CASH BUDGET A TOOL FOR DECISION MAKING IN AN ORGANIZATION A CASE STUDY OF NIGERIA

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY:

Every rational economic unit has some objectives to attain, individual, corporate bodies in government have objectives to achieve. To achieve their respective objectives, resources have to be made available, unfortunately nature did not distribute her resources abundantly, whilst objectives and needs are numerous and varied as they are various economic units.

In order to make resources available, cash is needed, according to investopedia, cash is legal tender or corns that can be used to exchange goods, debt or services some time it can also incluces the value of assets that can be converted into cash immediately, as reported y a company.

Acoring to Shine Mat (15 June 2012): companies have those primary motives for holding cash and hey are:

The transaction motive

The precautionary motive

The speculative motive.

The transation motive enables firms and companies to conduct their ordinary business making purchases and sales. The precautionary motive depends on the predict ability of cash flow and the ability of company to borrow a short notice. This motive enable a firm to provide enough funds as a protection against unexpected opportunity that may arise. Moreover, sound working capital management require the maintenance of adequate amount of cash. The organization must plan towards its and this plan is know as budgeting a subset of corporate plan.

1.2     STATEMENT OF PROBLEM

Budget is one of the controlling instruments used by the management, it is a plan or estimate to be attained by an enterprise. In this study, efforts are made ot find solution to the following problems. The problem of why budget cases failed to be realized it is because of insufficient capital. Another problem that management face is their liability ot manage (long term) cash budget and forecast which may take up to two years, this is because of instability in the inflow and outflow of cash. Cash balances my fluctunate considerably within a single accounting period, there by making cash short tall that can put a company in serious jeiopardy. To solve this, it is quite common to create and maintain cash forecasts on a weekly basis. If there may be large or unusually cash balances indicated in the cash budget. these balances are dealt with in the financing budget where suitable investment is indicated for them.

1.3            OBJECTIVE OF THE STUDY:

The main objective of this study is to investigate cash budget as tool for decision making in an organization specifically, the researcher wants to:

i         Determine where cash budget is actually a basis for decision making in an organization.

ii        Know the impact of conducting continuous cash budget

iii       The level of which cash budget has help organizations increasing more wealth and effective management

iv       How cash budget allows management to establish the amount of credit that it can extend to customers without beginning to have problem’s with liquidity.

v        Know how cash budget help the organization to avoid having a cash shortage during when you have numeral expenses.

vi       To know how management manages it inflow and out flow