The Purpose of the Cash Budget
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"The principal purpose of the cash budget is to see how much cash the company will have in the bank at the end of the year." Do you agree? Explain. If you agree, are there any other purposes that might also be important? If you don't agree, what do you feel is the principal purpose then?
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Solution Summary
This solution explains some of the purposes of a cash budgets. Additionally, it highlights some of the principle methods of determining the cash budget of an organization.
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Planning is the primary function of management. Budgets are the expressions in financial terms of management's plans for operating and financing the business.
The operating budgets are prepared for achieving short-term operational goals of the organization. Operating budgets may be sub-divided into various functional budgets. Different types of operating budgets are prepared for different purposes for ex. Cash budget sales budget, purchase budget, production budget etc.
The cash budget is a summary of the firm's expected cash inflows and Outflows over a particular period of time.
"The principal purpose of the cash budget is to see how much cash the company will have in the bank at the end of ...
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