Ch20. Cash-flow forecasting and working capital

A small business has the movements of the table of cash over a three-month period.

 

Which of the following statements about the business’s cash flow is correct?

• Total cash flow for the three months is positive

• Cash flow in two of the months is negative

• Total cash flow for the three months is negative

• Cash flow in each month is positive

Cash is more important than profit in …

• … the long run

• … small businesses

• … large businesses

• … the short run

What does working capital measure?

• A business’s profit

• A business’s current liabilities

• A business’s current assets

• A business’s liquidity

Which of the following does the length of the working capital cycle not depend on?

• The amount paid to workers

• How quickly buyers are found for finished goods

• The amount paid to suppliers

• How quickly raw materials are converted into saleable output

A business has forecast a negative closing cash balance of $5000. The owners have decided to delay a payment to trade payables of $2000. They offer a discount of $500 to their largest credit customer to encourage early payment. The amount owed by this customer is $6000. What will be the amended forecast closing balance?

• $3000

• $2500

• $1000

• $8500

The ... is the most important line on a cash-flow statement

• net cash flow

• opening balance

• closing balance

If the balance is ... , then the business might decide to finance this with an overdraft

• negative

• positive

• zero

Making sure that the business has enough cash coming into the business to cover the cash going out

• Cash-flow management

• Cash-flow forecast

• Liquidity

• Credit sales

• Net cash flow

An estimate of the future cash inflows and outflows to identify any time periods when there might be cash shortages

• Cash-flow management

• Cash-flow forecast

• Liquidity

• Credit sales

• Net cash flow

The ability of a business to pay its short-term debts

• Cash-flow management

• Cash-flow forecast

• Liquidity

• Credit sales

• Net cash flow