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Basic Question 12 of 15
True or False? 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.
User Contributed Comments 3
| User | Comment |
|---|---|
| yu0825 | What is safety stock off case? I think this case is true just because if a company has zero-balance account, the company will have higher risk. Please someone explain? |
| zeiad | yes please some one explain |
| IvanTG | Zero-balance account does not carry any balance, hence the name. Any checks written against this account will clear by an instant transfer from the master account. Company uses less cash by doing so...(assuming the fees associated with this type of account aren't much higher) |
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Learning Outcome Statements
describe issuers' objectives and compare methods for managing working capital and liquidity
CFA® 2025 Level I Curriculum, Volume 2, Module 4.