Which of the following describes the cash budget? A. It helps in planning to ensure the business has adequate cash. B. It captures the variable and fixed expenses of the business. C. It aids in planning to ensure the company has adequate inventory and cash on hand. D. It depicts the breakdown of sales based on terms of collection.

Which of the following describes the cash budget -  It helps in planning to ensure the business has adequate cash - option A.

Explanation:

An estimation of the cash flow for a business over a certain period is referred to as a cash budget. This budget is used to determine whether an entity has adequate cash to operate.

Option A best describes a cash budget, therefore, it is the correct answer.

A. It helps in planning to ensure the business has adequate cash.

Explanation: The cash budget is an estimation of the net amount of cash and cash-equivalents being transferred into and out of a business over a specific period of time. This budget helps in planning to ensure the business has adequate cash to operate otherwise more liquidity is created by raising capital in forms of stocks or debts. To create a cash budget, firms use sales and production forecasts together with estimates about necessary spending and accounts receivable collections.

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