Deck 9: Cash Flow and Taxes

Question 1

What are the two steps in making a cash flow projection?

A) projecting receipts and paying bills before they are due
B) projecting expected cash expenses and subtracting inventory cost
C) projecting cash receipts and subtracting expected cash expenses
D) projecting receipts and capital expenditures for a quarter

Answer 1

C

Question 2

If the amount of cash that flows in and out of your business changes significantly during certain times of the year, include the following in your business plan: ________.

A) a cash flow statement
B) a projected cash flow statement
C) expectations for seasonal variations
D) flow chart

Answer 2

C

Question 3

If Tara invests $10,000 at 5% interest for 5 years, what will her earnings be at the end?

A) $607.75
B) $2,762.82
C) $12,500
D) $12,763

Answer 3

D

Question 4

Which of the following is not a key rule for managing cash flow?

A) Check cash balance every day.
B) Pay bills as late as possible but on time.
C) Pay bills as soon as possible.
D) Collect cash as soon as possible.

Question 5

Why is it not a good idea to rely on your income statement to run your business?

A) The income statement records cash when it comes into the business.
B) The income statement adds non-cash expenses back to the business's earnings.
C) The income statement deducts non-cash expenses, such as depreciation, even when no cash is actually flowing out of the business.
D) The income statement usually contains errors that other statements don't have.

Question 6

Orders are not entered onto the cash flow statement as cash receipts because you ________.

A) don't get the cash until the customer actually pays for the order
B) might get them confused with revenue on the income statement
C) will have a more accurate cash flow statement if you enter them once a month
D) might get a cancellation

Question 7

________ = Cash on Hand + Cash Receipts - Cash Disbursement.

A) Profit
B) Revenue
C) Cash flow
D) Gross profit

Question 8

On your cash flow statement, you will need to ________ the amount you deducted from the income statement as a depreciation expense.

A) subtract
B) amortize
C) double
D) add back

Question 9

Which of the following is the bottom line on a cash flow statement?

A) net profit
B) cost of goods sold
C) taxes
D) ending cash balance

Question 10

Which business below is most likely to have cash flow that is cyclical?

A) gas station
B) pet food business
C) tax return preparation business
D) grocery store

Question 11

Cash flow is the lifeblood of a business.

Question 12

If Jacques invests $20,000 at 10% interest for 3 years, what will the future value of the money be?

A) $26,000.00
B) $20,606.02
C) $23,606.02
D) $26,620.00

Question 13

How could the income statement potentially confuse a business owner?

Question 14

Once a business is operational, an entrepreneur needs to keep an eye on ________, which is defined as "Current Assets minus Current Liabilities."

A) working capital
B) the operating ratio
C) capital assets
D) None of the above.

Question 15

A burn rate is ________.

A) the number of months a business can survive without making sales
B) the amount of cash per month a business can spend before it runs out of cash
C) the amount of cash a business burns on rent per month
D) the number of days a business can survive without making sales

Question 16

The cash flow statement is: cash flow = cash on hand + credit and cash sales - cash disbursements.

Question 17

The ________ value of money is the amount it will be worth a number of periods from the present.

A) present
B) future
C) cash
D) investment

Question 18

Which of the three financial statements an entrepreneur prepares is used to guide the day-to-day operations of the business?

A) the cash flow statement
B) the income statement
C) the balance sheet
D) tax returns

Question 19

Which statement best describes how the cash flow statement differs from the income statement?

A) The income statement records sales and expenses when they happen, not when cash is actually exchanged. The cash flow statement records cash inflows and outflows when they actually occur.
B) The income statement records income, as it comes in, while the cash flow statement records cash from sales.
C) The income statement keeps track of cash when sales are made. The cash flow statement keeps track of cash after sales are made.
D) The cash flow statement also includes the current market value of assets.

Question 20

A(n) ________ rate of return means that interest is earned on the base amount plus any interest previously earned.

A) compound
B) accrued
C) annual
D) fixed

Question 21

Corporate, partnership, individual income tax, and ________ tax returns must be filed on time with the U.S. Internal Revenue Service.

A) state
B) local - city or county
C) self-employment
D) township

Question 22

Credit is ________.

A) exemplified by purchasing a product to sell, and you don't have to pay until after you have sold it
B) the ability to buy something without spending actual cash
C) both of the above
D) essentially using someone else's money for gain

Question 23

Future value is a component of the time value of money; however, present value is not.

Question 24

________ is the amount an investment is worth discounted back to the present.

A) Present value of money
B) Future value of money
C) Time value of money
D) Prediscounted value of money

Question 25

What is the burn rate? Why is it important?

Question 26

Both cash inflows and outflows can be managed to control overall cash flow.

Question 27

________ tax is federal tax that business owners are assessed on wages paid to themselves.

A) Sales
B) Corporate
C) Self-employment
D) Unemployment

Question 28

What are the tax issues for the various legal structures your business can have?

Question 29

A ________ is a legal structure for your business which separates the owners/partners from personal liability and provides a more flexible allocation of profit and loss.

A) limited liability company (LLC)
B) sole proprietorship
C) partnership
D) limited partnership

Question 30

One of the penalties for failure to file proper wage taxes is sweeping your company bank account. What action will the federal government take?

A) cleaning out your inventory of saleable items
B) charge interest and penalties
C) taking out any available funds
D) confiscate your state business license

Question 31

Factoring is the selling of a business' accounts receivables at a discount to a finance company called a factor in exchange for immediate cash.

Question 32

Which of the following would be the most or least seasonal businesses and therefore have the least or most cyclical cash flow: a. snow plowing; b. high school senior photography; c. cleaning and repairing lawn mowers, d. evening and weekend babysitting? Why?

Question 33

________ is the amount an investment is worth discounted back to the present.

A) Earnings value
B) Future value
C) Present value
D) Tangible value

Question 34

To manage cash flow, you should ________ and then subtract expenses you expect to incur.

A) project gross receipts
B) project gross sales
C) project cash receipts
D) project net income

Question 35

Because entrepreneurs do not have Social Security tax taken out of their income by their employer, they must pay a(n) ________.

A) self-employment tax
B) sales tax
C) operating tax
D) capital assets tax

Question 36

As a sole proprietorship, you sell tangible products to the public at retail. You will need to pay ________.

A) sales tax
B) self-employment tax
C) services tax
D) Both A and B.

Question 37

Every time an entrepreneur spends cash, she or he takes a risk. If one buys ________, then the entrepreneur faces the risk of storage costs and pilfering.

A) a computer for your chief financial officer
B) capital assets
C) inventory
D) None of the above.

Question 38

Make your life easier at tax time by keeping ________.

A) complete financial records
B) operating ratios
C) a good working capital figure
D) high net income

Question 39

The present value of money is based upon the value of your "next-best" opportunity for investment at a particular ROI. If this value is 10%, it is better to get $10,000 at the end of the first year than ________ today.

A) $10,000
B) $9,500
C) $9,090
D) $8,000