Section A — Multiple Choice (10)

Cash flow refers to:

• Profit remaining after tax

• Movement of cash in and out over a period

• Increase in inventory value

• Owner’s equity changes

Which document best indicates a firm’s ability to pay its debts on time?

• Income statement

• Balance sheet

• Cash flow statement

• Budget variance report

A cash flow forecast primarily helps a business:

• Reduce fixed costs

• Identify periods of shortfalls and surpluses

• Increase market share

• Decrease tax liability

Which of the following is not listed as a cash flow management strategy?

• Distributing payments through the year

• Offering discounts for early payment

• Factoring

• Issuing new ordinary shares

Factoring is best described as:

• Borrowing against inventory

• Selling accounts receivable to a finance company at a discount

• Extending supplier payment terms to 90 days

• Using a bank overdraft for temporary cash needs

In invoice discounting, who collects the receivables?

• The finance company

• The exporter’s bank

• The business itself

• A government agency

According to the Telstra case, supplier payment terms were extended to:

• 30 days

• 60 days

• 90 days

• 120 days

Net working capital equals:

• Current assets – current liabilities

• Total assets – total liabilities

• Cash – payables

• Equity – long-term debt

Controlling current assets focuses on managing:

• Cash, receivables, and inventories

• Payables, loans, overdrafts

• Plant and equipment

• Intangible assets

Sale and leaseback means a business:

• Leases an asset then buys it later

• Sells an owned asset to a lessor and leases it back

• Rents an asset without any ownership transfer

• Uses an overdraft to fund asset purchases