Question

Why is Cash Budget Statement important in a company? (NO PLAGIARISM, MINIMUM 150 WORDS)

Answer 1

Ans. A firm need cash to meets its daily operation needs and to finance assets. It is of essence for any company to know how much cash it requires to run its business and to sustain itself. Cash budget is a statement of estimated cash receipts and cash payments of the company and it provides informaton aboout cash requirements. Cash budget is important because it assess whether a company will have enough cash to continue operations. It helps in planning and controlling the uses of cash . Further it enables the company to meet its liquidity requirements by taling necessary steps proactively. It is a proactive measure of cash management.Cash budget acts as a controlling device. The expenses of various departments in the firm can best be controlled so as not to exceed the budgeted limit. Further,Cash budget acts as a standard for evaluating the financial performance. Cash budget plans for cash dividend to shareholders, consistent with the liquid position of the firm. It helps in following a sound consistent dividend policy.