Finance Skills for Managers - D076
UNIT 5 Question and answers rated A+
2025/2026
Cash budgets - correct answer ✔a forecast of future events. They are usually prepared for a shorter
time horizon—generally between one month and one year, similar to our household budgeting. They
are generally used to estimate whether a company has a sufficient amount of cash for regular
operations. In addition, they help companies and individuals to be accountable and make sure that cash
is not wasted.
There are at least three key uses of the cash budget: - correct answer ✔indicating future financing
needs, providing a basis for corrective action, and providing the data for performance evaluation.
Future Financing Needs - correct answer ✔the firm can see when its borrowing needs will be highest
during the year—when the firm will have its maximum borrowing need and when it can expect to be
able to pay down its loan. For small businesses in which cash may be scarce, understanding the
company's expected cash position from month to month is crucial. Managers who understand their cash
position well are in a better position to negotiate and renew their loans and credit lines because they
are able to demonstrate when the company will be able to repay its borrowings.
Corrective Action - correct answer ✔provide a basis for taking corrective action when budgeted and
actual figures do not match.
Performance Evaluation - correct answer ✔provide a basis for performance evaluation. They contain
management's best estimate of the firm's cash flow. Variances from the budget may indicate that
certain managers or divisions are not meeting targets. This variance may become one aspect of that
manager's or division's periodic performance evaluation.
There are six principles of effective budgeting that take all areas of budgeting into account. - correct
answer ✔Know Yourself
Understand the Key Areas of Savings, Income, and Expenses.
, Develop Savings, Income, and Expense Strategies.
Keep Records
Use a Method That Meets Your Needs and Objectives.
Eliminate Consumer Debt and Minimize Long-Term Debt.
When evaluating a company's performance, what can variances on a company's cash budget indicate? -
correct answer ✔Variances show that certain managers or divisions are not meeting targets.
How far into the future do cash budgets usually forecast? - correct answer ✔Between one month and
one year
What are three principles of budgeting that are important to know before beginning the budgeting
process? - correct answer ✔Keep records; develop savings, income, and expense strategies; and use a
method that meets your needs and objectives
What are the three main uses of cash budgets? - correct answer ✔Cash budgets are used to forecast
future financial need, aid in performance evaluation, and show when corrective action is needed.
Creating a cash budget is a matter of understanding your business, understanding the timing of cash
flows, and keeping track of borrowing requirements. It can be broken down into three steps: - correct
answer ✔Determine cash receipts
Estimate cash disbursements
Create the cash budget
The five steps to create a budget for your personal finances are as follows: - correct answer
✔Understand your goals
Track your savings, income, and expenses
Develop a cash budget (plan)
Implement your plan
UNIT 5 Question and answers rated A+
2025/2026
Cash budgets - correct answer ✔a forecast of future events. They are usually prepared for a shorter
time horizon—generally between one month and one year, similar to our household budgeting. They
are generally used to estimate whether a company has a sufficient amount of cash for regular
operations. In addition, they help companies and individuals to be accountable and make sure that cash
is not wasted.
There are at least three key uses of the cash budget: - correct answer ✔indicating future financing
needs, providing a basis for corrective action, and providing the data for performance evaluation.
Future Financing Needs - correct answer ✔the firm can see when its borrowing needs will be highest
during the year—when the firm will have its maximum borrowing need and when it can expect to be
able to pay down its loan. For small businesses in which cash may be scarce, understanding the
company's expected cash position from month to month is crucial. Managers who understand their cash
position well are in a better position to negotiate and renew their loans and credit lines because they
are able to demonstrate when the company will be able to repay its borrowings.
Corrective Action - correct answer ✔provide a basis for taking corrective action when budgeted and
actual figures do not match.
Performance Evaluation - correct answer ✔provide a basis for performance evaluation. They contain
management's best estimate of the firm's cash flow. Variances from the budget may indicate that
certain managers or divisions are not meeting targets. This variance may become one aspect of that
manager's or division's periodic performance evaluation.
There are six principles of effective budgeting that take all areas of budgeting into account. - correct
answer ✔Know Yourself
Understand the Key Areas of Savings, Income, and Expenses.
, Develop Savings, Income, and Expense Strategies.
Keep Records
Use a Method That Meets Your Needs and Objectives.
Eliminate Consumer Debt and Minimize Long-Term Debt.
When evaluating a company's performance, what can variances on a company's cash budget indicate? -
correct answer ✔Variances show that certain managers or divisions are not meeting targets.
How far into the future do cash budgets usually forecast? - correct answer ✔Between one month and
one year
What are three principles of budgeting that are important to know before beginning the budgeting
process? - correct answer ✔Keep records; develop savings, income, and expense strategies; and use a
method that meets your needs and objectives
What are the three main uses of cash budgets? - correct answer ✔Cash budgets are used to forecast
future financial need, aid in performance evaluation, and show when corrective action is needed.
Creating a cash budget is a matter of understanding your business, understanding the timing of cash
flows, and keeping track of borrowing requirements. It can be broken down into three steps: - correct
answer ✔Determine cash receipts
Estimate cash disbursements
Create the cash budget
The five steps to create a budget for your personal finances are as follows: - correct answer
✔Understand your goals
Track your savings, income, and expenses
Develop a cash budget (plan)
Implement your plan
