Ignoring the Risk of Theft, Cash Balances Cannot Spoil, Yet

question 106

Multiple Choice

Ignoring the risk of theft, cash balances cannot spoil, yet managers are concerned with carrying costs.Why?

• A)the federal government may devalue the currency
• B)higher balances require additional supervisors
• C)cash balances are idle and face an opportunity cost
• D)embezzlement is a real risk in most firms

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Definitions:

Plant Asset

A long-term asset used in the production of goods or services, not expected to be consumed or converted into cash within a year.

Book Value

The worth of an asset as reported in the balance sheet, determined by subtracting any depreciation from the asset's initial cost.

Depreciable Cost

The total amount that an asset’s value can be depreciated over its useful life, excluding salvage value.

Salvage Value

The conjectured remain value of an asset at the end of its productive life.