Cash and Cash-flow MCQ Test

Which two of the following are benefits to a business of having a positive cash flow? Select two answers:

Which two of the following are ways a business could improve its cash flow position? Select two answers:

Which one of the following is a reason why a business should construct a cash-flow forecast?

• It informs owners if the business is making a profit/loss

• It helps managers to prepare for any future cash shortfall

• It enables managers to calculate the break even point

• It enables the owners to assess past financial performance

Below is an extract from a business’s cash-flow forecast. January (£’000s) Total receipts (cash) Total payments 100 Net cash flow Opening balance 90 Closing balance 120 Based on this information, the total receipts for January will be:

• £70,000

• £100,000

• £130,000

• £210,000

The correct formula to calculate net cash flow in a cash-flow forecast is:

• Total cash inflows - total cash outflows in a given period

• Total cash outflows - total cash inflows in a given period

• Opening balance - closing balance

• Opening balance + closing balance

A negative figure on the closing balance of a cash-flow forecast is called a:

• Surplus

• Profit

• Deficit

• Loss

For a future time period, a cash-flow forecast predicts:

• The profit or loss a business will make

• The break even level of output

• The money flowing into and out of the business

• The margin of safety

Which one of the following statements is true in relation to cash-flow and/or profit?

• Cash-flow and profit have the same meaning in business

• Businesses should always be more concerned about profit than cash

• The profit figure is always shown in the cash-flow forecast

• A positive cash flow is important to ensure business survival

An extract from a business’ cash-flow forecast for June and July is shown in the table below: June (£) July (£) Total receipts (cash) 125,000 110,000 Total payments 39,000 34,000 Net cash flow Opening balance 12,000 Closing balance Based on this information, the closing balance for July will be:

• £98,000

• £150,000

• £174,000

• £320,000

A business is experiencing cash flow problems. It currently has the following trade credit terms in operation with its suppliers and customers: Credit period Suppliers 30 days Customers 60 days Based on this information, which of the following would be a suitable way for the business to improve its cash flow position?

• Increase customer credit period and reduce supplier credit period

• Reduce customer credit period and increase supplier credit period

• Increase credit period with both customers and suppliers

• Reduce credit period with both customers and suppliers