PGA Level 1 Facility Management Practice Exam 2025 – Comprehensive Test Prep

The correct choice indicates that a cash budget typically projects cash flow patterns over a 12-month period. This time frame is essential for facility management and financial planning because it allows managers to monitor and anticipate their cash needs, ensure that adequate funds are available for operational expenses, and make informed decisions about investments and expenditures.

A 12-month cash budget provides a clear picture of seasonal fluctuations and other trends in cash inflows and outflows, which can vary throughout the year. This insight is critical for planning purposes, as it helps identify potential shortfalls or surpluses in cash and allows for timely adjustments to financing strategies or spending plans.

Choosing a time frame shorter than 12 months, like 6 months, may not adequately capture seasonal variations or longer-term financial trends, which could lead to suboptimal decision-making. Conversely, extending the forecast to 18 or 24 months may introduce more uncertainty, making it harder to predict cash flows accurately, as too many variables can change over those extended periods. Thus, a 12-month cash budget strikes the right balance between sufficient detail and manageable predictability for effective financial management.