Ch.4 Test

Which of the following is NOT a type of cash flow in a business?

• a) Operating cash flow
• b) Investing cash flow
• c) Employee cash flow
• d) Financing cash flow

What is the main risk of selling on credit?

• a) Increased cash flow
• b) Late payments and bad debts
• c) Higher inventory levels
• d) Reduced product costs

Which formula is used to calculate working capital?

• a) Revenue - Expenses
• b) Current Assets - Current Liabilities
• c) Total Assets - Total Liabilities
• d) Cash Flow - Inventory Costs

What does positive working capital indicate about a business?

• a) It has more liabilities than assets
• b) It can cover short-term expenses and invest in growth
• c) It must take out loans to stay operational
• d) It has too much cash tied up in inventory

What is payroll management?

• A) The process of hiring and firing employees
• B) The process of calculating and distributing employee paychecks
• C) A system that tracks employee work hours
• D) A government regulation for business operations

Which short-term financing method allows businesses to buy inventory now and pay later?

• a) Invoice discounting
• b) Trade credit
• c) Factoring
• d) Business lines of credit

T/F: A cash budget helps businesses estimate cash inflows and outflows to prevent shortages.

• True
• False

T/F: Factoring allows businesses to sell unpaid invoices, but they remain responsible for collecting payments from customers.

• True
• False

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

• A) Gross pay includes only wages, while net pay includes benefits
• B) Gross pay is before deductions; net pay is after deductions
• C) Net pay is what businesses pay in taxes
• D) Gross pay is taxed at a lower rate than net pay

Which of the following is an example of wage-based compensation?

• A) A real estate agent earning commission
• B) A store manager receiving a yearly salary
• C) A factory worker earning an hourly wage
• D) A CEO getting a performance bonus