A Firm Tries to Extend Its Disbursement Float in Order

question 68

Multiple Choice

A firm tries to extend its disbursement float in order to reduce its working capital needs. Which of the following is a risk that may be associated with this strategy, if it is taken too far?

• A) may attract a late fee
• B) may be required to pay before delivery for future supplies
• C) may jeopardize the entire relationship with the supplier
• D) all of the above

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Definitions:

Inventory

Products and items that a company keeps with the final intention of selling or further processing.

Special Order

A unique, one-time order or request from a customer, often requiring customized production or handling outside of regular operations.

Capacity

Capacity refers to the maximum amount of work or output a system is capable of achieving in a given period under normal conditions.

Sales Price

The amount of money charged for a product or service; the price for which something is sold.