Some Companies Use a Lockbox System,whereby Customers Mail Payments to a Post

question 85

Multiple Choice

Some companies use a lockbox system,whereby customers mail payments to a post office box address.The lockbox contents could be handled by a bank,another external organization,or the owner of the company.One of the advantages of using a lockbox is that it

• A)improves segregation of duties.
• B)results in more accurate bank deposits.
• C)results in more accurate accounts receivables.
• D)provides more detailed bank deposit information.

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Definitions:

Net Present Value (NPV)

Net Present Value is a method used in capital budgeting to evaluate the profitability of an investment or project, calculating the present value of all cash inflows and outflows using a specified discount rate.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, used in capital budgeting to estimate the profitability of potential investments.

Payback Method

An investment appraisal technique that calculates the time needed for an investment to generate cash flows sufficient to recover the initial cost.

Weighted Average Cost of Capital (WACC)

A calculation of a company's cost of capital in which each category of capital (debt, equity) is proportionally weighted.