Which of the following statements is 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 must be made on the 10th of each month, then a regular monthly cash budget will be misleading. The problem can be corrected by using a daily cash budget.
C) Sound working capital policy is designed to maximize the time between cash expenditures on materials and the collection of cash on sales.
D) If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10, net 30 to net 60.
E) If a firm sells on terms of net 90, and if its sales are highly seasonal, with 80% of its sales in September, then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365) would probably be lower in October than in August.

Question

Quizplus · Accepted Answer

A regular monthly cash budget may not accurately reflect cash flow timing if inflows and outflows occur at different times, which can be addressed with a daily cash budget.

Which of the Following Statements Is CORRECT