The Primary Reason That Managers Impose a Minimum Cash Balance

question 138

Multiple Choice

The primary reason that managers impose a minimum cash balance in the cash budget is

• A)because management needs discretionary cash for unforeseen business opportunities.
• B)managers lack discipline to control their spending.
• C)that it protects the organization from the uncertainty of the budgeting process.
• D)that it makes the financial statements look more appealing to creditors.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the production of finished goods.

Fixed Costs

Expenses that do not change in total despite fluctuations in production levels or sales volume.

Income Statement

A financial statement that shows a company's revenues, expenses, and profitability over a specified period of time, providing insight into its financial performance.

Absorption Costing

An accounting method where all manufacturing costs, including both fixed and variable costs, are allocated to produced units.