Management accountants usually provide for a minimum cash balance in their cash budgets for which of the following reasons?
A)Stockholders demand a minimum cash balance.
B)It is an important way of effectively managing cash.
C)It provides a safety buffer for variations in estimates.
D)It makes funds available for major capital expenditures.

Question

Quizplus · Accepted Answer

Providing for a minimum cash balance in cash budgets provides a safety buffer for variations in estimates. This means that if estimates for cash receipts or cash disbursements are not accurate, there would still be enough cash available to operate the business or pay bills without experiencing a cash shortfall. It is an important way of effectively managing cash flow and reducing the risk of financial difficulties. Choices A, B, and D are not accurate reasons for providing a minimum cash balance in cash budgets.

Management Accountants Usually Provide for a Minimum Cash Balance in Their