Which Is the Better Choice for Evaluating Across Companies: Days

question 148

Multiple Choice

Which is the better choice for evaluating across companies: Days' Cash on Hand or the amount in the company's Cash account?

• A) The amount in the Cash account, because the company with the largest amount of cash is the most liquid.
• B) Days' Cash on Hand, because it is calculated as a ratio, which expresses cash relative to the cash requirements of the business.
• C) Days' Cash on Hand, because a daily cash amount is more accurate.
• D) The amount in the Cash account, because companies with a lower cash balance are considered a greater credit risk.

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Definitions:

Monetary Contraction

A decrease in the money supply in an economy, often implemented by central banks to control inflation.

Trade Restrictions

Measures imposed by governments to regulate or limit international trade.

Tariff

A tax levied on goods imported into a country.

Imported Steel

Steel that is produced in one country and brought into another for use in manufacturing or construction.