Certification in Supplier Diversity Practice Exam

What does a cash flow budget primarily link together?

1. Past expenses and future goals

2. Budgeted expenditures and actual results

3. Budgeted expenditures and revenue

4. Revenue and marketing strategies

The correct answer is: Budgeted expenditures and revenue

A cash flow budget primarily links budgeted expenditures and revenue. This is because a cash flow budget is a financial tool that helps organizations plan and analyze their cash inflows and outflows over a specific period. By forecasting expected revenues and planned expenditures, businesses can determine whether they have sufficient cash to meet their obligations and achieve their financial goals. This connection is crucial for effective financial management, as it allows organizations to anticipate periods of surplus or shortfall. Tracking budgeted expenditures against anticipated revenue guides businesses in making informed decisions, such as adjusting spending, seeking additional funding, or optimizing cash reserves. While past expenses and future goals might inform budgeting practices, and actual results provide insights into performance, the core of a cash flow budget is its direct relationship between the projected income and expenses. Understanding this linkage helps organizations maintain liquidity and ensure they can fund operations while pursuing strategic initiatives.