Question

Why is it important for an entrepreneur not only to create a cash budget, but also to decide how it will be used within the firm?

Answer 1

Cash management plays a main role for a success or failure of a business.

• If a company has too little cash means it may have to pass on profitable ventures.
• If a company has too little cash means unable to process at normal level.

Entrepreneur also decides how to use cash budget because it is very important for a firm. There are many points which shows how it becomes important for an Entrepreneur

1. Cash budget is necessary for an organization because it gives an estimate of the anticipated receipts and payment of cash during the budget period.
2. It allows companies to predict the cash shortage and take corrective action before any crisis.
3. It shows the anticipated cash flows.
4. It shows beginning and ending cash balance.