The Financing Section of a Cash Budget Is Needed If

question 165

Multiple Choice

The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than

• A) the prior years.
• B) management's minimum required balance.
• C) the amount needed to avoid a service charge at the bank.
• D) the industry average.

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Definitions:

Trade Credit

A financial agreement in which a customer is allowed to purchase goods or services and pay the supplier at a later scheduled date, effectively extending interest-free credit.

Current Liabilities

Short-term financial obligations a company is required to pay within one year or within the normal operating cycle.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year.

Return On Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively a company uses invested funds to generate profit.