Step 7b Disbursements For Capital Expenditures Budget

The Disbursements for Capital Expenditures Budget reconciles the accrual values from Step 7A to cash figures. This schedule ties into the creation of the Cash Budget, which is covered later in this chapter. My financial model makes the assumption that Napavale disburses, or pays for, 100 percent of the current period's capital expenditures purchases. This assumption is highlighted in the Assumptions and Dashboard worksheet in Figure 6.7. Note that I am treating the disbursements for capital expenditures in a fundamentally different way than I treated the disbursements for operating expenses in Chapter 4.

While I utilized the concept of "days payable" in Chapter 4 for the Disbursements for Operating Expenses Budget, I address the issue of linking disbursements for capital expenditures to the purchases projections for capital expenditures by assuming a certain percentage of a given period's purchases are paid for, or disbursed, in that same period.

It is important to note that I am assuming all capital expenditures will be paid for in either the period in which the item underlying the capital expenditure is bought or in the following period. As such, all capital expenditure purchases are either paid for in the period in which they were purchased or

Capital Expenditure Budget
FIGURE 6.7 Assumptions and Dashboard Worksheet

in the immediately subsequent period. This is not an issue in my financial model for Napavale as I am assuming all capital expenditure purchases are paid for in the period incurred, but you can modify this style of financial model to account for different assumptions.

This "percentage paid for in a given period" approach to linking accrual-based budget figures and actual cash disbursements for those purchases represents another approach to building a financial model as compared to the days payable approach highlighted in Chapter 4. I am presenting this percentage approach for the sake of reference. You should feel free to use whichever approach is most appropriate for your own financial models.

Figure 6.8 presents the Capital Expenditures Budget worksheet, which now includes projections for the disbursements for capital expenditures.

Figure 6.9 offers an alternative view of the Capital Expenditures Budget worksheet in which the values and formulas contained within the worksheet's cells are exposed. Due to the length of several of the formulas in this worksheet, only a few of the columns are shown in Figure 6.9. Based on the manner in which the "percentage disbursement" approach for capital expenditures works, I need to account for the payment of capital expenditures incurred in prior periods using the formulas shown in the rows in

Capital Expenditure Budget Spreadsheet
FIGURE 6.8 Capital Expenditures Budget

the worksheet under the "Disbursements for Capital Expenditures Budget" heading.

The names of the input and output cells in the Assumptions and Dashboard worksheet are presented in Figure 6.10. Figure 6.11 offers a view of the names of the input and output cells in the Disbursements for Capital Expenditures Budget worksheet.

Images Capital Budget Work Sheet

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  • Geraldino
    What are disbursements for operating expenses?
    5 years ago
    What does a capital expenditure budget look like?
    2 years ago

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