Which of the Following Statements Is Correct

question 102

Multiple Choice

Which of the following statements is correct?

• A) Poor synchronisation of cash flows which results in high cash management costs can be partially offset 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 synchronisation and how it clears its checks.
• C) Lockbox systems are used mainly for security purposes as well as to decrease the firm's net float.
• D) If a firm can speed up its collections and slow down its disbursements, it will be able to reduce its net float.
• E) A firm practicing good cash management and making use of positive net float will bring its check book balance as close to zero as possible, but must never generate a negative book balance.

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Definitions:

Capital Assets

Long-term assets that are significant in value and are used in the operations of a business, not easily convertible to cash.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Donated Materials

Items or supplies given to an organization for free, often recognized as income at their fair value in the period received and reported in the financial statements.

Deferral Method

An accounting method where certain revenues or expenses are deferred on the balance sheet until they can be realized in the income statement.