Financial Literacy Quiz

What is the main difference between gross income and net income?

• Gross income is revenue after expenses; net income is total revenue.

• Gross income is total revenue; net income is revenue after all expenses are deducted.

• Gross income includes passive income; net income does not.

• Gross income is net income minus variable expenses.

Which of the following is NOT an example of a fixed expense?

• Rent

• Salaries

• Raw materials

• Insurance

Why is it important to create an emergency fund as part of a financial plan?

• To invest in long-term projects

• To cover regular monthly expenses

• To have funds available for unexpected situations

• To allocate for marketing campaigns

What does positive cash flow mean for a business?

• The business is experiencing higher expenses than revenue.

• The business is paying off debts faster than expected.

• The business has more cash coming in than going out.

• The business is generating cash only through loans.

List two strategies a business can use to optimize cash flow and explain why they are effective.

• Increase expenses and reduce sales

• Delay payments and increase inventory

• Speed up receivables and manage payables

• Invest in long-term assets and reduce marketing

Explain the importance of setting SMART goals in financial planning.

• They are vague and hard to measure.

• They provide a clear and structured approach.

• They focus only on short-term gains.

• They are irrelevant to financial success.

An investment portfolio should only include one type of asset to minimize risk.

• True

• False

• Depends on the market

• Only for short-term investments

A key benefit of budgeting is that it helps businesses allocate resources efficiently and prepare for financial uncertainties.

• True

• False

• Only for large businesses

• Only during economic downturns

What is a common issue for small retail businesses with high receivables but low cash on hand?

• Excessive inventory

• Cash flow issues

• High employee turnover

• Low customer satisfaction

Which of the following is a measure a business could take to manage cash flow more effectively?

• Increase inventory

• Delay payments to suppliers

• Offer discounts for early payments

• Hire more staff