Deck 14: Cash: Lifeblood of the Business

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

Many small businesses experience problems in cash flow management because of the mismatch between the timing of the receipt of cash and the timing of the need to expend cash.

Question 5

Reconciling the differences between the bank and book balances gives a corrected bank balance and a corrected book balance which are identical.

Question 6

A cash budget is the essential starting point for all financial and accounting considerations in a small business.

Question 7

The bank available balance and the bank ledger balance will always show the same value.

Question 8

Commercial paper is transferable to other investors.

Question 9

Cash flow management only involves steps to increase cash outflows.

Question 10

One technique to increase cash inflow is to offer discounts for delayed payments.

Question 11

Factoring is a method of borrowing against payables.

Question 12

Currency is the most common form of cash.

Question 13

The difference between revenue and expense is called sales.

Question 14

Small businesses never experience any cash flow problems.

Question 15

Short-term debts are not transferable to other investors.

Question 16

The best prevention method for avoiding a cash flow problem is attending to and understanding the operations of a business-its patterns of generating cash inflows and outflows.

Question 17

To prepare a cash flow statement,the cash inflows and outflows are categorized under cash from operations,cash from investing,and cash from financing.

Question 18

Noncash employee incentive is a strategy to decrease cash outflow.

Question 19

All money is considered currency,but all currency is not considered money.

Question 20

Financing may be in the form of cash donated to a business in return for ownership.

Question 21

_____ represent either ownership or debt of publicly held firms and government issued debt,in the form of bonds,notes,and bills.

A) Demand deposits
B) Marketable securities
C) Set-asides
D) Traveler's checks

Question 22

The amount that revenues exceed expenses is termed _____.

A) interest
B) credit
C) profit
D) overhead

Question 23

According to the definition provided by the U.S.Dallas Federal Reserve Bank,which of the following is one of the primary purposes of money?

A) Creating competition
B) Maximizing the wealth of all citizens equally
C) Creating cash flow statements
D) Making exchanges

Question 24

According to the poll conducted by the National Federation of Independent Business (NFIB),small business faced cash flow problems because of:

A) delayed payments from customers.
B) lack of seasonal fluctuation in sales.
C) delayed payments from vendors.
D) unexpected increases in taxes.

Question 25

Which of the following is an example of a cash equivalent?

A) Currency
B) Commercial paper
C) Demand deposit
D) Traveler's check

Question 26

Susan,who is a florist,purchases her flowers on credit.Lucy,a customer,takes eight bouquets and promises to pay Susan within two weeks.The amount that Lucy owes Susan is termed _____.

A) receivables
B) deposits
C) charge backs
D) payables

Question 27

Amounts owed to vendors for merchandise or services purchased on credit are called _____.

A) receivables
B) deposits
C) charge backs
D) payables

Question 28

Tammy is talented at craft but lacks the cash flow management skills required to run a business.She opens a store,Tammy's Craft Corner,with the help of her son David-a business major-who would manage the budgets and expenses of the business.Tammy buys her craft materials on credit from her supplier but clears all her debts at the end of every month.The amount that Tammy owes her supplier is referred to as _____.

A) payables
B) charge backs
C) deposits
D) receivables

Question 29

A _____ is a form of money that can be immediately used to make payments.

A) debt investment
B) marketable security
C) commercial paper
D) traveler's check

Question 30

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

Question 31

Money that is immediately available to be spent is called _____.

A) receivable
B) stock
C) chargeback
D) cash

Question 32

_____ make up most of the noncurrency cash which is available immediately.

A) Marketable securities
B) Debt investments
C) Commercial papers
D) Demand deposits

Question 33

The two forms of short-term financing are short-term debt and _____.

A) bonds
B) commercial paper
C) marketable security
D) demand deposit

Question 34

Checking and savings accounts are the most common forms of _____.

A) commercial papers
B) marketable securities
C) demand deposits
D) debt investments

Question 35

_____ refers to amounts that are owed to a business for merchandise that was sold on credit.

A) Payables
B) Deposits
C) Receivables
D) Charge backs

Question 36

Currency is a form of cash represented by:

A) stocks and bonds.
B) bills and coins.
C) commercial paper.
D) demand deposits.

