Deck 6: Forecasting Cash Flows

Question 1

According to the textbook, successful entrepreneurs manage cash flows

A) proactively
B) passively
C) reactively
D) aggressively
E) diligently

Answer 1

A

Question 2

What are ways an entrepreneur can use to reduce the probability of running into cash flow problems?

A) Use a cash budget
B) Set a target minimum cash balance
C) Adhere to the target minimum cash balance
D) B and C
E) A, B, and C

Answer 2

E

Question 3

List all the assumptions of the operation explicitly

A) will help entrepreneur identify potential flaws in their business model.
B) is unnecessary.
C) results in trapping the entrepreneurs in the weeds and lose sight of the larger goals and visions.
D) give away too much information to outside investors or competitors.
E) is a common mistake made by inexperienced entrepreneurs.

Answer 3

A

Question 4

Some approaches for determining the target minimum cash balance include:

A) one to three months of cash expenses
B) worst case scenario analysis
C) residual cash retention.
D) A and B
E) A, B, and C

Question 5

Methods to maintain the target minimum cash balance include the following except

A) increase startup funds
B) Use short-term loans
C) Use revolving line of credit
D) Use cash advance from credit companies
E) All of the above

Question 6

Forecasting sales for a new business

A) uses the same approach as for an existing business
B) is the same for most industries
C) may involve different techniques depending on the industry
D) is a well-established science
E) is usually the last step in preparing the cash budget

Question 7

The most important and difficult task of estimating cash flows for an established business is

A) computing historic ratios
B) computing historic rolling averages
C) identifying values that will change during the forecast period
D) A and B
E) A, B, and C

Question 8

Cash budget is usually prepared for

A) 6 month
B) one to three years
C) three to five years
D) five to ten years
E) ten to twenty years

Question 9

Projections for cash budget is usually

A) daily or weekly
B) weekly or monthly
C) monthly or quarterly
D) quarterly or annually
E) annually or longer

Question 10

Cash flow forecasting and cash budget development are

A) iterative processes.
B) non-routine processes for new businesses only.
C) easy because entrepreneurs want to keep the estimates simple..
D) A and B
E) A, B, and C