Which of the following is considered a good practice in cash management?

Maximizing amounts of customer deposits is considered a good practice in cash management because it enhances liquidity and provides a more stable cash flow for a business. When a company has a higher level of customer deposits, it means that it can utilize that cash to meet operational needs, invest in growth opportunities, or manage other financial obligations without relying heavily on external financing. This practice also indicates a strong customer relationship and trust, as customers are willing to deposit more funds, which can lead to more business and revenue stability.

In contrast, investing heavily in new inventory may tie up cash that could be utilized for other operational needs, making it less advantageous in terms of immediate cash management. Minimizing payment terms with vendors can negatively impact relationships and could lead to missed opportunities for better payment terms or discounts. Additionally, reducing cash reserves can be risky, as it leaves the business vulnerable to unforeseen expenses or economic downturns. Therefore, maximizing customer deposits contributes positively to a company's financial health and operational efficiency.