Using a cash budget is more useful than the percentage of sales method because:
I. It can more precisely estimate the amount of financing needed.
II. It can better estimate the time of financing need.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question

Quizplus · Accepted Answer

A cash budget provides a detailed projection of all cash inflows and outflows over a specific period, typically monthly, and can estimate the exact amount and timing of financing needed. On the other hand, the percentage of sales method only estimates the financing needed based on a percentage of the anticipated sales, but does not take into account the timing of cash flows. Therefore, a cash budget is more useful in estimating financing needs than the percentage of sales method.

Using a Cash Budget Is More Useful Than the Percentage