Role of Cash Budgeting in Working Capital Management

Medium Working Capital Management Cash Management

Maxwell Electronics is a medium-sized tech company that manages its cash reserves actively. Recently, the finance team has been evaluating different cash management strategies to optimize liquidity while minimizing idle cash on hand. One approach they consider is implementing a cash budgeting system that outlines projected cash inflows and outflows for the upcoming quarters.

Which of the following statements best describes the role of cash budgeting in working capital management?

It focuses solely on minimizing cash inflows to maximize profits.

It helps ensure that sufficient cash is available to meet projected expenses while maximizing interest income from excess cash.

It eliminates the need for short-term financing by keeping cash balances low.

Hint

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