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Chapter 13

Cash budget

6.1 Definition

A cash forecast is an estimate of cash receipts and payments for a
future period under existing conditions.

A cash budget is a commitment to a plan for cash receipts and
payments for a future period after taking any action necessary to bring
the forecast into line with the overall business plan.

The cash budget is one of the most vital planning documents in an organisation. It
will show the cash effect of all of the decisions taken in the planning process.

A cash budget can give forewarning of potential problems that could arise so that
managers can be prepared for the situation or take action to avoid it.

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