You are required to: 1. Explain Cash Budget 2. Prepare Cash budget for Company 3. Interpret the Results. 4. Give your recommendation for Credit Policy of Company. 5. What do you think about company's Cash or Liquid Position? 6. How company can increase its liquidity? Cash budget is a summary of cash receipts and cash payments over a specific period of times. This budget tells whether the company has sufficient cash to operate or not. Saudi Agricultural Company Cash Budget For the Three months ending April 30 February March April 5000 -50000 -51500 391) 40 41 42 432) 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 24000 72000 26000 96000 18000 68000 3000 94000 46000 70500 Opening Balance of Cash Add Cash receipts Cash Sales 80% Collected in the next month Interest Income Total Cash Available Less Disbursements Payment to Suppliers Payment for Wages Payment for Overheads Rent expense Advance Income Tax Paid Rent expense Advance Income Tax Paid Bonus Purchase of Plant Total Disbursements Ending Balance 48000 10000 13500 1000 52000 11000 15000 1000 60000 14000 16000 1000 15000 1000 1000 1000 15000 10000 61500 144000 -50000 18500 97500 -51500 106000 35500 57 58 59 60 61 62 63 64 65 66 67 66 Company's Liquidity position is very poor.It has to change its credit policy