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Which management actions can affect the cash flow budget? Discuss in 80–100 words

Which management actions can affect the cash flow budget? Discuss in 80–100 words

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Expert Solution

Cash management may be defined as a process of managing cash in a way that company is able to meet its short term liabilities on time. Cash management is an indicator of financial stability and solvency of business.

The following management actions can affect the cash flow budget;

  1. How much times accounts receivable take to convert into cash. How long funds remain invested in accounts receivables determines the loss of return on funds so invested. Therefore it is important to manage accounts receivables in a way that their collection period is reduced to minimum possible days. If the amount is collected within the period allowed or less than the period allowed then it will have a positive effect on cash flow budget.
  2. If the management is able to delay the outflows as long as possible then it also have a positive effect on the cash flow budget.
  3. Credit policy adopted by the management is the another actions that can affect the cash flow budget

ekkarill92 answered 1 year ago
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