposits. When selecting between these instruments Thorne Co will consider the length of time the surplus is available for the size of the surplus (some instruments have minimum investment levels), the risk associated with each instrument, the yield offered and any penalties for early withdrawal. A small company similar to Thorne Co with an annual turnover slightly in excess of $1m per year is likely to find bank deposits the most convenient method for investing short-term cash surpluses.

Since the company seems to generate a cash excess of approximately $250000 per year the company must also consider how to invest this longer-term surplus. As a fresh company Thorne Co is likely to want to invest surplus funds in expanding its business but as a small company it is probable to find a few sources of funds other than bank debt and retained earnings.

There is so a need to guard against capital loss when investing cash that is intended to fund expansion at a later date. As the retail property market is extremely competitive investment opportunities must be selected with care and retained earnings must be invested on a short- to medium-term basis until an appropriate investment opportunity can be found.


Related Discussions:- Report on cash budget

Price-yield relationship of a callable bond, The price-yield relation...

The price-yield relationship of a non-callable or a non-putable bond is convex because price and yield are inversely proportional. Figure 1 shows the price-yield

Explain marginal cost of capital, Q. Explain Marginal cost of capital? ...

Q. Explain Marginal cost of capital? The calculation of cost of capital focused when the firms total financing and its paten of financing is given and remains constant. However

Standard deviation, Standard Deviation An investment must be evaluated ...

Standard Deviation An investment must be evaluated on two dimensions - rate of return and risk. An investor cannot enjoy a high return without any exposure to risk.  The higher

Current assets management, how is operating cycle applicable to poultrybusi...

how is operating cycle applicable to poultrybusiness in Uganda (broilers)

Bajaj Electronics, 1. How would you judge the potential profit of Bajaj Ele...

1. How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit?

Delivery and credit risk, When a borrower uses repo market for fund f...

When a borrower uses repo market for fund financing, he has to deliver the securities to the lender. One way to do this is to deliver the collateral to the lender

Basic concepts of principles of credit analysis, Credit analysis is the fin...

Credit analysis is the financial analysis used for determining the creditworthiness of an issuer using various quantitative and qualitative factors. The four Cs an anal

Index amortizing notes (ina), In the Index Amortizing note, the princ...

In the Index Amortizing note, the principal is repaid according to an amortization schedule linked to a specific reference rate. It is structured in such a manner

Written report on company, I have a assignment of financial accounting It...

I have a assignment of financial accounting Its a report on company Assignment length 2000 words

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd