Which of the following is an important feature of a cash budget?

A cash budget focuses specifically on cash inflows and outflows over a certain period, allowing a business to plan its cash needs effectively. Historical cash flow patterns from the past 12 months are crucial in this process because they provide a baseline for predicting future cash flows. By analyzing previous trends, businesses can identify seasonal fluctuations in cash flow, recognize periods of surplus or deficit, and anticipate requirements for working capital. This historical perspective informs decision-making regarding expenditures, ensuring that the organization maintains enough liquidity to meet its obligations while also capitalizing on opportunities for growth.

Indications of projected profits, while important for overall financial planning, do not directly reflect cash movements, as they often include non-cash items. Predicted market trends, though relevant for broader business strategy, do not specifically pertain to cash flow management. The preparation of cash reserves is a related concept, but the focus of the cash budget itself is on the estimation of cash flow rather than the reserves it may lead to. Therefore, the emphasis on historical cash flow patterns as an integral feature of a cash budget is central to its effectiveness in cash management.