The preparation of a cash budget serves which of the following purposes?
A)To estimate the amount and timing of cash flows that are needed in order to optimise the price of the firm's ordinary shares
B)To calculate the amount of future cash flows that would be needed in order to achieve the optimal level of financing during the forecast period
C)To determine the amount and timing of short-term financing that would be required for the operation of a business during the forecast period
D)To estimate the amount of sales volume that would be required in order to achieve the break-even point

Question

Quizplus · Accepted Answer

The preparation of a cash budget serves the purpose of determining the amount and timing of short-term financing that would be required for the operation of a business during the forecast period. This helps to ensure that the business has enough cash on hand to cover its expenses and meet its obligations. Option A is not correct as the cash budget is not related to optimising the price of the firm's ordinary shares. Option B is also incorrect since the cash budget focuses on short term financing, while optimal financing generally refers to long-term financing. Option D is not correct either, as the cash budget does not estimate sales volume or break-even points, but rather focuses on expected inflows and outflows of cash.

The Preparation of a Cash Budget Serves Which of the Following