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hell sir,
please can you explain to me how a business manages surpluses and deficits predicted in cash
budgets.thank you.
Given the nature of the exam, this is unlikely to be asked in Paper MA, and is much more likely in Paper FM (and is of course therefore discussed in the Paper FM lectures).
If tt is a short-term surplus then they will look for short-term investments such as a deposit account.
If it is a long-term surplus then they they consider investment in more assets or consider paying a higher dividend to the shareholders.If it is a short-term deficit then they will look to see if they can get debtors to pay sooner, or will make arrangements for an overdraft from the bank, or defer buying new assets or paying a dividend.
If it is a long-term deficit then they will see if they can cut costs or arrange raising long-term finance.
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