Which of the Following Statements Is Most Correct

question 44

Multiple Choice

Which of the following statements is most correct?

• A) 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.
• B) If cash inflows from collections occur in equal daily amounts but most payments are made regularly on the 10th of each month, then it is not necessary to use a daily cash budget. A cash budget focused on the end of the month will suffice.
• C) Sound working capital policy is designed to maximize the time between cash expenditures on materials and the collection of cash on sales.
• D) The cash flows shown on the cash budget are the actual cash inflows and outflows and thus different from the firm's free cash flows, because FCF reflects after-tax operating income and the investments required to maintain future operations.

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