Which of the Following Statements Is CORRECT

question 85

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:

Long-term Memory

A type of memory that stores information for a long period, potentially for a lifetime, encompassing experiences, knowledge, and skills.

One-Fifth

Quantitatively, a fraction equivalent to 20 percent or one out of five parts.

Mammals

A class of warm-blooded vertebrate animals that have, in the female, mammary glands which produce milk for feeding their young.

Except

To exclude or leave out from a group, list, or category.