Advantages of Cash Flow Matching and Dedicated Strategies Include

question 44

Multiple Choice

Advantages of cash flow matching and dedicated strategies include:
I. Once the cash flows are matched, there is no need for rebalancing.
II. Cash flow matching typically earns a higher rate of return than active bond portfolio management.
III. Financial institutions' liabilities often exceed the maturity of available bonds, making cash matching even more desirable.

• A) I only
• B) II only
• C) I and III only
• D) I, II, and III

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Definitions:

Variable Costing

A bookkeeping technique that incorporates only variable production expenses, such as direct materials, direct labor, and variable manufacturing costs, into the cost of products, while omitting fixed overhead.

Manufacturing Company

A company engaged in the conversion of raw materials into finished goods on a large scale, using labor, machines, and chemicals processes.

Contribution Margin

The difference between sales revenue and variable costs of goods sold, indicating the amount available to cover fixed costs and generate profit.

Trendy Fashion Apparel

Clothing items that are currently in style and popular among consumers.