Final answer:
The cash budget in budget preparation primarily handles short-term fluctuations in cash flow, ensuring sufficient liquidity to meet obligations and efficient cash management.
Step-by-step explanation:
In the context of budget preparation, a cash budget is an essential financial document that is used to manage a company's or a government's short-term cash flow. It helps in forecasting all cash receipts and expenditures expected to occur during a specific time period, usually monthly or quarterly. This enables an organization to ensure that it has sufficient liquidity to meet its obligations, as well as to manage its cash most efficiently.
The correct answer to the question is, therefore, c. short-term fluctuations in cash flow. Unlike the more general budgeting process, which involves projecting long-term income and expenses, cash budgets focus on immediate financial management. This is particularly important for small businesses or government agencies to prevent cash shortages and to plan for any potential shortfalls or surpluses.
While cash budgets are not typically concerned with long-term fluctuations in revenue, long-standing investments in fixed assets, or sources of long-term cash reserves, they are critical tools for day-to-day business decision making and maintaining financial stability.