Use the information below to answer the following questions.
Saddle Company, a leather manufacturer, has a sales budget of $500,000 for February. The cost of sales is estimated to be 35% of sales. All materials purchased by Saddle Company are paid for in the month following the purchase. The beginning inventory for February is $10,000, and an ending inventory of $11,000 is desired. The trade payables balance at the beginning of February is $88,000.
-Which of these is a question that could be asked when evaluating the implications of the cash budget?
A) Is the profit level satisfactory?
B) Is the level of gearing satisfactory?
C) Is there any need for additional finance?
D) All are questions that could be asked.

Question

Quizplus · Accepted Answer

Evaluating the cash budget would involve examining the inflows and outflows of cash in order to determine if there is a need for additional finance. The other options (profit level and gearing) are more related to overall financial performance rather than specifically evaluating the cash budget.

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