Which of the Following Is True Regarding flOat Costs and the Size

question 123

Multiple Choice

Which of the following is true regarding float costs and the size of the optimal cash balance held by a firm?

• A) Float costs impact the optimal cash balance as determined by the BAT model only.
• B) The higher the cash balance, the lower the float cost.
• C) The lower the cash balance the lower the float cost.
• D) Float costs have no impact on the size of the optimal cash balance.
• E) Float costs increase the variance of cash flows per period, and thus the optimal cash balance.

Recognize the importance of maintaining a minimum cash balance (compensating balances).

Understand the objectives and implementation of internal control systems.

Identify and apply adjustments for bank statement and company books in bank reconciliations.

Recognize elements of internal control, including information and communication, control procedures, and monitoring.

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Definitions:

Change Documentation Process

A systematic approach to recording, managing, and implementing changes in a project to ensure traceability and compliance.

Time Needed

The duration required to complete a task, project, or process.

Common Understanding

Shared knowledge or agreement among individuals or groups regarding a specific topic or project.

Project Purpose

The fundamental reason for the initiation of a project, often aligned with specific goals or desired outcomes.