4.5 Learning Objective 4-5
1) A budget is a financial plan that helps coordinate business activities.
2) When preparing a cash budget, a company must determine how much cash it will need in a future period.
3) The cash-budget can span any length of time.
4) Cash equivalents include accounts receivable expected to be collected within 90 days or less.
5) A compensating balance maintained for a loan increases the actual interest rate on a loan.
6) A cash budget does all of the following EXCEPT:
A) helps a company manage cash by planning cash receipts and cash payments.
B) determines if the company will have excess cash available for investing purposes.
C) determines if the company will need to borrow money.
D) assess the riskiness of a new product.
7) When preparing a cash budget, the budgeted balance is:
A) the beginning cash balance.
B) the budgeted cash payments.
C) the minimum amount of cash the company needs.
D) the budgeted cash receipts.
8) Managers control cash receipts and disbursements, as well as the ending cash balance, through a(n):
A) sales budget.
B) operating budget.
C) statement of cash flows.
D) cash budget.
9) In a cash budget, if the cash available before financing falls below the budgeted balance:
A) the company should reduce its cash receipts.
B) the company can invest the excess cash.
C) the company will need additional financing.
D) the company is facing bankruptcy.
10) When reporting cash on the balance sheet, companies:
A) show each bank account separately.
B) combine cash with accounts receivable.
C) include any restricted amounts.
D) combine cash and cash equivalents.