Question

The cash budget is especially important to a firm when:

A. there is not a lot of confidence in the sales forecast.
B. it has a relatively large amount of operating cash.
C. the P/E ratio has been trending downwards.
D. it may have to negotiate a short-term bank loan.

Answer 1

The cash budget is especially important to a firm when it may have to negotiate a short-term bank loan. It helps the firm determine how much money it will have on hand at any given time and whether it needs to borrow money to cover its expenses.

Step-by-step explanation:

The cash budget is especially important to a firm when it may have to negotiate a short-term bank loan. A cash budget is a financial planning tool that helps a firm manage and control its cash flows. It helps the firm determine how much money it will have on hand at any given time and whether it needs to borrow money to cover its expenses. By having a cash budget in place, a firm can better plan for short-term cash needs and avoid financial difficulties.