Business Revision Quiz 3 - Cash Flow and Contribution

A cash flow advantage of having a bank overdraft is that

• Fixed repayments help cash flow planning

• No interest is payable until the overdraft is repaid

• Stocks can be offset against the overdraft limit

• It provides flexibility to meet short-term liquidity needs

One way to speed up cash inflows is to:

• Buy more stocks

• Pay suppliers earlier

• Offer discounts for prompt customer payment

• Pay shareholders a dividend

Which of these calculations shows the net working capital of a business?

• Trade debtors less trade creditors

• Cash balances less bank overdraft

• Current assets less current liabilities

• Fixed assets less depreciation

What is involved in factoring

• The leasing of fixed assets from a bank

• The purchase of raw material components from a wholesaler

• The purchase of forward contracts from suppliers

• The selling of a company's trade debtors to a third party

A reduction in the quantity or value of inventories held would normally

• Reduce cash flow

• Increase profit

• Improve cash flow

• Reduce costs

Short-term cash flow can be improved by

• Repaying a bank loan

• Increasing the value of finished goods stocks

• Increasing overheads

• Extending the period of trade credit

Which of the following would specifically lead to a cash flow problem only?

• The product is poor quality

• Their advertising is poor

• They can't sell their goods

• Suppliers demand up-front payments

What is meant by sale and leaseback?

• Buying a fixed asset and leasing it to the supplier

• Selling stocks and then leasing them from a distributor

• Selling a fixed asset and then leasing it from the new owner

• Buying stocks and then leasing them to a wholesaler

Which of these would be a cash inflow into a business?

• Giving shareholders a dividend

• Payment to supplier

• Receipt of an overdraft

• Receipts from sales to customers

Which of the following is a possible symptom of overtrading?

• An increase in stock turnover

• A decrease in time taken to pay suppliers

• A significant fall in liquidity ratios

• A slowdown in turnover