Which of the following statements concerning the cash budget is CORRECT? Answer

Question

Which of the following statements concerning the cash budget is CORRECT?
Answer
-Depreciation expense is not explicitly included, but depreciation's effects are reflected in the estimated tax payments.
-Cash budgets do not include financial items such as interest and dividend payments.
-Cash budgets do not include cash inflows from long-term sources such as the issuance of bonds.
-Changes that affect the DSO do not affect the cash budget.
-Capital budgeting decisions have no effect on the cash budget until projects go into operation and start producing revenues

Explanation / Answer

CAsh budgets do not include cash inflows from long-term sources such as issuance of bonds. The cash budget predicts cash flows. Its purpose is to provide a plan to indicate when cash receipts and cash payments can be expected. The forecast should indicate the needs for short-term borrowing as well as surpluses available for short-term investing. The correct option is 3) Cash Budgets do not include cash inflows from long-term sources such as issuance of bonds.

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