A cash flow budget is primarily concerned with which measure?

A cash flow budget is fundamentally focused on cash flow, which represents the movement of cash into and out of an organization over a specific period. This budget helps managers understand the timing and amounts of cash receipts and disbursements.

The importance of cash flow lies in the fact that it ensures a facility has enough liquidity to meet its obligations, such as paying bills, salaries, and other expenses when they are due. Unlike net income or profit margins, which can include non-cash items and accounting estimations, cash flow represents the actual cash available to the facility.

By efficiently monitoring cash flow, a facility can avoid potential cash shortages, plan for future expenses, and make informed decisions regarding investments and operational changes. This makes cash flow the primary measure of focus in a cash flow budget.