A firm's peak borrowing needs will probably be overstated if it bases its monthly cash budget on the assumption of uniform daily cash receipts and disbursements,but actual receipts are concentrated at the beginning of each month.

Question

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If actual cash receipts are concentrated at the beginning of each month, the firm's peak borrowing needs may be lower than anticipated if it bases its cash budget on the assumption of uniform daily cash receipts and disbursements. This is because the firm may have periods of high cash balances due to large inflows of cash at the beginning of the month, which can help offset any cash shortages later in the month. Therefore, if the firm does not take into account the timing of its actual cash receipts and disbursements, it may overestimate its borrowing needs.

A Firm's Peak Borrowing Needs Will Probably Be Overstated If