Financial Management
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You and the VP of Accounting are meeting with the CFO next week to discuss critical areas of the operating budget for next year and the capital budget as well. Of particular concern to the CFO is the company's working capital position, the impact of some short-term notes that the company must pay-off next year, the company's current ratio, and determining how to finance a major capital project (construction of a new production plant).
Assume you are organizing your thoughts for the meeting with the VP of Accounting in preparation to meet with the CFO later. Go to the Discussion Board and discuss the following topics, giving examples:
(1) how working capital can impact a company's finances;
(2) what the company can do to handle short-term debt that is coming due;
(3) explain current ratio, discuss its implications, and describe a good current ratio; and
(4) describe briefly how businesses make capital budgeting decisions.
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Solution Summary
The response addresses the queries posted in 960 words with references.
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The response addresses the queries posted in 960 words with references.
//Organizations need to take various decisions during the course of its business. Different estimates and forecasting needs to done by the companies regarding the business decisions, whether short term or long term. Thus, before considering the discussion points we should introduce the operating and capital budgets like this: //
Operating Budget of an organization indicates the estimated operating revenues along with operating expenses. Organization estimate and prepare their operating budget for the following year by analyzing its past and current trends according to the available data. It is prepared for a period of one year and shows the estimates of normal operations during that course. On the other hand, Capital budget is prepared for more than a year and handles the long term capital expenditures and revenues, if any. It provides the view of capital expenditures that the organization needs to make over the long term period of say 3 to 5 years or more (Finkler & Graf, 2000).
//As we have discussed about the operating and capital budget, we should now move forward and discuss the various critical areas. In this regard, we will start the discussion from the working capital's impact on the company finances' and discuss examples in this regard. //
Working Capital indicates the amount that the company requires in its normal day to day operations. Investment in the working capital requires ...
Education
- MBA (IP), International Center for Internationa Business
- BBA, University of Rajasthan
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