Western Governors University (WGU) BUS5000 C201 Business Acumen Practice Exam

A firm's cash budget primarily focuses on cash inflows and outflows, providing a detailed account of the expected cash that will be available to the company over a specific period. This focus is essential for managing liquidity, as it ensures that the firm has enough cash to meet its obligations as they arise. By forecasting when cash will come in and when it will be spent, the firm can make informed decisions about expenditures, investments, and financing.

Understanding cash inflows and outflows helps in anticipating any potential shortfalls, enabling the firm to take proactive measures, such as arranging for credit or delaying certain expenditures. This is crucial for maintaining smooth operations and financial stability. While projected expenses, sales forecasts, and debt repayment plans are all important components of overall financial planning, they do not provide the immediate and actionable insights that a cash budget offers regarding the actual liquidity status of the firm.