Which of the following statements is true about cash budgets?
A) They project cash surpluses but do not project cash shortages.
B) They are used by financial managers to get a better understanding of the timing of cash flows within the planning period.
C) They show projected cash inflows and outflows for each year over a tenyear period.
D) They are seldom important because all firms experience even cash inflows and outflows over the course of a year.

Question

Which of the following statements is true about cash budgets?
A) They project cash surpluses but do not project cash shortages.
B) They are used by financial managers to get a better understanding of the timing of cash flows within the planning period.
C) They show projected cash inflows and outflows for each year over a ten­year period.
D) They are seldom important because all firms experience even cash inflows and outflows over the course of a year.

Quizplus · Accepted Answer

Cash budgets are used by financial managers to estimate the timing and amount of cash inflows and outflows within a planning period, usually a year. They project both cash surpluses and cash shortages, allowing managers to anticipate and plan for these situations. They typically cover a shorter period, such as a year, rather than a ten-year period (option C). Lastly, option D is false as all firms do not experience even cash inflows and outflows throughout the year.

Which of the Following Statements Is True About Cash Budgets