Deck 14: Cash: Lifeblood of the Business

Question 1

There are two factors of cash outflows that must be controlled: the amount and timing of cash being paid out.

Answer 1

True

Question 2

A person or business entity that possesses a security is called demand depositor.

Answer 2

False

Question 3

The rule of thumb for trade discounts is that you should always capture 5 percent or more,if the billing period is less than 30 days.

Answer 3

False

Question 4

In December 2003,the supply of currency in circulation in the U.S.was $663 billion.

Question 5

The difference between revenue and expense is called sales.

Question 6

Cash-to-cash cycle is also referred to as operating cycle.

Question 7

The bank available balance is the actual cash value of the account and can vary significantly from the ledger balance.

Question 8

According to a recent poll by NFIB Foundation,less than 20 percent of small businesses experience money problems indicating the importance and effectiveness of these businesses.

Question 9

When reconciling is done,the corrected bank balance and the corrected book balance will be identical.

Question 10

Many small businesses experience difficulty or even failure because of the mismatch in time between receiving cash and spending cash.

Question 11

The most simple and most effective way to obtain payments from customers is asking for your money.

Question 12

Currency is the most common form of cash.

Question 13

While all money is currency;all currency is not money.

Question 14

Delays in transferring money among banks due to internal procedures is called processing float.

Question 15

One technique to increase cash flow is to offer discounts for deferred payments.

Question 16

Budgets are the essential starting point for all financial and accounting considerations in a small business.

Question 17

Credit customers pay on average 10 percent of what they owe in the month following the sale,and 10 percent thereafter per month,which translates to minimum payment requirements.

Question 18

Stock options or added vacation days are examples of non cash incentives.

Question 19

Factoring is a method of borrowing against payables account.

Question 20

The best prevention method,or approach for avoiding a cash flow problem is attending to and understanding your business operations.

Question 21

Assets that may be quickly converted to cash is called:

A)cash equivalent.
B)inventory.
C)receivables.
D)payables.

Question 22

Use of temporary agencies is the key factor that adds to the cost of employees.

Question 23

_____ are made up of stocks and bonds for which there is an active auction market.

A)Demand deposits
B)Marketable securities
C)Commercial papers
D)Receivables

Question 24

The time that is required for a business to acquire resources,convert them into a product,sell the product,and receive cash from the sale refers to:

A)seasonal sales.
B)cash-to-cash cycle.
C)hard-to-soft circle.
D)charge back cycle.

Question 25

The small business owners in the NFIB Foundation poll reported that all of these were causes of cash flow problems EXCEPT:

A)difficulty collecting money due from customers.
B)seasonal variations in sales.
C)unexpected decreases in sales.
D)unexpected increases in taxes.

Question 26

The difference between revenue and expense is called:

A)sales.
B)interest.
C)profit.
D)overhead.

Question 27

Cash is composed of all of these forms of money that can be immediately used to make payments EXCEPT:

A)currency.
B)receivables.
C)demand deposits.
D)traveler's checks.

Question 28

Money that is immediately available to be spent is called:

A)profit.
B)sales.
C)charge back.
D)cash.

Question 29

Amounts owed to vendors for merchandise or services purchased on credit is called:

A)receivables.
B)demand deposits.
C)payables.
D)charge back.

Question 30

Primary advantage of bartering is that it is essentially tax-free as long as no cash is involved.

Question 31

_____ make up most of the non currency cash.

A)Marketable securities
B)Demand deposits
C)Commercial papers
D)Receivables

Question 32

Consignment is the practice of trading goods and services without the use of money.

Question 33

Money held in checking and savings accounts are called:

A)demand deposits.
B)marketable securities.
C)commercial papers.
D)receivables.

Question 34

_____ are notes issued by credit-worthy corporations.

A)Demand deposits
B)Marketable securities
C)Commercial papers
D)Receivables

Question 35

An often overlooked cause of cash shortage is the growth trap.

Question 36

The bills and coins printed by government to represent money refers to:

A)currency.
B)receivables.
C)demand deposits.
D)traveler's checks.

