Question

Shorter-term cash budgets (such as a daily cash budget for the next month) are generally used for actual cash control while longer-term cash budgets (such as a monthly cash budget for the next year) are generally used for planning purposes. True or False?

Answer 1

Answer:

The statement is true

Explanation:

Short term cash budget focuses on short duration mostly within one to three months while long term cash budget focuses on cash inflow and outflow for a longer duration which is one year.

Short term cash budget ensures liquidity of an organization whether it has funds to meet immediate requirements so it basically helps in controlling cash inflows and outflows.

Long term cash budget helps in decision making and planning future investments as it is reviewed periodically.