Financial Budgeting and Break-Even Analysis Report

Desklib provides past papers and solved assignments for students. This report analyzes financial budgets and break-even points.

Part 6 (a)
Cash budget are the type of the budgets in the company which are prepared by the company for anticipating the
future cash flow position of the company from the various sources. This budget also represents the calculation of
the future expenses of the company for the specific period of time. Thus is to be explained in one word then it can
be said that cash budgets are the formal presentation of the anticipated income and the expenses of the company.
Inventory Budget: This budget represents the need or the requirement of the inventory in the company. This type
of budget in the company represents the valuation of the opening closing inventory in the stock of the company.
Accounts receivable budget: Credit sales and the payment made to the debtors of the company are managed by
the account receivable budget of the company. By the maintenance of this type of the budget in the company
represents the effective use of the working capital in the company.
Accounts payable budget: This budget of the company represents the amount which are payable by the company
to the creditors of the company. Preparation of this budget in the company provides the assurance for making the
timely payment to the customers of the company.
Recommendation:
By making the evaluation of the above budget, the analysis can be made that company is demanding for making
the improvement in the credit policies of the company. Presently the company is collecting the 70% of its dues
after 1 month, 20% in the 2nd month and rest in the third month. Company should develop some strategy in the
company for motivating the debtors of the company to make the early payment. Similarly the company should
develop the strategy for improving the payment policy of the company also.

Part 6 (b)
Break -even point is known as the tool for measuring the point of the company at which the level or the
amount of revenue generated by making the sales of the company recovers all the fixed cost and the
variable cost of the company. At this point the company is making no profits and the losses. As per the
calculations conducted in the previous part it can be said that the company is making the sufficient sales
in the company and recovers the cost to attain the level of Break- even point in the company.
Recommendation:
Sales level of the company should be improved to achieve the high level of profitability in the company.