The following rule applies when preparing the cash budget.If available cash plus net cash receipts and disbursements is negative,then borrowing is necessary.

Question

Quizplus · Accepted Answer

This statement is true. When the available cash balance plus net cash receipts and disbursements is negative, it means that the company is short on cash and needs additional funding to cover its expenses. This can be achieved through borrowing, such as obtaining a loan or line of credit. Therefore, it is important to consider the cash budget and potential financing needs when planning for a company's cash flow.

The Following Rule Applies When Preparing the Cash Budget