Which of the Following Statements Is Most Correct

question 136

Multiple Choice

Which of the following statements is most correct?

• A) Depreciation is included in the estimate of cash flows (Cash flow = Net income + Depreciation), so depreciation is set forth on a separate line in the cash budget.
• B) If cash inflows and cash outflows occur on a regular basis, such as the situation in which inflows from collections occur in equal amounts each day and most payments are made regularly on the 10th of each month, then it is not necessary to use a daily cash budget. A cash budget prepared at the end of the month will suffice.
• C) Sound working capital policy is designed to maximize the time between cash expenditures on materials and the collection of cash on sales.
• D) Statements b and c are correct.
• E) None of the statements above is correct.

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Definitions:

Composite Units

A measurement used in accounting to collectively represent a group of similar items or transactions as a single entity.

Break-Even Point

The point at which total costs and total revenue are equal, meaning the business is neither making a profit nor a loss.

Sales Mix

The combination of different products or services that a company sells, influencing overall sales volume, revenues, and profits.

Break-Even Point

The level of production or sales at which total costs equal total revenue, resulting in zero profit or loss.