[jimmyjimmy12]

Please help me check whether what my answers are all right.

Describe the links between cash budget and liquidity of a business.

-the liquidity shows the available cash to met its debts.

-the cash budget shows the cash outflow/inflow.

I have not been taught about the liquidity of a business so any opinions would help thanks

[ArcSine]

You've got the beginnings of the main ideas there, but you can plump up both of those points a bit.

Liquidity looks not just at immediately available cash, but also analyzes those other assets which are expected to be converted to cash soon (with "soon" usually being defined in the particular analysis at hand). In other words, a good liquidity analysis will consider receivables, inventories, etc. along with their respective "cash conversion" cycles. You'll also consider liabilities and obligations that'll be maturing (coming due) in the near term. So, liquidity is a bigger picture than just how much cash is in the cigar box today.

The cash budget shows the expectations of cash flows over the forecast period. Now, think about how those expectations are driven partially from the considerations encompassed in the liquidity stuff above.

Good luck with it, amigo!

[jimmyjimmy12]

Thank you it sounds good