Using a cash budget is more useful than the percentage of sales method because:
A)Only statement I is correct
B)Only statement II is correct
C)Both statements I and II are correct
D)Neither statement I nor II is correct

Question

Quizplus · Accepted Answer

Statement I is correct because a cash budget provides a detailed projection of cash inflows and outflows, which helps in managing liquidity and ensuring that the company can meet its financial obligations. Statement II is correct because the percentage of sales method is less precise as it assumes that all costs and revenues vary directly with sales, which may not always be the case.

Using a Cash Budget Is More Useful Than the Percentage