The process of preparing a cash budget requires the financial manager translate the pro forma income statement into cash flows.

Question

Quizplus · Accepted Answer

A cash budget is prepared by analyzing the projected cash inflows and outflows during a specific period of time, usually a month or a year. The cash budget is based on the pro forma income statement, which provides the revenue and expense projections for the same period. The financial manager needs to translate the income statement into cash flows to determine the actual cash inflows and outflows, and to identify any cash shortfalls or surpluses.

The Process of Preparing a Cash Budget Requires the Financial