Which of the following statements about a cash budget is true?
A)It is usually prepared as a part of the overall master budget.
B)Particular emphasis is paid to cash outflows.
C)Costs of potential shortfalls in cash are built into the firm's cost structure.
D)Cash budgets are strictly long-term forecasts.

Question

Quizplus · Accepted Answer

A cash budget is typically a part of the master budget that outlines the expected cash inflows and outflows for a specific period. It helps in managing the cash flow of the business efficiently.

B) Particular emphasis is paid to cash outflows - This statement is also true, but it doesn't make the statement about cash budget true.

C) Costs of potential shortfalls in cash are built into the firm's cost structure - This statement is not true. Cost structure refers to the composition of fixed and variable costs of a business, and it doesn't have anything to do with potential shortfalls in cash.

D) Cash budgets are strictly long-term forecasts - This statement is not true. Cash budgets can be short-term (e.g., weekly or monthly) or long-term (e.g., annually), depending on the business's needs.

Which of the Following Statements About a Cash Budget Is