The best and most comprehensive picture of a firm's liquidity position is obtained by examining its cash budget.

Question

Quizplus · Accepted Answer

A cash budget provides a detailed projection of a firm's cash inflows and outflows over a specific period of time, allowing for an accurate assessment of its liquidity position. This includes information on expected cash collections from customers, payments to suppliers and employees, capital expenditures, and other significant cash outflows. By analyzing the cash budget, managers can identify potential cash shortages and take appropriate actions to ensure that the firm has sufficient liquidity to meet its obligations.

The Best and Most Comprehensive Picture of a Firm's Liquidity