Question

Why do we need to budget for cash flow?

Answer 1

We will need budgeting for the cash flows because cash flows are most important for the business and it is even more important than the profits, because cash flows are often preferred by a large number of investors for investment into the company as they are reflecting the ability of company to generate cash and sustain and survive in the long run as this company will be having higher liquidity and flexibility in the business.

cash flows will be reflecting the liquidity of the business and hence it is important to maintain the liquidity of the business for preparation of a budget which will be effectively determining the expenses and income regarding various cash expenses and cash income and it will be providing adequate liquidity for the company in the short run and it will eliminate the risk of any kind of insolvency. Proper preparation of budgeting in advance will be providing the company with an additional liquidity and it will also offer the company with an opportunity to maximize its value because it will be having a better liquidity by effective preparation of budget.