Question

The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than Select one: a. the prior years b. management's minimum required balance c. the amount needed to avoid a service charge at the bank d. the industry average

Answer 1

b. management's minimum required balance

Step-by-step explanation:

A cash budget is prepared to reveal the expected expenditure and receipts during a period. Such a budget projects a company's cash position i.e availability of cash in the near future.

Estimated cash outflows are deducted from cash inflows and the opening cash balance is added to ascertain the shortfall or excess before financing.

If the balance arrived at is lower than the desired level of balance by management, financing section reveals the borrowings required.

The section also shows debt obligations with respect to interest and repayments and the helps management decide how it can raise finances to bridge the cash deficit.