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    What information is needed in order to prepare a cash budget?

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    What information is needed in order to prepare a cash budget? What is the relationship between an operating budget and a cash budget? Why is it important for an organization to prepare a cash budget?

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    Solution Preview

    What information is needed in order to prepare a cash budget?
    The information needed in order to prepare a cash budget are:
    1) Cash Inflows
    2) Cash Outflows
    3) Closing and opening cash balances

    What is the relationship between an operating budget and a cash budget?
    The operating budget gives inputs to prepare the cash budget. For example, the sales budget will tell about the cash inflows from the customers and sales. The purchase budget will give information about the outflows relating to the material. The operating expense budget will determine the cash outflows relating to the expenses.

    Why is it ...

    Solution Summary

    This response explains the concept of a cash budget. It provides information on the difference between a cash budget and an operating budget and the importance a cash budget has for an organization.

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