Managing a business's days cash on hand provides which of the following benefits?

• A. It allows the business to avoid preparing cash flow statements.
• B. It guarantees higher interest income from excess cash balances.
• C. It helps ensure the company can meet short-term obligations as they come due.
• D. It eliminates the need for bank reconciliations.

Answer: (C)

Verified step by step guidance

1. Understand the concept of 'Days Cash on Hand': This metric measures the number of days a company can continue to pay its operating expenses using its available cash. It is a critical liquidity measure.
2. Recognize the importance of liquidity: Liquidity ensures that a company can meet its short-term obligations, such as paying suppliers, employees, and other operational costs, without relying on external financing.
3. Evaluate the benefits of managing Days Cash on Hand: Proper management helps the company maintain financial stability and avoid disruptions in operations due to cash shortages.
4. Clarify misconceptions: Managing Days Cash on Hand does not eliminate the need for preparing cash flow statements or bank reconciliations, nor does it guarantee higher interest income from excess cash balances.
5. Conclude with the correct benefit: The primary advantage of managing Days Cash on Hand is ensuring the company can meet short-term obligations as they come due, which is essential for maintaining operational continuity.