If the cash available falls below the budgeted balance:
A) the company should reduce its cash receipts.
B) the company can invest the excess.
C) the company will need additional financing.
D) the company is facing bankruptcy.

Question

Quizplus · Accepted Answer

If the cash available falls below the budgeted balance, it means that the company has already spent more than it has earned. In this case, the company will need additional financing to cover its expenses and/or repay loans. Reducing cash receipts or investing excess cash will not solve the problem of a cash shortfall. Bankruptcy is also not the immediate consequence of a cash shortfall, but it can be a potential risk if the company is unable to secure additional financing or improve its cash flow situation.

If the Cash Available Falls Below the Budgeted Balance