Question 1

When investing surplus cash, an owner's primary objective should be on the safety and liquidity of the investments.

Accepted Answer

Safety and liquidity are the primary concerns for investing surplus cash as it provides a cushion against unexpected business expenses and helps maintain financial stability.

Question 2

A sweep account is a checking account that automatically "sweeps" all funds in a company's checking account above a predetermined minimum into an interest-bearing account.

Accepted Answer

This is a correct definition of a sweep account.

Question 3

Revising business plans annually forces owners to focus on managing the business more effectively.

Accepted Answer

Revising business plans annually helps owners to reevaluate their goals, strategies, and challenges, which in turn helps them to make better business decisions and manage the company more effectively.

Question 4

Identify the "big three" of cash management. As a small business consultant, what would you recommend your clients do to control the "big three" more effectively?

Accepted Answer

The answer of Identify the "big three" of cash management....

Question 5

A sweep account automatically "sweeps" all funds in a company's checking account above a predetermined minimum into an interest-bearing account, enabling it to keep otherwise idle cash invested until it is needed to cover checks.

Accepted Answer

The answer of A sweep account automatically "sweeps" all funds...

Question 6

Because small business owners often rely on informal procedures for managing cash, they are most likely to become victims of embezzlement and fraud by their employees.

Accepted Answer

Small business owners may not have formal procedures in place to monitor their cash flow, making it easier for employees to commit fraud or embezzlement.

Question 7

In order to deter employee theft, it is best to separate cash management duties between at least two different employees.

Accepted Answer

Separating cash management duties between two or more employees creates a system of checks and balances that can help deter employee theft. This approach ensures that no single employee has complete control over cash handling and reduces the likelihood that any one employee can steal undetected.

Question 8

What are the basic steps in preparing a cash budget? Which forecast is the "heart" of the cash budget?

Accepted Answer

The answer of What are the basic steps in preparing...

Question 9

Small business managers need not be concerned about investing surplus cash since small amounts of cash sitting around for a few days or weeks are not worth investing.

Accepted Answer

Small business managers should consider investing surplus cash, even if the amount is small, to earn some return on investment instead of letting it sit idle.

Question 10

Your friend Jake owns a business that is achieving phenomenal growth. Explain why it is said that: "Fast-growing companies are most likely to experience cash shortages."

Accepted Answer

The answer of Your friend Jake owns a business that...

Question 11

When trying to prevent employee theft, business owners should create a "police state" environment and trust no one.

Accepted Answer

While it's important to take measures to prevent employee theft, creating a "police state" environment and not trusting anyone can be counterproductive and damage employee morale. It's possible to create a culture of accountability and transparency without being overly suspicious or distrustful.

Question 12

When investing surplus cash, the small business owner should seek the highest returns possible on the money.

Accepted Answer

While high returns are desirable, the small business owner should also consider the risk associated with the investment, ensuring that it aligns with their risk tolerance and business goals.

Question 13

What steps can a small business owner take to avoid the cash "crunch"?

Accepted Answer

The answer of What steps can a small business owner...

Question 14

How are sales forecasts developed for an established business? How are sales forecasts developed for a new business enterprise?

Accepted Answer

The answer of How are sales forecasts developed for an...

Question 15

Rather than build the current year's budget on increases from the previous year's budget, zero-based budgeting starts from a budget of zero and evaluates the necessity of every item.

Accepted Answer

Zero-based budgeting does not assume any previous budget as a starting point and evaluates the necessity of every item from scratch.

Question 16

Why is cash a unique asset? What are the advantages of efficient cash management?

Accepted Answer

The answer of Why is cash a unique asset? What...

Question 17

The profits your small business is generating are high; however, you never seem to have enough cash to pay your bills on time. Are cash and profit the same thing? Why or why not?

Accepted Answer

The answer of The profits your small business is generating...

Question 18

What steps can a small business owner take to minimize bad debt losses?

Accepted Answer