Company A has no cash budget. In which of the following areas will this pose a...
Company A has no cash budget. In which of the following areas will this pose a financial risk for the company?
a) Day-to-day management of cash balances
b)Spontaneous financing
c) Inventory control
d) long-term financial planning
Homework Answers
Answer: Option (a) Day-to-day management of cash balances is the correct answer.
Cash budget- It is an estimation of inflow and outflow of cash for a given period of time. It manages the day to day cash that is used in paying expenditure and for short term financing. It also keeps records of daily cash sales. It forecasts the ending balance (positive or negative) by calculating inflow and outflow of cash for an accounting period. Cash budget is very necessary for day to day operations so any company that does not make cash budget, its day to day management of Cash balance may be in risk.
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