Final answer:
The true statement about the capital expenditures budget is D) It must be completed before the cash budget is prepared, as it provides crucial information about future capital outlays necessary for cash flow planning.
Step-by-step explanation:
When considering which of the following statements is true of the capital expenditures budget, it's important to understand its place within the overall budgeting process. A capital expenditures budget is concerned with major investments in long-term assets, like machinery or buildings, and it's an integral part of a business's strategic financial planning.
The correct answer is: D) It must be completed before the cash budget is prepared. This is because the capital expenditures budget outlines the planned purchases of major assets. Understanding what these expenditures will be, and when they will occur, is necessary to determine the cash requirements of the business over the budget period. Consequently, the cash budget, which projects the company's cash flow, needs to consider the timing and scale of these capital expenditures to ensure that the business has enough liquidity to meet its obligations.
Options A) It is a part of the financial budget is true but does not directly answer the question about sequencing. Option B) It must be completed after the budgeted income statement is prepared, is not necessarily true, as capital expenditure plans may influence the budgeted income statement. Option C) It includes the sales budget, is incorrect because the sales budget is part of the operating budget, not the capital expenditures budget.