Question 1

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

Accepted Answer

Preauthorized payment arrangements ensure that payments are automatically deducted from a customer's account, reducing the time required to manually collect payments. This increases efficiency and decreases the total collection time for a firm.

Question 2

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

Accepted Answer

A zero-balance account means there is no balance left in the account after all transactions are accounted for. It does not relate to the concept of safety stock, which is a certain level of inventory maintained as a buffer against unexpected demand or supply chain disruptions.

Question 3

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 4

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

Since McLeod Enterprises does not use a zero-balance account, it would need to maintain a larger total cash safety stock to ensure it has enough cash on hand to cover any unexpected expenses or cash outflows. This is because without a zero-balance account, McLeod would not have automatic transfers of funds to cover deficits in its cash balance, unlike Peterson Products.

Question 5

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

Accepted Answer

A zero-balance account is a type of bank account where the balance is maintained at zero. Funds are transferred from a master account to the zero-balance account as needed, usually for specific purposes such as payroll or disbursements. Therefore, a zero-balance account does receive funds from a master account.

Question 6

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

Accepted Answer

Accepting debit card transactions allows for immediate payment and eliminates the need for customers to send payment via check or other means, decreasing the total collection time for a firm.

Question 7

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 8

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

By collecting the mail earlier and delivering it directly to the payment processors, the time it takes to process payments will be reduced.

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

This statement is true. One of the objectives of cash management is to determine the best way to invest any temporary excess cash reserves of the firm. This can help to maximize returns and potentially earn additional income for the company. However, it is important to also consider liquidity needs and risk tolerance when making investment decisions with excess cash.

Question 10

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

Accepted Answer

A zero-balance account is a checking account in which a balance of zero is maintained by automatically transferring funds from a master account to the zero-balance account only as needed to cover checks presented for payment. This helps the firm to avoid idle cash balances and free up surplus cash for investment or other purposes.

Question 11

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

Accepted Answer

A lockbox system allows customers to send their payments directly to the bank rather than to the firm, which decreases the time it takes for the firm to receive and process the payments. This results in a decrease in the total collection time for the firm.

Question 12

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

Accepted Answer

By adding more staff in the mornings, the firm can process mail and payments more efficiently, which should result in a reduction in total collection time.

Question 13

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

Accepted Answer

Offering a discount for electronic payments incentivizes customers to pay promptly and eliminates the time and costs associated with traditional paper checks or invoices, ultimately reducing collection time for the firm.

Question 14

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

Accepted Answer

By establishing preauthorized payments, the firm can automatically receive the payment from the customer without waiting for them to manually initiate the payment. This can help reduce the total collection time as the payment is received on time, without any delay or follow-up required.

Question 15

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

One of the main objectives of cash management is to determine the optimal level of cash that should be held by an organization, taking into account factors such as cash inflows and outflows, cash forecasting, and liquidity needs. This helps to ensure that the organization has enough cash on hand to meet its obligations, while also minimizing the costs associated with holding excess cash.

Question 16

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, the payments are received and processed by a third-party bank before being deposited into the company's account. Therefore, by the time the company receives the payment information, the cheques are already in the clearing process.

Question 17

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

One of the objectives of cash management is to determine the most efficient and effective methods for collecting cash owed to the firm.

Question 18

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

Accepted Answer

A zero-balance account is designed to maintain a balance of zero, and funds are only deposited as needed to cover specific transactions.

Question 19

Over-the-counter collections help reduce collection ﬂoat.

Accepted Answer

Over-the-counter collections refer to payments made directly to the company at their physical location. By accepting such payments, the company can reduce collection float, which is the time between when a payment is made and when it is deposited and made available to the company. Therefore, the statement is true.

Question 20

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

This is a correct statement. One of the objectives of cash management is to determine the most efficient way to pay for expenses incurred by the company. This involves optimizing the timing and method of payments, such as choosing between cash, credit, or other payment options.

Quiz 19: Cash and Liquidity Management

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

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

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

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.

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

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

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

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.

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.

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

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

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

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

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

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

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.

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

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

Over-the-counter collections help reduce collection ﬂoat.

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.