Which of the following statements is CORRECT?
A) Shorter-term cash budgets,in general,are used primarily for planning purposes,while longer-term budgets are used for actual cash control.
B) The cash budget and the capital budget are developed separately,and although they are both important to the firm,one does not affect the other.
C) Since depreciation is a non-cash charge,it neither appears on nor has any effect on the cash budget.
D) The target cash balance should be set such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts,although it should be changed to reflect long-term changes in the firm's operations.
E) The typical cash budget reflects interest paid on loans as well as income from the investment of surplus cash.These numbers,as well as other items on the cash budget,are expected values;hence,actual results might vary from the budgeted amounts.

Question

Quizplus · Accepted Answer

The statement that the typical cash budget reflects interest paid on loans as well as income from the investment of surplus cash is true. However, these numbers, along with other items on the cash budget, are expected values and may not necessarily reflect actual results. Therefore, option E is the correct statement. The other options are incorrect. Option A is incorrect because both short-term and long-term cash budgets are used for planning and control purposes. Option B is incorrect because the cash budget and capital budget are interrelated and affect each other. Option C is incorrect because although depreciation is a non-cash expense, it does affect the cash budget indirectly through its impact on taxes. Option D is incorrect because the target cash balance should be adjusted for seasonal patterns and unanticipated fluctuations in receipts or disbursements to maintain sufficient liquidity.

Which of the Following Statements Is CORRECT