On a cash budget,if available cash balance plus net cash receipts and disbursements is negative,________.
A) repayment of loan is suggested
B) repayment of loan is required
C) borrowing is necessary
D) borrowing is not necessary

Question

Quizplus · Accepted Answer

A negative cash balance indicates that the company has more cash going out than coming in. Therefore, borrowing becomes necessary to cover the shortfall and avoid defaulting on payments. Option A and B are not applicable unless the negative cash balance is due to outstanding loans/interest payments. Option D is incorrect since borrowing is necessary if the cash balance is negative.

On a Cash Budget,if Available Cash Balance Plus Net Cash