Question 37

A _____ must be paid in less than one year from the date of the financial statement on which it is reported but can be sold to other investors at any time.

A) commercial paper
B) demand deposit
C) marketable security
D) short-term debt

Question 38

Debt investments that mature in less than three months are an example of _____.

A) currency
B) cash equivalents
C) demand deposits
D) traveler's checks

Question 39

_____ are notes issued by credit-worthy corporations.

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

Question 40

The time required for a business to acquire resources,convert them into a product,sell the product,and receive cash from the sale is referred as the _____ cycle of a business.

A) seasonal
B) operating
C) credit
D) chargeback

Question 41

Tammy is talented at craft but lacks the cash flow management skills required to run a business.She opens a store,Tammy's Craft Corner,with the help of her son David-a business major.Jane purchases a picture frame from Tammy using a credit card.She notices a crack in the frame and returns it to Tammy.Jane contacts the credit card service provider for a refund.The credit card company removes the sale amount from Tammy's account which is referred to as a(n)_____.

A) incentive
B) liquidity
C) overdraft
D) charge back

Question 42

Which of the following maintains a record of the inflows and outflows in a cash account?

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

Question 43

_____ is the name given to the bank's accounting system for all recognized transactions that affect the account,including deposits,electronic transfers,service fees,and checks presented to the bank for payment.

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

Question 44

Tammy is talented at craft but lacks the cash flow management skills required to run a business.She opens a store,Tammy's Craft Corner,with the help of her son David-a business major-who manages the budgets and expenses of the business.David prepares the quarterly budget and maintains a company book for recording all transactions.The company book balance that David regularly updates is the sum of:

A) the actual amount of cash that is available to the firm at any specific time.
B) the deposits and withdrawals recorded in a bank's accounting records.
C) the cash inflows and cash outflows recorded in the firm's accounting records.
D) the negative balance in a depositor's bank account.

Question 45

The information that the bank knows about an account,but is not known by the account holder,includes:

A) the checks written and mailed by an account holder but have not been received by the bank.
B) the amount of any direct payments made in the account by the account holder's customers.
C) deposits that the account holder has mailed or made after bank closing.
D) the sum of cash inflows and cash outflows recorded in the holder's accounting records.

Question 46

The sum of money that has actually been received and paid out of a depositor's account is termed _____.

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

Question 47

A(n)_____ refers to the sum of cash inflows and cash outflows recorded in a firm's accounting records.

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

Question 48

Cash that can be obtained by selling the products and services of a business and collecting cash from customers is called:

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

Question 49

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

A) Clearing house
B) Float
C) Charge back
D) Reconciling

Question 50

An entity that processes checks and electronic fund transfers for banks and other financial organizations is called a _____.

A) credit union
B) clearinghouse
C) float
D) bearer

Question 51

Cash that can be obtained from stocks,bonds,land,buildings,or equipment that a business has is called:

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

Question 52

Availability float and _____ float are the two primary causes of float.

A) bank ledger
B) reconciling
C) charge back
D) processing

Question 53

Delays in the movement of money among depositors and banks is referred to as a(n)_____.

A) overdraft
B) ledger balance
C) float
D) charge back

Question 54

A(n)_____ is a delay in transferring money among banks due to internal procedures.

A) overdraft
B) availability float
C) charge back
D) processing float

Question 55

A delay in delivering checks from the writer of a check to the recipient's bank is called _____.

A) processing float
B) overdraft
C) availability float
D) charge back

Question 56

A reduction in the bank account of a merchant by a credit card company is termed _____.

A) charge back
B) liquidity
C) overdraft
D) reconciliation

Question 57

The information that the account holder knows about his or her account,but the bank does not know,includes:

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

Question 58

_____ refers to a situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount of the check.

A) Charge back
B) Nonsufficient fund
C) Reconciling
D) Overdraft

Question 59

In a business,accepting payments by credit card causes significant differences between the bank and book balances because the credit card service provider:

A) records the gross amount of each credit card sale.
B) deposits the amount of the sale in the business's account on the date of the sale itself.
C) deposits the sale amount in the business's account after deducting a service fee.
D) retains the sale amount in the business's account in the event of customer challenge.

