Cash Budget

AAA

DEFINITION of 'Cash Budget'

An estimation of the cash inflows and outflows for a business or individual for a specific period of time. Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular operations and/or whether too much cash is being left in unproductive capacities.

INVESTOPEDIA EXPLAINS 'Cash Budget'

A cash budget is extremely important, especially for small businesses, because it allows a company to determine how much credit it can extend to customers before it begins to have liquidity problems.

For individuals, creating a cash budget is a good method for determining where their cash is regularly being spent. This awareness can be beneficial because knowing the value of certain expenditures can yield opportunities for additional savings by cutting unnecessary costs.

For example, without setting a cash budget, spending a dollar a day on a cup of coffee seems fairly unimpressive. However, upon setting a cash budget to account for regular annual cash expenditures, this seemingly small daily expenditure comes out to an annual total of $365, which may be better spent on other things. If you frequently visit specialty coffee shops, your annual expenditure will be substantially more.

RELATED TERMS
  1. Annual Budget

    Any budget that is prepared for a 12-month period. An annual ...
  2. Balanced Budget

    A situation in financial planning or the budgeting process where ...
  3. Zero-Based Budgeting - ZBB

    A method of budgeting in which all expenses must be justified ...
  4. Budget

    An estimation of the revenue and expenses over a specified future ...
  5. Capital Budgeting

    The process in which a business determines whether projects such ...
  6. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
Related Articles
  1. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  2. Markets

    Cash Flow On Steroids: Why Companies Cheat

    Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it.
  3. Fundamental Analysis

    What is the difference between operating cash flow and net income?

    Learn how net income is an income statement for a certain period of time, while cash flow shows inflows and outflows based on conversion of sales into cash.
  4. Fundamental Analysis

    How do you calculate operating cash flow in Excel?

    Lenders and investors can predict the success of a company by using the spreadsheet application Excel to calculate the free cash flow of companies.
  5. Investing

    What Is Hollywood Spending On Oscar Campaigns?

    Here's a look at how much Hollywood is spending this awards season to take home the gold at the 2015 Academy Awards.
  6. Budgeting

    Are You Spending Too Much?

    Post-holiday credit card bills are just one signal that it's time to cut back on spending. Here are others.
  7. Credit & Loans

    What are common factors that lower your net worth?

    Net worth is determined by calculating financial assets versus liabilities. As the liabilities increase versus the assets, net worth is lowered.
  8. Budgeting

    What does your net-worth consist of?

    Discover what your specific assets and liabilities are and how to classify the components that go into calculating your net worth.
  9. Personal Finance

    How Many Credit Cards Do You Carry in Your Wallet?

    With the abundance of credit card offers in mailboxes, advertised on TV and offered at retail stores, it's no wonder Americans have a lot of credit debt.
  10. Personal Finance

    What Are Your New Year’s Financial Habits?

    By focusing on habits, you will adopt simple, sustainable behaviors that will put you on the path to achieving bigger and better goals in 2015 and beyond.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center