Which of the Following Statements Is CORRECT

question 81

Multiple Choice

Which of the following statements is CORRECT?

• A) If cash inflows from collections occur in equal daily amounts but most payments must be made on the 10th of each month, then a regular monthly cash budget will be misleading.The problem can be corrected by using a daily cash budget.
• B) Sound working capital policy is designed to maximize the time between cash expenditures on materials and the collection of cash on sales.
• C) If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10 net 30 to net 60.
• D) If a firm sells on terms of net 90, and if its sales are highly seasonal, with 80% of its sales in September, then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365)would probably be lower in October than in August.
• E) Depreciation is included in the estimate of cash flows (Cash flow = Net income = Depreciation); hence depreciation is set forth on a separate line in the cash budget.

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Definitions:

Harlem Renaissance

African-American literary and artistic movement of the 1920s centered in New York City’s Harlem neighborhood; writers Langston Hughes, Jean Toomer, Zora Neale Hurston, and Countee Cullen were among those active in the movement.

Claude McKay

A Jamaican writer and poet who was a seminal figure in the Harlem Renaissance, a significant literary movement in the 1920s among African Americans.

Slumming

The practice of visiting poorer urban areas for the purpose of entertainment or voyeurism by those from higher socioeconomic classes.

Jazz Clubs

Venues dedicated to the performance and enjoyment of jazz music, often featuring live bands and a vibrant atmosphere.