Advantages of Cash Budgets
The cash budget ensures adequate cash planning and control
(a) Cash deficits are revealed and management can respond by taking appropriate action. Remedial action can be taken by injecting more capital into the business, by borrowing, by examining their credit policy or by deferring capital expenditure.
(b) Cash surpluses are indicated and once recognised need to be managed. Management can invest cash in the short-term, or avail of trade discounts by bulk purchasing materials or finance capital projects.
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