Which of the Following Statements Are Correct Concerning the Cash

question 9

Multiple Choice

Which of the following statements are correct concerning the cash balance of a firm?
I. Most firms plan on maintaining a minimum cash balance at all times.
II. The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum cash balance retained by the firm.
III. The cumulative cash surplus at the end of March is used as the beginning cash balance for April when you are compiling a projected monthly cash balance report.
IV. A negative cumulative cash surplus indicates a borrowing need by the firm.

• A) I and III only
• B) II and IV only
• C) I and IV only
• D) II and III only
• E) I and II only

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Definitions:

Credit Terms

The conditions under which a seller extends credit to a buyer, including payment deadlines, interest rates, and discounts for early payments.

Invoice Discount

A reduction in the billed price granted to customers, often used as an incentive for early payment.

Credit Terms

The agreement between a buyer and a seller that outlines the payment terms for goods or services, including the due date and any interest or penalties for late payment.

FOB Shipping Point

A term indicating that the buyer assumes responsibility for the goods and shipping costs once the goods leave the seller's premises.