Final answer:
The cash budget combines the cash receipts and cash payments schedules in determining cash flow. It is a tool used by businesses to forecast and manage their cash flow.
Step-by-step explanation:
The given statement is True. The cash budget indeed combines the cash receipts and cash payments schedules in determining cash flow. A cash budget is an important tool used by businesses to forecast and manage their cash flow. It helps in estimating the inflows and outflows of cash for a specific period and assists in making informed decisions about expenditures.
Let's understand this with an example. Suppose a company prepares a cash budget for the month of January. The cash receipts schedule will include the anticipated cash inflows, such as sales revenue, loans, or investments. The cash payments schedule will include the expected cash outflows, such as salaries, rent, raw material purchases, and other expenses.
By combining the cash receipts and cash payments schedules, the company can determine the net cash flow for the month. If the cash inflows exceed the outflows, it indicates a positive net cash flow, indicating that the company will have surplus cash. On the other hand, if the cash outflows exceed the inflows, it indicates a negative net cash flow, indicating that the company might face a cash shortage.