For the following two situations, select the statement that would be most helpful in managing cash in each situation which is consistent with effective cash management techniques.

Situation 1: Sale of property raised our bank account balance so much that we do not know what to do with the excess funds.

Situation 2: We are encountering a cash flow problem, and credit terms cannot be tightened any more. Management did not approve of selling receivables to a factor.

Are the statements Situation 1 or Situation 2?

Statement

Increase the speed of collection on receivables by offering a sales discount 1/10 or 2/10, net 30.

Offer customers shorter credit terms, e.g., 30 instead of 45 days.

Sell receivables to a factor.

Keep inventory quantities down to a level that is adequate for meeting current orders.

Delay payment of liabilities by negotiating longer credit terms from suppliers, e.g., 40 instead of 30 days.

Plan timing of major expenditures.

Invest idle cash.

Balance the Cash account daily after recording all cash transactions, including electronic fund transfers (EFT), and prepare a monthly bank reconciliation statement.

Check customers' credit history and references thoroughly before extending credit.