Which of the Following Statements Is CORRECT

question 3

Multiple Choice

Which of the following statements is CORRECT?

• A) If cash inflows from collections occur in equal daily amounts but most payments must be made on the 10th of each month, then a regular monthly cash budget will be misleading.The problem can be corrected by using a daily cash budget.
• B) Sound working capital policy is designed to maximize the time between cash expenditures on materials and the collection of cash on sales.
• C) If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10 net 30 to net 60.
• D) If a firm sells on terms of net 90, and if its sales are highly seasonal, with 80% of its sales in September, then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365) would probably be lower in October than in August.
• E) Depreciation is included in the estimate of cash flows (Cash flow = Net income = Depreciation); hence depreciation is set forth on a separate line in the cash budget.

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Definitions:

Depth of Focus

The range within which an image can be moved away from or closer to a lens without significantly affecting its sharpness.

Accommodation

Ability of electrically excitable tissues, such as nerve or muscle cells, to adjust to a constant stimulus so that the magnitude of the local potential decreases through time; also called adaptation.

Convergence

The tendency of unrelated animals and plants to evolve superficially similar characteristics under similar environmental conditions or the movement of eyes inward towards the nose.

Cone Sensitive

Refers to the responsiveness of cone cells in the retina to different wavelengths of light, enabling color vision.