Which of the Following Statements Is FALSE

question 91

Multiple Choice

Which of the following statements is FALSE?

• A) Firms with seasonal cash flows may find themselves with a surplus of cash during some months that is sufficient to compensate for a shortfall during other months. However, because of timing differences, such firms often have short-term financing needs.
• B) A company forecasts its cash flows to determine whether it will have surplus cash or a cash deficit for each period.
• C) Positive cash flow shocks cannot create short-term financing needs.
• D) When sales are concentrated during a few months, sources and uses of cash are also likely to be seasonal.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Unequal Lives

A term used in capital budgeting to describe projects or investments with different durations.

Replacement Chain Method

A capital budgeting technique that compares different investment projects with unequal lifespans by calculating their equivalent annual cost.

Equivalent Annual Annuity

Equivalent Annual Annuity is a calculation used to compare the annualized cash flows of projects or investments with different durations.