Concentration banking:
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A. B. C. D.D
Concentration banking is a cash management technique used by corporations to centralize their funds in one or a few bank accounts, which are typically located in a concentration bank. The concentration bank acts as a central point for all the corporation's cash flows, consolidating the cash from all of its accounts and transferring it to a single account.
Among the given options, option B, "Moves excess funds from a concentration bank to regional banks," is not an accurate description of concentration banking. Concentration banking is designed to centralize funds rather than distribute them to regional banks. Therefore, option B is incorrect.
Option A, "Increases idle balances," is not entirely accurate, as the primary purpose of concentration banking is not to increase idle balances, but to facilitate the efficient management of cash flows. However, concentration banking may result in increased idle balances in some cases, as funds may accumulate in the concentration account until they are needed for disbursement. Therefore, option A is partially correct.
Option C, "Is less important during periods of rising interest rates," is not accurate. The importance of concentration banking is not dependent on the level of interest rates, but rather on the size and complexity of the corporation's cash flows. Therefore, option C is incorrect.
Option D, "Improves control over corporate cash," is a correct description of the benefits of concentration banking. By centralizing funds in a single account, concentration banking provides greater visibility and control over cash flows, allowing corporations to manage their funds more efficiently and effectively. Therefore, option D is the correct answer.
In summary, concentration banking is a cash management technique that centralizes funds in one or a few bank accounts. It provides greater control and visibility over corporate cash flows and is not dependent on interest rates. While it may result in increased idle balances in some cases, that is not its primary purpose.