Question 1

To manage cash efficiently, business owners should strive to accelerate their accounts payable and stretch out their accounts receivable.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following measures a company's liquidity and its ability to pay its bills and other financial obligations on time?

Accepted Answer

A)   Cash budget
B)   Cash flow
C)   Cash management
D)   All of the aboveE) A) and B)
F) B) and C)

Question 3

If an account receivable becomes past due, the best strategy is simply to wait; statistics show that customers eventually pay their bills if business owners do not bother them with repeated collection attempts.

Accepted Answer

A) True 
 B)False

Question 4

A cash discount offers a price reduction if the owner pays an invoice on time.

Accepted Answer

A) True 
 B)False

Question 5

It is likely that young companies and rapidly growing companies will experience cash flow difficulties.

Accepted Answer

A) True 
 B)False

Question 6

What steps can a small business owner take to avoid the cash "crunch"?

Accepted Answer

Techniques that allow small business own...

Question 7

Which of the following is true about inventory management for the small business owner?

Accepted Answer

A)   Most small business owners have turned to technology and computer spreadsheets to achieve maximum efficiency in managing it.
B)   Inventory is the largest capital investment for most businesses but few owners use any formal means for managing it.
C)   Inventory is generally highly liquid and can be easily mortgaged to a bank for immediate cash if needed.
D)   Inventory yields a return of about 25 percent for manufacturing firms but nothing for service companies.E) A) and D)
F) B) and C)

Question 8

Forty percent of industrial and wholesale sales are on credit, and 90 percent of retail sales are on account.

Accepted Answer

A) True 
 B)False

Question 9

Some financial analysts recommend that new owners estimate cash disbursements as best they can and then add another 25 to 50 percent of the total!

Accepted Answer

A) True 
 B)False

Question 10

Many banks allow entrepreneurs to schedule their loan payments to fit their company's cash flow cycles.

Accepted Answer

A) True 
 B)False

Question 11

Companies lose billions of dollars each year due to employee theft.

Accepted Answer

A) True 
 B)False

Question 12

Roughly 80 percent of the typical business' inventory turns over quickly.

Accepted Answer

A) True 
 B)False

Question 13

A firm's cash budget should:

Accepted Answer

A)   be prepared on a monthly basis for at least one year in advance and cover all seasonal fluctuations.
B)   cover a longer planning horizon when a firm's pattern is highly variable.
C)   show the amount and timing of cash receipts and cash disbursements on an annual basis.
D)   show the amount and timing of cash receipts and cash disbursements on a quarterly basis.E) None of the above
F) A) and C)

Question 14

A sweep account is a checking account that:

Accepted Answer

A)   bears interest, allowing depositors to write checks without tying up money for a specific period of time.
B)   never has funds as they are drawn from a master account.
C)   automatically moves all funds in a company's checking account above a predetermined minimum into an interest-bearing account.
D)   need to be reviewed and updated on a regular basis.E) None of the above
F) B) and C)

Question 15

Changing your firm's shipping terms from "F.O.B. buyer" to "F.O.B. seller" can improve your cash flow, as it switches the cost of shipping from you to your buyer.

Accepted Answer

A) True 
 B)False

Question 16

Small businesses selling on credit find that:

Accepted Answer

A)   it is relatively inexpensive and it is simple.
B)   it is expensive, requires a great deal of effort, and it is risky.
C)   it is essentially borrowing money from the customer.
D)   many can get by without selling on credit because their business customers do not expect to use credit.E) A) and D)
F) A) and C)

Question 17

A cash budget allows a small business owner to anticipate cash shortages and cash surpluses and gives him time to handle, or even avoid, approaching problems.

Accepted Answer

A) True 
 B)False

Question 18

A sweep account automatically "sweeps" all funds in a company's checking account above a predetermined minimum into an interest-bearing account, enabling it to keep otherwise idle cash invested until it is needed to cover checks.

Accepted Answer

A) True 
 B)False

Question 19

________ small businesses take the time to conduct a credit check.

Accepted Answer

A)   All
B)   Most
C)   Few
D)   None of the aboveE) B) and C)
F) All of the above

Question 20

Important advantages of leasing include the flexibility of the lease agreement and protection against obsolescence.

Accepted Answer

A) True 
 B)False

Exam 12: Managing Cash Flow

Which of the following measures a company's liquidity and its ability to pay its bills and other financial obligations on time?

Correct AnswerverifiedShow Answer

Some financial analysts recommend that new owners estimate cash disbursements as best they can and then add another 25 to 50 percent of the total!

Correct AnswerverifiedShow Answer

Roughly 80 percent of the typical business' inventory turns over quickly.

Correct AnswerverifiedShow Answer

It is likely that young companies and rapidly growing companies will experience cash flow difficulties.

Correct AnswerverifiedShow Answer

Small businesses selling on credit find that:

Correct AnswerverifiedShow Answer

A cash budget allows a small business owner to anticipate cash shortages and cash surpluses and gives him time to handle, or even avoid, approaching problems.

Correct AnswerverifiedShow Answer

A sweep account is a checking account that:

Correct AnswerverifiedShow Answer

Important advantages of leasing include the flexibility of the lease agreement and protection against obsolescence.

Correct AnswerverifiedShow Answer

If an account receivable becomes past due, the best strategy is simply to wait; statistics show that customers eventually pay their bills if business owners do not bother them with repeated collection attempts.

Correct AnswerverifiedShow Answer

Many banks allow entrepreneurs to schedule their loan payments to fit their company's cash flow cycles.

Correct AnswerverifiedShow Answer

Forty percent of industrial and wholesale sales are on credit, and 90 percent of retail sales are on account.

Correct AnswerverifiedShow Answer

A sweep account automatically "sweeps" all funds in a company's checking account above a predetermined minimum into an interest-bearing account, enabling it to keep otherwise idle cash invested until it is needed to cover checks.

Correct AnswerverifiedShow Answer

A cash discount offers a price reduction if the owner pays an invoice on time.

Correct AnswerverifiedShow Answer

Which of the following is true about inventory management for the small business owner?

Correct AnswerverifiedShow Answer

To manage cash efficiently, business owners should strive to accelerate their accounts payable and stretch out their accounts receivable.

Correct AnswerverifiedShow Answer

________ small businesses take the time to conduct a credit check.

Correct AnswerverifiedShow Answer

What steps can a small business owner take to avoid the cash "crunch"?

Correct AnswerverifiedTechniques that allow small business own...View AnswerShow Answer

Companies lose billions of dollars each year due to employee theft.

Correct AnswerverifiedShow Answer

A firm's cash budget should:

Correct AnswerverifiedShow Answer

Changing your firm's shipping terms from "F.O.B. buyer" to "F.O.B. seller" can improve your cash flow, as it switches the cost of shipping from you to your buyer.

Correct AnswerverifiedShow Answer

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Techniques that allow small business own...
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