Cash Budget and Working Capital Management Quiz

A company expects cash sales of ₱150,000 in March and credit sales of ₱250,000. 60% of credit sales are collected in the same month and 40% in the next month. How much is the cash collection in March

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Answer explanation

• Cash Sales = ₱150,000

• Credit Sales = ₱250,000 × 60% = ₱150,000

• Total = ₱150,000 + ₱150,000 = ₱300,000

The main purpose of a cash budget is to:

• Maximize sales revenue

• Monitor net income performance

• Ensure liquidity and proper cash planning

• Record actual cash inflows and outflows

If a company delays payment of suppliers to the following month, this will:

• Increase current cash balance

• Decrease cash inflows

• Increase cash outflows

• Reduce sales revenue

Which of the following is NOT part of a cash budget?

• Cash inflows from sales

• Depreciation expense

• Cash outflows for expenses

• Beginning cash balance

A firm has a beginning cash balance of ₱50,000. Expected collections are ₱200,000, and disbursements total ₱180,000. The minimum cash balance required is ₱100,000. How much is the excess or deficiency?

• ₱70,000 excess

• ₱30,000 deficiency

• ₱120,000 excess

• ₱20,000 deficiency

Answer explanation

• Beginning ₱50,000 + ₱200,000 – ₱180,000 = ₱70,000

• Required ₱100,000 → Deficiency = ₱30,000

XYZ Corp’s credit policy allows 70% collection in the month of sale, 25% in the next month, and 5% uncollectible. If January sales were ₱200,000, what is the February cash collection from January sales?

• ₱140,000

• ₱50,000

• ₱60,000

• ₱40,000

Answer explanation

From January Sales ₱200,000 × 25% = ₱50,000 collected in February.

If a company underestimates expenses in the cash budget, the most likely result is:

• Excess Cash

• Cash Shortage

• Higher Profit

• Increased equity

Answer explanation

A cash budget is most useful for:

• Identifying non-cash expenses

• Recording past financial performance

• 1. Preparing the income statement

• Planning for seasonal fluctuations in cash needs

Working capital is calculated as:

• Current Assets – Current Liabilities

• Total Assets – Total Liabilities

• Cash + Accounts Receivable – Accounts Payable

• Current Assets ÷ Current Liabilities

If a company’s current ratio is less than 1, it means:

• The firm has more current assets than current liabilities

• The firm may struggle to meet short-term The firm may struggle to meet short-term obligations

• The firm is highly liquid

• The firm is debt-free