Question 1

Providing a discount for customers who pay electronically should help reduce the total collection time for your firm.

Accepted Answer

Offering discounts for electronic payments incentivizes customers to pay faster, thus reducing the time it takes for the firm to collect payments. Electronic payments are typically processed more quickly than traditional methods like checks, leading to improved cash flow and reduced collection periods.

Question 2

Accepting debit card transactions will decrease the total collection time for a firm.

Accepted Answer

Accepting debit card transactions typically results in funds being transferred to the firm's account quickly, often within 1-2 business days, thus decreasing the total collection time compared to traditional methods like checks or credit sales that can take longer to process and clear.

Question 3

Billing customers electronically will decrease the total collection time for a firm.

Accepted Answer

The answer of Billing customers electronically will decrease the total...

Question 4

A zero-balance account is funded on an as-needed basis only.

Accepted Answer

A zero-balance account is indeed funded on an as-needed basis, where funds are transferred to it only when payments need to be made, maintaining a zero balance at other times.

Question 5

One of the objectives of the cash management process is to determine the Appropriate level of cash that must be kept on hand.

Accepted Answer

Determining the appropriate level of cash to keep on hand is crucial in cash management to ensure liquidity for daily operations while optimizing investment opportunities for excess cash.

Question 6

A zero-balance account helps the firm free up surplus cash.

Accepted Answer

A zero-balance account is designed to maintain a balance of $0 by automatically transferring funds from a master account in the exact amount of transactions that occur, which helps in efficiently managing and utilizing surplus cash for other investments or operational needs.

Question 7

The use of a lockbox system to collect payments provides one principal benefit: a reduction in processing time.

Accepted Answer

The answer of The use of a lockbox system to...

Question 8

Establishing preauthorized payment arrangements will decrease the total collection time for a firm.

Accepted Answer

Preauthorized payment arrangements ensure that payments are automatically transferred from the customer's bank account to the firm's account on agreed-upon dates, reducing the time it takes to collect payments manually.

Question 9

One of the objectives of the cash management process is to determine the Best way to invest the temporary excess cash reserves of the firm.

Accepted Answer

The cash management process aims to manage a firm's short-term assets and liabilities efficiently, including determining the best ways to invest temporary excess cash reserves to optimize returns while maintaining liquidity.

Question 10

Adding additional staff in the mornings for mail and payment processing should help reduce the total collection time for your firm.

Accepted Answer

Adding more staff during peak processing times, such as mornings for mail and payment processing, can help distribute the workload more effectively, leading to faster processing times and reduced total collection time for the firm.

Question 11

One of the objectives of the cash management process is to determine the best way to pay for materials, services, etc., provided to the firm.

Accepted Answer

Cash management involves optimizing the collection, handling, and usage of cash, which includes determining the most efficient and cost-effective methods to pay for materials, services, and other expenses incurred by the firm.

Question 12

Peterson Products uses a zero-balance account for cash management purposes. McLeod Enterprises does not. If the firms are otherwise identical, one would expect McLeod to maintain a larger total cash safety stock than Peterson.

Accepted Answer

Peterson Products, by using a zero-balance account, effectively minimizes idle cash balances by automatically transferring funds to meet disbursements, thus requiring a smaller cash safety stock. McLeod Enterprises, not utilizing such a system, would likely maintain a larger total cash safety stock to cover unexpected transactions.

Question 13

Collecting your firm's mail earlier in the morning and delivering it directly to the people who process these payments should help reduce the total collection time for your firm.

Accepted Answer

Collecting mail earlier and delivering it directly to the people who process payments reduces internal processing time, which is a component of the total collection time, thereby potentially reducing the overall collection time.

Question 14

Over-the-counter collections help reduce collection float.

Accepted Answer

Over-the-counter collections allow for immediate or faster deposit of checks or cash into a bank account, reducing the time it takes for funds to become available and thus reducing collection float.

Question 15

A zero-balance account receives funds from a master account.

Accepted Answer

A zero-balance account is typically linked to a master account from which it receives funds to maintain a balance of zero by automatically transferring the exact amount needed to cover checks or debits.

Question 16

One of the objectives of the cash management process is to determine the Best means by which to collect cash owed to the firm.

Accepted Answer

Cash management involves optimizing the collection, concentration, and disbursement of cash, including determining the most efficient methods to collect receivables owed to the firm.

Question 17

Implementing a lockbox system will decrease the total collection time for a firm.

Accepted Answer

A lockbox system speeds up the collection and processing of receivables by having customers send payments directly to a bank or a secure post office box, reducing the total collection time for a firm.

Question 18

Establishing preauthorized payments for fixed payments from customers should help reduce the total collection time for your firm.

Accepted Answer

Preauthorized payments ensure that funds are automatically transferred from the customer's account to the firm's account on a predetermined schedule, thereby reducing the time it takes to collect payments manually.

Question 19

With respect to the workings of a lockbox system, by the time the company starts to record the payments, the cheques are already in the clearing process.

Accepted Answer

In a lockbox system, banks collect and process payments on behalf of a company. The checks are deposited and start the clearing process as soon as they are received by the bank, before the company records the payments.

Question 20

A zero-balance account is required to maintain a safety stock.

Accepted Answer

A zero-balance account is a type of bank account that maintains a zero balance because funds are automatically transferred from a master account in the exact amount needed for each transaction, not related to maintaining safety stock in inventory management.

Quiz 19: Cash and Liquidity Management