Which of the following statements about cash management is false?
A)Depreciation expense does not appear explicitly on the cash budget, but its tax effects are included.
B)If cash flows are not uniform during the month, then weekly or perhaps daily cash budgets should be prepared rather than monthly budgets.
C)Compensating balance requirements do not affect a firm's target cash balance.
D)Cash management involves costs, and it is important to analyze whether the benefits received outweigh the costs incurred.
E)The cash budget is the foundation of good cash management.

Question

Quizplus · Accepted Answer

Compensating balance requirements do affect a firm's target cash balance. Compensating balances are funds that a bank requires a firm to keep in a non-interest-bearing account as a condition of granting a loan or extending credit. These funds reduce the amount of available cash and raise the firm's target cash balance.

Which of the Following Statements About Cash Management Is False