Question 37

Money in the end is a form of:

A)information.
B)paper.
C)plastic.
D)culture.

Question 38

Approximately 55 percent of small businesses that fail do so because of:

A)cash flow problems with an immediate impact.
B)lack of profitability.
C)missing the mark on product demand.
D)sour banking relationships.

Question 39

There are two purposes of money:

A)to buy and to accumulate.
B)to make exchanges and to keep track of wealth.
C)to buy and to sell.
D)to save and to accumulate.

Question 40

Amounts that are owed to a business for merchandise that was sold on credit refers to:

A)receivables.
B)demand deposits.
C)payables.
D)charge back.

Question 41

_____ must be paid in less than one year from the date of the financial statement on which it is reported.

A)Commercial paper
B)Receivables
C)Marketable securities
D)Short-term debt

Question 42

There are two primary causes of float:

A)book balance float and bank ledger float.
B)bank ledger balance and bank available balance.
C)reconciling float and charge back float.
D)availability float and processing float.

Question 43

A reduction in the bank account of a merchant by a credit card company refers to:

A)reconciling.
B)liquidity.
C)overdrafting.
D)charge back.

Question 44

Delays in transferring money among banks due to internal procedures is referred to as:

A)availability float.
B)overdrafting.
C)processing float.
D)reconciling.

Question 45

For small businesses,the key budget is the _____ budget.

A)cash
B)retained earnings
C)sales
D)marketing

Question 46

Information that the bank knows about your account that you do not know includes all of these EXCEPT:

A)the amount of service charges taken from your account.
B)the amount of any direct payments made to your account by your customers.
C)the deposits you have made after bank closing.
D)the amount of any interest received or charged.

Question 47

What is the term used for delays in delivering checks from the writer of the check to the recipient's bank?

A)Availability float
B)Overdrafting
C)Processing float
D)Reconciling

Question 48

The _____ is a schedule of the amounts and timing of the receipt of cash into a business.

A)cost of goods sold budget
B)cash receipts budget
C)sales budget
D)payables budget

Question 49

Which of these refers to the accounting process that identifies the causes of all differences between book and bank balances?

A)Overdrafting
B)Reconciling
C)Charge back
D)Liquidity

Question 50

The _____ is the actual cash value of the account.

A)bank ledger balance
B)company book balance
C)clearinghouse
D)bank available balance

Question 51

The basis to being able to control a business's money is to understand and be able to predict the patterns of cash flows.This is possible by preparing a:

A)cash disbursements budget.
B)comprehensive budget.
C)cash receipts budget.
D)cash budget.

Question 52

Cash can come from all of these sources for a small business EXCEPT:

A)cash flow from subsidy.
B)cash flow from operations.
C)cash flow from investing.
D)cash from financing.

Question 53

The two forms of short-term financing are short term debt and:

A)cash equivalent.
B)commercial paper.
C)marketable security.
D)demand deposit.

Question 54

Which of these refers to an entity that processes checks and electronic fund transfers for banks and other financial organizations?

A)Credit unions
B)Thrifts
C)Clearinghouse
D)Trade unions

Question 55

Delays in the movement of money among depositors and banks is referred to as:

A)overdraft.
B)float.
C)ledger balance.
D)reconciling.

Question 56

The _____ is the name given to the sum of cash inflows and cash outflows recorded in the firm's accounting records.

A)bank ledger balance
B)company book balance
C)clearing house
D)bank available balance

Question 57

The sum of deposits and withdrawals recorded in a bank's accounting records is called the:

A)bank ledger balance.
B)company book balance.
C)clearinghouse.
D)bank available balance.

Question 58

A negative balance in a depositor's bank account is referred to as:

A)overdraft.
B)float.
C)ledger balance.
D)reconciling.

Question 59

Accepting payments by credit card causes significant differences between the bank and book balances due to all of the following reasons EXCEPT:

A)the service provider records the gross amount of each credit card sale.
B)the service provider takes up to three working days to actually make the deposit to your account.
C)the credit card service provider deposits to your account the sale amount less the credit card service fee.
D)credit card clearing services also will reduce the amount deposited in the event of fraud.

