Which of the Following Statements Is Most Correct

question 61

Multiple Choice

Which of the following statements is most correct?

• A) A cash management system which minimizes collections float and maximizes disbursement float is better than one with higher collections float and lower disbursement float.
• B) A cash management system which maximizes collections float and minimizes disbursement float is better than one with lower collections float and higher disbursement float.
• C) The use of a lockbox is designed to minimize cash theft losses. If the cost of the lockbox is less than theft losses saved, then the lockbox should be installed.
• D) Other things held constant, a firm will need an identical line of credit if it can arrange to pay its bills by the 5th of each month than if its bills come due uniformly during the month.
• E) The statements above are all false.

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Definitions:

2/10

A common trade credit term indicating a 2% discount if payment is made within 10 days; otherwise, the full amount is due in 30 days.

Net 30 Day Credit

A payment term indicating that the full payment is due within 30 days from the invoice date.

External Financing

External financing involves acquiring capital from outside sources to fund business operations and investments, such as through loans, issuing equity, or other forms of financial support from outside the company.

Total Production Costs

The combined costs of materials, labor, and overhead incurred in producing goods.