A Lockbox System That Accelerates Cash Collections Also Decreases a Firm's

question 106

True/False

A lockbox system that accelerates cash collections also decreases a firm's receivables.

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Definitions:

Weighted Average Cost of Capital (WACC)

This is the average rate of return a company is expected to pay its security holders to finance its assets. WACC is the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital.

Terminal Cash Flow

The final net cash flow in a series of cash flows, representing the net amount received or paid at the conclusion of a project or investment period.

Annual Operating Cash Flows

The amount of cash generated by regular business operations in a given year.

Initial Investment Cost

The total amount of money needed to start a project, purchase an asset, or invest in a financial instrument.