USA Cash Flow Projection


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Please help. I took an Accounting test about Cash Flow Projection and just want to know if I did it correctly. One of the assumptions state that the company will spend $1M in technology in the 1st month of the fiscal year and it currently has a $2 M budget. In doing the cash flow projection, do I just enter $1 in Month 1 and do not enter any projections from Month 2 onwards? Or do i assume that there might be unexpected expenses in technology and input projected expenditures? I only entered the actual expenditures of $1M and no projections. Is this correct? Please advise.
 
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Fidget

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Sounds fine to me. Your question stated that there's a budget for $2m, and $1m of it will be spent in the first month, and so the $1m expected outflow of cash in the first month is what you've put in your projection.

This is cash flow remember, so you can only project cash flows that you expect to come in and go out based on what you know. You cannot forecast for 'unexpected' cash inflows/outflows, because by definition, if it happens, it's a surprise because you weren't expecting it!

Always best to just work with the information you get in a question, otherwise you're in danger of answering a question that wasn't actually set.
 
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bklynboy

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Its a bit unclear but since you have a 2M budget you need to capture 2M throughout the year. 1M we know goes in Jan and the other 1M - thats where you need to understand how they plan on spending.
 

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