Constructing a Cash Budget and Projecting Financial Statements: An Exercise of Short-Term Financial Planning for Entrepreneurs
Review of Business & Finance Studies, Vol. 5 (1) pp. 99-112, 2014
14 Pages Posted: 1 Feb 2014
Date Written: 2014
Abstract
This case presents a teaching tool that equips students with an essential skill of short-term financial planning for entrepreneurs. Short-term financial planning concentrates on a venture’s cash needs, the lifeblood of an entrepreneurial venture, so these ventures can better survive the early stages of operations. In this case, students are required to build up a cash budget by utilizing payment schedules of sales, inventory purchases and wage-and-commissions. Other tasks demanded by this challenging case include projecting the following: monthly income statements, balance sheets and statements of cash flows over a four-month period. Students who take on this case should possess a solid understanding of the interrelationship among income statements, balance sheets and statements of cash flows. This case is suitable for a graduate-level finance course or an upper-level undergraduate class of entrepreneurship in either finance or accounting departments. Students might be assigned to work individually or in groups on this case. Completion of the case requires 10-15 hours outside of class. Class discussion should be about 2-3 hours.
Keywords: Entrepreneurial Finance, Cash Budget, Financial Statements
JEL Classification: M13, M41
Suggested Citation: Suggested Citation