(Appendix 10A) To prepare a cash budget, managers plan:
I. Cash receipts
II. Cash disbursements
III. Short-term borrowing or investments
A) I and II only
B) I and III only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

To prepare a cash budget, managers need to plan for all three components: cash receipts, cash disbursements, and short-term borrowing or investments. Cash receipts must be forecasted accurately to determine the cash inflows, while cash disbursements must be estimated to determine the cash outflows. By comparing these two, managers can determine whether they need to borrow or invest short-term to maintain a positive cash balance. Therefore, all three choices (I, II, and III) are necessary for preparing a cash budget.

(Appendix 10A) to Prepare a Cash Budget, Managers Plan