BUISENESS MANAGEMENT
FINANCIAL MANAGEMENT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
to break the income statement down into monthly periods
|
|
|
to determine monthly cash receipts
|
|
|
to determine the collection pattern
|
|
|
to allow the firm to anticipate the need for outside funding
|
Detailed explanation-1: -The primary purpose of the cash budget is to allow the firm to anticipate the need for outside funding or excess funds to be invested. The primary purpose of the cash budget is to forecast income. Companies generally prefer to maintain some minimum cash balance.
Detailed explanation-2: -A company will use a cash budget to determine whether it has sufficient cash to continue operating over the given time frame. A cash budget will also provide a company with insight into its cash needs and any surpluses, which help it determine if the business is using cash effectively.
Detailed explanation-3: -The purpose of a cash budget is to estimate cash receipts, cash payments and the resultant cash balances over a particular period in the future.
Detailed explanation-4: -The cash budget represents a detailed plan of future cash flows and is composed of four elements: cash receipts, cash disbursements, net change in cash for the period, and new financing needed.