Which of These Principles of Cash Managements Is Untrue

question 34

Multiple Choice

Which of these principles of cash managements is untrue?

• A) There are disadvantages for a business in holding very low levels of inventory.
• B) The longer the operating cycle the longer it takes to pay creditors.
• C) It is generally a mistake to delay paying creditors if it means discounts on offer are lost.
• D) Generally cash surplus to requirements should be used to acquire necessary non-current assets rather than being kept on fixed deposit.

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Definitions:

Financing Activities

Comprises transactions that result in changes in the size and composition of the equity capital or borrowings of an entity. Examples include issuing bonds, repaying bank loans, and paying dividends.

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Stock Dividend

A distribution of shares of stock to its stockholders.