The cash budget does not ascertain which capital expenditure projects are feasible or should be deferred. It only shows the cash available for projects and other activities.
The cash flow statement in the annual report is based on actual results, not on budgeted figures.
The cash budget (or cash management and working capital budget) tracks the inflows and outflows of cash on a month-by-month (possibly even week-by-week or day-by-day) basis. If this budget is accurate it will allow the company to plan for any cash shortfalls that may occur during the year and also enable it to plan for any excess cash accumulating during the year. This can enable the company to plan its short-term investments of excess cash so that they mature when the cash is needed. And prediction of cash shortfalls enables the company to obtain a loan more easily because it is aware of its need before the shortfall arrives, and it can present cash inflow and outflow projections to the bank to support its loan request.
The cash budget does not determine the opportunity costs of alternative sales and production strategies.
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