Which of the Following Statements Is CORRECT

question 6

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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