Expenses Do Not Have to Be Paid in Cash at the Time

question 115

Multiple Choice

Expenses do not have to be paid in cash at the time they are incurred. When payment is made on a later date, the liability accounts payable account will decrease and the asset

• A) cash will increase.
• B) cash will decrease.
• C) will not be affected.
• D) accounts receivable will increase.

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Definitions:

Marketable Securities

Financial instruments that can easily be converted to cash quickly at a reasonable price.

Miller-Orr Model

A financial model used to manage cash flow and determine the optimal level of cash reserves for a firm.

Trading Costs

Expenses associated with buying and selling securities, including commissions, spreads, and slippage.

Collection Float

The time period between when a payment is initiated by a debtor and when the funds are actually available to the creditor.