Which of the Following Is Not True with Respect to the Reporting

question 71

Multiple Choice

Which of the following is not true with respect to the reporting of cash?

• A)Cash equivalents are normally combined with cash and reported as a current asset.
• B)Compensating balances are minimum cash balances required by the bank.
• C)Restricted cash can be either a current or a non-current asset, depending on when it is expected to be used.
• D)Cash overdrafts are reported as contra-assets.

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Definitions:

Optimal Capital Structure

The best mix of debt, equity, and other financial instruments that maximizes a company's market value while minimizing its cost of capital.

Modigliani And Miller Model

A financial theory proposing that the market value of a company is determined by its earning power and the risk of its underlying assets, and is independent of its capital structure.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity used to finance its overall operations and growth.

Stock Price

The cost of purchasing a share of a company's stock. The price at which a stock is traded on the market, representing the value investors assign to a company.