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

question 105

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:

Thinning The Assets

A process of selectively selling off or disposing of less productive, less profitable, or underutilized assets by a company to improve financial health or operational efficiency.

Holdback Money

Funds retained by one party in a transaction as a safeguard to ensure some form of compliance or completion by the other party.

Goodwill

An intangible asset that arises when a business is purchased for more than the fair value of its standalone assets and liabilities, often attributed to the company's brand, customer base, and reputation.

Escrow Settlement

A financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction, ensuring fair and secure dealings.