Which of the Following Actions in Managing the Cash Account

question 57

Multiple Choice

Which of the following actions in managing the cash account would, in general, either not be feasible or else not be consistent with the firm's wealth maximisation objective?

• A) Increase synchronisation of inflows and outflows.
• B) Use drafts for disbursing funds.
• C) Use a lockbox plan.
• D) Maintain an average balance which is equal to that required as a compensating balance or that which minimises total cash management costs, whichever is lower.
• E) None of the above (all would be feasible and consistent actions).

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Definitions:

Pure Play

Refers to a company that focuses on a specific industry segment, offering a narrow and specialized range of products or services.

Divisional Beta

A measurement of the risk associated with a particular division of a company, relative to the overall market.

Accounting Beta

A measure of the sensitivity of a company's operating income to changes in the economy or its sector, used for risk assessment in strategic planning.

Beta

The measure of market risk in portfolio theory. The degree to which a stock’s return moves with the market’s return.