Which One of These Statements Is True

question 11

Multiple Choice

Which one of these statements is true?

• A)The cumulative finance surplus requirement is computed prior to adjusting for the minimum cash balance.
• B)A financially sound firm will always have a positive quarterly net cash flow.
• C)A negative cumulative cash surplus indicates a borrowing need.
• D)Most firms plan on maintaining a zero cash balance.
• E)The minimum cash balance generally increases on a quarterly basis.

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Definitions:

Compounded Annually

Interest calculation on a loan or investment once per year where each year's interest is added to the principal.

Rate of Return

The increase or decrease in the value of an investment over a certain time frame, represented as a percentage of the investment's original price.

Compound Annual Return

The annualized average percentage rate of return that accounts for the compounding of interest over a period of time.

Diversified Equity Mutual Fund

A mutual fund that invests in a wide range of equities from various sectors to reduce investment risk.