Fundamentals of Corporate Finance, Student Value Edition
3rd Edition
ISBN: 9780133576863
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Question
Chapter 20, Problem 1CC
Summary Introduction
Cash budget: Cash budget is a
To Explain: Forecast of the firm’s future cash requirements.
Expert Solution & Answer
Answer to Problem 1CC
The forecast of the firm’s future requirements is made by preparing a budget, which is called as cash budget.
Explanation of Solution
- The cash budget is a statement which predicts the amount of cash comes and goes in a business for a specific period of time. This budget is basically prepared for quarterly or monthly basis and this is done to find where the cash shorts.
- By the help of this budget, the cash shortfall can be predicted and so the management prepares itself to cover the cash shortfall through external financing. The preparation of this budget helps the business to manage any cash problems that can arise in future beforehand.
Conclusion
Thus, the forecast of the firm’s future requirements is made by preparing a cash budget.
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Chapter 20 Solutions
Fundamentals of Corporate Finance, Student Value Edition
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