An alternative method of projecting a firm's future financial ...

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An alternative method of projecting a firm's future financial needs (such as bank loans ) involves creation of a pro forma cash budget.
 
  Would you consider a cash budget to be more appropriate for short-term or long-term projections? Why? How do monthly cash budgets aid in the development of an annual cash budget? Is a cash budget more helpful for firms with seasonal needs or for those with constant cash flow needs?

Question 2

Paul has a personal auto policy with a per-person liability limit of 300,000. He also has a personal umbrella policy with a limit of 2,000,000 and a self-insured retention of 1,000.
 
  How much will be paid by each policy if a person wins a judgment of 500,000 against Paul as a result of bodily injury arising from the auto accident?
  A) The auto policy will pay nothing, and the umbrella policy will pay 449,000.
  B) The auto policy will pay 250,000, and the umbrella policy will pay 250,000.
  C) The auto policy will pay 300,000, and the umbrella policy will pay 199,000.
  D) The auto policy will pay 300,000, and the umbrella policy will pay 200,000.

[stillxalice]

Answer to Question 1

A CASH BUDGET is a more direct cash flow forecast, because it's based on the assumption that a firm is often currently borrowing money and will need to increase or decrease its loan amount in the coming year. A cash budget forecasts the timing and amount of cash inflows and outflows, and it is often created based on monthly cash flows. This type of budget is particularly useful for firms that face seasonal financing needs. Thus, a cash budget is often more valuable as a short-term rather than a long-term financial forecasting vehicle.

Answer to Question 2

Answer: D

[mmm]

Correct answers!

[stillxalice]

Great! Please up vote