Which of the Following Statements Is CORRECT

question 128

Multiple Choice

Which of the following statements is CORRECT?

• A) The cash budget and the capital budget are developed separately, and although they are both important to the firm, one does not affect the other.
• B) Since depreciation is a non-cash charge, it neither appears on nor has any effect on the cash budget.
• C) The target cash balance should be set such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts, although it should be changed to reflect long-term changes in the firm's operations.
• D) The typical cash budget reflects interest paid on loans as well as income from the investment of surplus cash.These numbers, as well as other items on the cash budget, are expected values; hence, actual results might vary from the budgeted amounts.
• E) Shorter-term cash budgets, in general, are used primarily for planning purposes, while longer-term budgets are used for actual cash control.

Understand the debt-to-equity ratio and its significance in evaluating a company's financial risk and structure.

Understand the basics of formatting text in business documents, including font size adjustments and using bullet points.

Learn how to modify graphic elements within business documents, including changing colors, making colors transparent, and rotating graphics.

Recognize and apply effective document design principles, such as those related to the professional appearance of business documents.

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Definitions:

Equity Method

An accounting approach used for recording investments in associate companies where the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor's share of the net assets of the investee.

Profit-Oriented Entity

A business whose primary goal is to generate profits rather than focusing on other goals such as social impact or environmental sustainability.

Fair Value

The financial return from disposing of an asset or expense of transferring a liability in a systematic transaction with market entities at the point of measurement.

Carrying Value

The book value of assets and liabilities as reported on the balance sheet, reflecting original cost adjusted for depreciation, amortization, and impairments.