What is the primary focus of a cash budget?

The primary focus of a cash budget is detailing cash inflows and outflows. A cash budget serves as a financial plan that outlines expected cash receipts and payments over a specific period, usually on a monthly or quarterly basis. This allows a business to anticipate its cash flow needs, ensuring that it has sufficient liquidity to meet obligations, such as paying bills, salaries, and other operational expenses.

By carefully detailing cash inflows—such as revenues from sales, loans, or other sources—and cash outflows—like rent, utilities, and other expenditures—a business can manage its cash position effectively. This is critical for maintaining operations, especially for businesses that may experience fluctuations in revenue during different periods.

In contrast, tracking inventory turnover more directly relates to managing and optimizing stock levels, forecasting sales revenue is concerned with predicting future sales volumes, and calculating production costs focuses on understanding expenses related to manufacturing goods. Each of these aspects is important for overall financial management but does not specifically address the immediate cash position like a cash budget does.