Financial managers often state that pro forma cash budgets are more crucial to the successful management of a firm than are the accounting statements. Explain the logic of this statement and present arguments to support such a claim.

Pro forma cash budgets forecast the cash position of the firm in the future. This forecast alerts the financial manager to cash shortfalls that may be forthcoming and also to excess cash that may be available. By having this information, financial managers can take actions to improve upon or prevent events before they occur. Accounting statements on the other hand are historical and show where the firm has been on a net profit basis. While the past provides trend and other information, it may or may not be indicative of the future.