Which of the Following Statements Is CORRECT

question 5

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:

Liabilities

Financial obligations or debts that a business or individual owes to others, which must be settled over time.

Total Return

The overall financial gain or loss on an investment over a specified time period, including both capital gains and any income received.

Long-Term Growth

The process of expanding or improving a business, investment, or economic endeavor over a considerable period, aiming for sustained and stable progress.

Functional Expenses

In non-profit accounting, these are the expenses directly related to the organization's programmatic, fundraising, and administrative activities.