Question 60

Which of the following is usually called the cash account?

A)Clearinghouse
B)Bank available balance
C)Bank ledger balance
D)Company book balance

Question 61

These are also referred to as master budgets.

A)Cash disbursements budget
B)Cash receipts budget
C)Comprehensive budget
D)Cash budget

Question 62

_____ is a method of borrowing against receivables.

A)Factoring
B)Noncore project
C)Discounted payment
D)Reconciling

Question 63

Cash payments received before product is completed or delivered is called:

A)noncore payments.
B)payables.
C)deposits and progress payments.
D)discounted payments.

Question 64

Which of these is NOT a strategy employed by small businesses for handling money shortages?

A)Selling receivables
B)Adjusting scheduled payments
C)Filing for bankruptcy
D)Selling investments

Question 65

The practice of accepting goods for resale,without taking ownership of them and without being responsible to pay prior to their being sold is called:

A)bartering.
B)consignment.
C)noncash incentive.
D)reconciling.

Question 66

Identify the budget that is a schedule of the amounts and timings of payments of cash out of a business.

A)Cash disbursements budget
B)Comprehensive budget
C)Cash receipts budget
D)Cash budget

Question 67

In _____ you may trade similar items without creating a taxable transaction.

A)bartering
B)consignment
C)noncash incentives
D)cash-to-cash cycle

Question 68

Which of the following is the term used for a financial crisis that is caused by a business growing faster that it can be financed?

A)Cash-to-cash cycle
B)Gaming the payment process
C)Charge back
D)Growth trap

Question 69

Using methods to appear to be paying bills on time,when in fact payment is being delayed or avoided is called:

A)gaming the payment process.
B)growth trap.
C)charge back.
D)cash-to-cash cycle.

Question 70

Every business that maintains inventory has an optimal level that minimizes the total cost of all of the following EXCEPT:

A)frequent purchases.
B)carrying inventory.
C)processing orders.
D)losing sales due to being out of stock.

Question 71

To factor your receivables your _____ must have good credit ratings.

A)suppliers
B)business
C)customers
D)agents

Question 72

The practice of trading goods and services without the use of money is called:

A)bartering.
B)consignment.
C)noncash incentive.
D)reconciling.

Question 73

The most common noncash incentive(s)is/are:

A)autonomy.
B)stock options.
C)added vacation days.
D)compensating time off.

Question 74

Which of these is NOT a technique to increase cash inflows?

A)Taking deposits and progress payments.
B)Foregoing receivables.
C)Asking for your money.
D)Taking on noncore paying projects.

Question 75

Which of these is the number one strategy employed by small businesses for handling money shortages?

A)Borrowing
B)Using personal money
C)Adjusting scheduled purchases
D)Laying off employees

Question 76

Percentage discounts from gross invoice amounts provided to encourage prompt payment is referred to as:

A)core discount.
B)trade discount.
C)non cash incentives.
D)consignment.

Question 77

When a business offers you a discount of 2 percent if you pay the bill in full within 7 days,it is called:

A)noncore payments.
B)progress payments.
C)receivables discount.
D)discount for prompt payments.

Question 78

All of the following provides savings in cash outflows EXCEPT:

A)trade discounts.
B)taking on noncore paying projects.
C)barter.
D)use of temporary agencies.

Question 79

Tammy's Craft Corner
Working at a local university, Tammy's favorite hobby included anything related to crafts. She could spend hours pouring over the craft books to actually working on and talking to people about craft projects. Tammy was great at what she did and liked to do, but lacked the money management skills. So when Tammy opened her business "Tammy's Craft Corner". Her son, a business major, decided to step in and help mom with managing the money side of the business.


-Tammy needs to know that the time that is required for her to acquire resources,convert them into craft products,sell the products,and receive cash from the sale is called:

A)accounts payable cycle.
B)reconciling.
C)demand deposits timeframe.
D)cash-to-cash cycle.

Question 80

Revenue-producing tasks and activities related to,but not part of the primary strategy of a business is called:

A)noncore projects.
B)discontinued tasks.
C)factoring receivables.
D)off-the-books strategy.