Which of the Following Statements Best Describes Float

question 114

Multiple Choice

Which of the following statements best describes float?

• A) A lack of synchronization of cash inflows and outflows will result in larger cash balances than would be necessary with better synchronization, but the cash balances can be reduced by increasing disbursement float and decreasing collections float.
• B) The size of a firm's net float is primarily a function of its natural cash flow synchronization and how it clears its cheques.
• C) Lockbox systems are used both for security purposes and to decrease the firm's net float.
• D) If a firm speeds up its collections and slows down its disbursements, this will reduce its net float.

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Definitions:

Break-even Point

The point at which total costs and total revenue are equal, meaning there is no net loss or gain, and one is "breaking even."

Contribution Margin

The amount remaining from sales revenue after all variable expenses are deducted, indicating how much contributes to covering fixed costs and generating profit.

Variable Costs

Costs that change in proportion to the level of production or sales activity within a business.

Fixed Costs

Expenses that do not change with the level of production or sales over a certain period, such as rent, salaries, and insurance.