All of the Following Statements About Current Liabilities Are True

question 63

Multiple Choice

All of the following statements about current liabilities are true except?

• A)Current liabilities are valued at their present value.
• B)Current liabilities are important for assessing short-term liquidity.
• C)Current liabilities will be satisfied in a year or one operating cycle.
• D)The difference between the present value and the face value of a current liability is small.

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Definitions:

Collection Float

The time period between when a payment is initiated by a debtor and when the funds are actually available to the creditor.

Transaction Motive

Refers to the need to hold cash for the purpose of conducting daily business transactions and operations.

Lockbox System

A service provided by banks to process payments by collecting and depositing checks into the company's account quickly.

NPV

Net Present Value (NPV) is a method used in capital budgeting to determine the value of an investment by calculating the present value of expected future cash flows using a specific discount rate.