What is the primary goal of a cash budget?

The primary goal of a cash budget is to indicate the business's future cash position. A cash budget serves as a financial plan that forecasts cash inflows and outflows over a specific period. By providing a clear picture of when cash will be available and when it will be needed, the cash budget helps businesses anticipate potential cash shortages or surpluses. This foresight allows for informed decision-making related to expenditures, investments, and financing needs, ensuring that there is sufficient liquidity to meet obligations as they arise.

This planning tool is essential for maintaining operational efficiency, enabling businesses to schedule their activities in a way that avoids disruptions due to cash flow issues. Hence, having this understanding of future cash positions can significantly impact strategic planning and financial stability.