Which of the Following Statements Is CORRECT

question 63

Multiple Choice

Which of the following statements is CORRECT?

• A) Depreciation is included in the estimate of cash flows (Cash flow = Net income + Depreciation), hence depreciation is set forth on a separate line in the cash budget.
• B) If cash inflows from collections occur in equal daily amounts but most payments must be made on the 10th of each month, then a regular monthly cash budget will be misleading. The problem can be corrected by using a daily cash budget.
• C) Sound working capital policy is designed to maximize the time between cash expenditures on materials and the collection of cash on sales.
• D) If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10, net 30 to net 60.
• E) If a firm sells on terms of net 90, and if its sales are highly seasonal, with 80% of its sales in September, then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365) would probably be lower in October than in August.

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Definitions:

Organizational Power

The capacity of individuals or groups within an organization to influence decisions, control resources, and direct the behavior of others.

Market Competition

The rivalry among businesses to attract customers and achieve higher sales, profits, and market share.

Authentic Leadership

A leadership style centered on transparency, ethicality, and fostering trust, aimed at encouraging genuineness among leaders.

Follower Identification

The extent to which followers see themselves as being similar to, and aligned with, their leaders and the group.