Question 1

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

Accepted Answer

Revising business plans annually allows owners to reassess their goals and strategies, identify areas for improvement and adjust their actions accordingly, ultimately leading to improved management of the business.

Question 2

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

Accepted Answer

Creating a "police state" environment can negatively impact employee morale and create distrust. Instead, business owners should focus on implementing proper security measures, promoting a culture of honesty and transparency, and providing appropriate training for employees on theft prevention. It's important to find a balance between protecting the company and maintaining a positive work environment.

Question 3

Changing your firm's shipping terms from "F.O.B. buyer" to "F.O.B. seller" can improve your cash flow, as it switches the cost of shipping from you to your buyer.

Accepted Answer

When shipping terms are changed from F.O.B. buyer to F.O.B. seller, the cost of shipping shifts from the seller to the buyer, thus improving the seller's cash flow.

Question 4

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 multiple employees creates a system of checks and balances to decrease the likelihood of theft.

Question 5

Most business owners should avoid leasing as a cash management strategy because it requires large capital outlays as down payments, and total lease payments typically are greater than those for conventional loans.

Accepted Answer

Leasing can be a viable cash management strategy for some businesses, especially those that need to conserve cash for other purposes. However, it is important to carefully weigh the costs of leasing versus purchasing with a conventional loan before making a decision. Down payments for leases can vary, and total lease payments may be higher or lower than loan payments depending on the terms of the lease agreement. Therefore, it is essential to consider all factors and consult with a financial advisor before choosing a cash management strategy.

Question 6

Important advantages of leasing include the flexibility of the lease agreement and protection against obsolescence.

Accepted Answer

Leasing allows for customized lease terms and the option to upgrade to newer technology or equipment, protecting against obsolescence.

Question 7

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

Accepted Answer

The primary objective when investing surplus cash should be on preserving capital (safety) and being able to access it when needed (liquidity), rather than maximizing returns.

Question 8

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 starts from a budget of zero and evaluates the necessity of every item, rather than basing it on increases from the previous year's budget.

Question 9

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 10

When a small business encounters a sales slowdown, the first thing the owner should do is cut marketing and advertising expenditures to conserve cash.

Accepted Answer

Cutting marketing and advertising expenditures may actually exacerbate the sales slowdown by decreasing the business's visibility and reach. It is important for small businesses to continue investing in marketing and advertising to attract customers, even during a sales slowdown. Other strategies to consider include improving customer service, offering promotions or discounts, and re-evaluating pricing strategies.

Question 11

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 12

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 13

Many banks allow entrepreneurs to schedule their loan payments to fit their company's cash flow cycles.

Accepted Answer

Many banks offer flexible loan repayment plans that allow entrepreneurs to schedule their payments to match their business's cash flow cycles. This helps to ensure that business owners can manage their finances effectively and avoid defaulting on their loans.

Question 14

Companies lose billions of dollars each year due to employee theft.

Accepted Answer

According to a report by the University of Cincinnati, businesses in the United States lose approximately $50 billion each year due to employee theft.

Question 15

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

Accepted Answer

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

Question 16

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 17

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 businesses may not have the resources to implement formal procedures for managing cash and may rely on trust in their employees. This makes them vulnerable to embezzlement and fraud by employees.

Question 18

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 an accurate definition of a sweep account.

Quiz 12: Managing Cash Flow

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

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

Changing your firm's shipping terms from "F.O.B. buyer" to "F.O.B. seller" can improve your cash flow, as it switches the cost of shipping from you to your buyer.

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

Most business owners should avoid leasing as a cash management strategy because it requires large capital outlays as down payments, and total lease payments typically are greater than those for conventional loans.

Important advantages of leasing include the flexibility of the lease agreement and protection against obsolescence.

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

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.

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.

When a small business encounters a sales slowdown, the first thing the owner should do is cut marketing and advertising expenditures to conserve cash.

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

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

Many banks allow entrepreneurs to schedule their loan payments to fit their company's cash flow cycles.

Companies lose billions of dollars each year due to employee theft.

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

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.

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.

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.