Cash budget is an effective tool of cash management and it may help the management in the following ways:

a)    Identification of the period of cash shortage so that the financial manager may plan well in advance about arranging the funds at an appropriate time.

b)    Identification of cash surplus position & duration for which surplus would be available so that alternative investment of this excess liquidity may be considered in advance.

c)    Better coordination of the timing of cash inflows & outflows in order to avoid chances of shortages or surplus of cash etc.

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