Which statement is correct A. Firms Cabot use lockboxes if they use cash concentration accounts. B. Firms prefer to increase delay on disbursements. C. Firms prefer to eliminate all types of float. D. Firms open regional offices so their employees can pick up lockbox payments throughout the day. E. The check clearing act for the 21st century is designed to reduce total collection time to one day.

Which statement is correct A. Firms Cabot use lockboxes if they use cash concentration accounts. B. Firms prefer to increase delay on disbursements. C. Firms prefer to eliminate all types of float. D. Firms open regional offices so their employees can pick up lockbox payments throughout the day. E. The check clearing act for the 21st century is designed to reduce total collection time to one day.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter23: Other Topics In Working Capital Management

Section: Chapter Questions

Problem 4Q

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Similar questions

Which statement is correct? A. Firms prefer to increase processing delay on disbursements. B. Firms open regional offices so their employees can pick up lockbox payments throughout the day. C. The Check Clearing Act for the 21st Century is designed to reduce total collection time to one day. D. Firms cannot use lockboxes if they use cash concentration accounts.
Which of the following statements is most correct? a. A cash management system that maximizes collections float while minimizing disbursement float is preferable to one that has lower collections float while increasing disbursement float. b. Other things held constant, a firm will need a smaller line of credit if it can arrange to pay its bills by the 5th of each month than if its bills come due uniformly during the month. c. None of the statements are correct. d. The use of a lockbox is intended to reduce cash theft losses. In the event that if the cost of the lockbox is less than the theft losses avoided, the lockbox should be installed. e. A cash management system that minimizes collections float while increasing disbursement float outperforms one with higher collections float but lower disbursement float.
Suppose that, as a result of increased use of electronic payments, banks no longer need to hold as much vault cash. Banks decide to reduce their vault cash holdings by $250million. a) Show the effects this would have on the balance sheets of commercial banks and the central bank. b) If, at the same time, depositors decide to reduce their cash holdings by $50million by depositing that amount with their banks, show the combined effect of these decisions on the balance sheets of commercial banks.
. Which one of the following best defines cash concentration? A. Combining all of a firm's receipts into one bank deposit B. Combining a week's worth of cash receipts into one bank deposit C. Combining cash from multiple banks into a firm's main bank accounts D. Using multiple lockboxes for collecting cash payments E. Combining a firm's bills so that disbursement checks are mailed only monthly
One objective of managing a firm's cash is to process its cash receipts as quickly as possible. Banks provide many services to process incoming payments quickly and efficiently. Consider the case of Sandberg Industries: Sandberg Industries owns an office building that it fents to Graham Company. Sandberg Industries and Graham have an agreement in which Graham's bank transfers the monthly rent automatically to Sandberg Industries' account. Which cash management technique is Sandberg using? Concentration banking A preauthorized check A lockbox arrangement
In a similar vein you could study how cash restrictions affect practices of individual bank customers. Again, which customers adapt easier and faster to regulation changes and which customers need more time. Does it affect their purchase decisions? Do they try to circumvent these regulations? How?
Which of the following actions is least likely to increase acompany’s accounts receivable turnover?a. Encouraging customers to use bank credit cards, suchas Visa and MasterCard, rather than other nationalcredit cards, such as American Express.b. Offer customers larger cash discounts for making earlypayments.c. Reduce the interest rate charged to credit customers.d. Sell accounts receivable to a factor.
Which of the following is false? a. Baumol model helps firm to find out their desirable level of cash balance under certainty b. Any presence of a cash buffer affects the cost of holding cash and ultimately the annual cost of cash for a particular firm c. A higher average daily disbursement float than average daily collection float is more desirable for a firm d. Accounts payable increase the number of days a firm’s resources are tied up in the operating cycle
Which of the following practices contributes to efficientcash management? a. Never borrow money—maintain a cash balance suffi-cient to make all necessary payments. b. Record all cash receipts and cash payments at the endof the month when reconciling the bank statements.c. Prepare monthly forecasts of planned cash receipts,payments, and anticipated cash balances up to a year inadvance.d. Pay each bill as soon as the invoice arrives.
which of the following would explain why the investment in Branch account is less than the Home Office Current account?A. a cash transfer to the home office is in transitb. a home office has received and deposited a remittance from a branch customer but has not yet notified the branchc. an inventory shipment to the branch (at cost) in transitd. a cash transfer to the branch is in transit
Question two Which of the following statements is CORRECT?Select one:A. Collection float refers to an immediate increment in a firm's available balance when a check is received.B. The basic cost of collection float to the firm is the opportunity cost of not being able to use the cash.C. Instantaneous electronic funds transfer would only eliminate all types of float if the transaction occurs during normal business hours.D. Float management only involves controlling a company's collection of cash.
Determine whether each policy below is good or bad cash management, then identify the cash management strategy violated or followed for each policy. 1. The company negotiates credit terms with suppliers to delay payment of liabilities as long as possible 2. Excess cash is put in checking accounts, earning no interest income. 3. Cash receipts and cash payments are regularly planned and reviewed. 4. Customers are offered discounts to pay early. 5. All equipment is purchased, even equipment infrequently used. Good or Bad Cash Management Strategy