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Preparing a cash budget for a company provides management with a tool to prepare for future financial events and decide upon various options.

Preparing a cash budget for a company provides management with a tool to prepare for future financial events and decide upon various options. In order to prepare a cash budget the starting point is a sales forecast. Explain how the sales forecast impacts the other parts of the cash budget such as production costs, sales & administrative costs, capital investment decisions and financing decisions. Also explain how the cash budget can impact the timing of certain decisions such as when to invest in capital projects or seek additional financing.

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