A Firm Tries to Extend Its Disbursement Float in Order

question 33

Multiple Choice

A firm tries to extend its disbursement float in order to reduce its working capital needs. Which of the following is a risk that may be associated with this strategy, if it is taken too far?

• A)may attract a late fee
• B)may jeopardise the entire relationship with the supplier
• C)may be required to pay before delivery for future supplies
• D)all of the above

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Definitions:

Instrument

A formal legal document that records a legally enforceable act, transaction, or agreement.

Bearer Instrument

A negotiable financial instrument that denotes ownership to whoever physically holds it.

Theft

The act of unlawfully taking someone else's property with the intent to permanently deprive them of it.

Negotiability

The characteristic of a written document (such as a check or bill of exchange) that ensures its transferability by endorsement or delivery.