Define Operating Budgets and Financial Budgets

question 104

Essay

Define operating budgets and financial budgets.List the specific budgets which are operating budgets.List the specific budgets which are financial budgets.

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Definitions:

Precautionary Motive

The need to hold cash as a safety margin to act as a financial reserve.

Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

Planned Expenditures

Forecasted spending for specific purposes within a certain time frame, often categorized into operating or capital expenditures.

Cash Surpluses

Occurs when a company has more cash inflow than outflow, leading to excess liquidity.