Which one of the following statements is correct concerning a company's cash balance?
A) Most firms attempt to maintain a zero cash balance at all times.
B) The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum desired cash balance.
C) On a cash balance report, the cumulative cash surplus at the end of May is used as June's beginning cash balance.
D) A cumulative cash deficit indicates a borrowing need.
E) The ending cash balance must equal the minimum desired cash balance.

Question

Quizplus · Accepted Answer

A cumulative cash deficit means that the company has spent more money than it has received in a given period, resulting in a negative cash balance. This indicates a borrowing need, as the company will need to obtain funds to cover its expenses and maintain adequate cash reserves. Choices A, B, C, and E are incorrect statements regarding a company's cash balance.

Which One of the Following Statements Is Correct Concerning a Company's