Assume Doug and Eddie Both Have Checking Accounts at Local

question 91

Multiple Choice

Assume Doug and Eddie both have checking accounts at Local Bank.On Monday morning,Eddie deposits a check from Doug written on Doug's account at Local Bank.The bank issues a provisional credit to Eddie's account.When is the check considered honored?

• A) if the bank does not dishonor the check by the opening of business on Tuesday morning
• B) if the bank does not dishonor the check by the opening of business on Wednesday morning
• C) if the bank does not dishonor the check by the opening of business on Thursday morning
• D) if the bank does not dishonor the check by the opening of business on Friday morning
• E) if the bank does not dishonor the check by the close of business on Monday afternoon

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Definitions:

Cash Equivalents

Liquid assets that can be quickly turned into a specific amount of cash and have initial maturity times of no more than three months.

Cash Ratio

A financial ratio indicating how well a company can cover its short-term obligations using its liquid assets.

Current Ratio

A financial metric that evaluates a firm's capacity to meet its short-term liabilities, which are due within a year.

Total Current Assets

The sum of all assets of a company that are expected to be converted into cash or used within one year or within the operating cycle.