Analyze the importance of cash budget with examples and illustrations?

Answer 1

A cash budget is extremely important, especially for small

businesses, because it allows a company to determine how much

credit it can extend to customers before it begins to have liquidity problems. For individuals, creating a cash budget is a good method for

determining where their cash is regularly being spent. This

awareness can be beneficial because knowing the value of certain

expenditures can yield opportunities for additional savings by cutting unnecessary costs.

For example, without setting a cash budget, spending a dollar a day on a cup of coffee seems fairly unimpressive. However, upon

setting a cash budget to account for regular annual cash

expenditures, this seemingly small daily expenditure comes out to

an annual total of $365, which may be better spent on other things.

Answer 2

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