alleryStart learning →Cash management means making sure of what?
AThat enough cash is on hand to pay bills as due
BThat every sale is made for cash and not on credit
CThat all surplus cash sits idle in a checking account
DThat cash is never invested in any security at all
Answer & Solution
Correct answer: A. That enough cash is on hand to pay bills as due
1. Cash management means making sure enough cash is on hand to pay bills as they come due and to meet unexpected expenses.
2. Many companies keep a minimum cash balance for that purpose, and the financial manager arranges loans to cover any shortfall.
3. Cash held in checking accounts earns little if any interest, so the manager keeps balances low and invests the surplus.
4. Leaving surplus cash idle is therefore the opposite of good cash management, not a description of it.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.2 How Organizations Use Funds_
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