A Firm with Unpredictable Cash Flows Is Trying to Set

question 71

Multiple Choice

A firm with unpredictable cash flows is trying to set upper and lower limits for cash balances.Which of the following factors will result in upper and lower limits being closer to each other?

• A)variance of the cash flows is low
• B)cost of trading securities is high
• C)interest rate is low
• D)current cash balance is low

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Definitions:

Cash Dividends

are profit distributions made by a corporation to its stockholders in the form of cash.

Accounts Receivable

Money owed to a business by its clients or customers for goods or services delivered but not yet paid for.

Income Statement

A financial statement that shows a company's revenues, expenses, and profit or loss over a specific period of time.

Cash Basis

An accounting method where revenues and expenses are recognized when cash is received or paid, not when they are incurred.