Question

Days' cash on hand of 52 would be considered

a.too high and an indication that the company is not returning profits back to owners.
b.too high and an indication that the company is not investing profits back into the business.
c.too low and would be a cause for concern for creditors.
d.adequate for most businesses.

Answer 1

D. Adequate for most businesses.

Step-by-step explanation:

This postulation of cash on hand by Day i.e of 52, is important to know especially if the company is at its very early stage of its lifetime; example is a start up when they are not making any cash sales or even due to seasonal cycles where there may be a slump in sales made.

It is also important in knowing how much money you have on hand allows you to adjust your expenditure if necessary and, if your days cash available figure starts to get too low, drastically cut back spending.