Question 60

A negative balance in a depositor's bank account is referred as a(n)_____.

A) availability float
B) overdraft
C) ledger balance
D) charge back

Question 61

A(n)_____ identifies when,how,and why money is expected to come into the business,and when,how,and why it is expected to leave.

A) bearer
B) overdraft
C) charge back
D) cash budget

Question 62

Percentage of concession in gross invoice amounts provided to encourage prompt payment are called _____.

A) receivables
B) noncash incentives
C) trade discounts
D) charge backs

Question 63

For a business to factor receivables,the _____ must have good credit ratings.

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

Question 64

Which of the following strategies is used by a business to decrease cash outflows?

A) Refusing the trade discounts offered by suppliers
B) Taking on noncore paying projects
C) Trading goods and services using only money
D) Avoiding the wastage of resources

Question 65

Which of the following is defined as the practice of "pocketing" money from customers and hiding the theft by not recording the sale?

A) Embezzlement
B) Larceny
C) Skimming
D) Phony disbursement

Question 66

Which of the following steps helps to protect cash from being stolen by employees?

A) Running periodic credit checks on employees who have access to a business's finances
B) Having internal and external audits and ignoring any variances in the budget
C) Assigning only one person to authorize bill payments and to write the checks for payments
D) Hiring an employee to examine every aspect of cash inflows of a business

Question 67

The _____ is a schedule of the amounts and timings of payments of cash out of a business.

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

Question 68

_____ is a method of borrowing against receivables.

A) Factoring
B) Trading
C) Discounting
D) Reconciling

Question 69

Every month,David,an assistant at a shoe store,steals money from his employer,after it has been received and recorded in the books,by altering the accounting records in the company book.David's act falls under which of the following categories of theft?

A) Shoplifting
B) Embezzlement
C) Skimming
D) Phony disbursement

Question 70

Revenue-producing tasks and activities related to,but not part of,the primary strategy of a business,are called _____.

A) discount projects
B) charge backs
C) noncore projects
D) consignments

Question 71

Maintaining an inventory helps a business to have an optimal level of cash flow by:

A) increasing the cost of carrying inventory.
B) reducing the cost of processing orders.
C) reducing cash inflow due to being out of stock.
D) increasing cash outflow due to waste resources.

Question 72

Which of the following is a technique used by a small business to increase cash inflows?

A) Making deposits and progress payments
B) Forgoing any receivables
C) Offering discounts for prompt payment
D) Refusing any noncore paying projects

Question 73

Reconciliation of bank and book balances helps to:

A) estimate the bank ledger balance for managing the cash flow of a business.
B) identify any mistakes made by either a bank or by a business.
C) provide an approximate value of cash held by a business.
D) exclude items on a bank statement that are not included in a business's accounting records.

Question 74

Tammy is talented at craft but lacks the cash flow management skills required to run a business.She opens a store,Tammy's Craft Corner,with the help of her son David-a business major-who manages the budgets and expenses of the business.Tammy receives a bulk order from a customer to make 100 paper roses for Valentine's Day.She charges 20 percent of the total sales price in advance and promises to deliver the order within 30 days. The advance payment that Tammy receives for the order before delivering the product is called _____.

A) discount payment
B) deposit and progress payment
C) noncash incentive
D) gaming the payment process

Question 75

_____ is a method that employees use to steal cash after it has been received and recorded in the company books.

A) Racketeering
B) Phony disbursement
C) Skimming
D) Embezzlement

Question 76

A _____ budget is also referred to as a master budget.

A) comprehensive
B) cash receipts
C) cash disbursements
D) capital

Question 77

Cash payments received before a product is completed or delivered are called _____.

A) overdrafts
B) discounted payments
C) payables
D) deposits and progress payments

Question 78

_____ is a schedule of the amounts and timings of the cash coming into a business.

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

Question 79

A jewelry store promises to deliver custom-made wedding rings to a buyer within 2 weeks.However,it charges ten percent of the sales price in advance.In this example,which of the following techniques is the store using to increase cash inflows?

A) It is offering discounts to customers for prompt payment.
B) It is taking deposits and progress payments.
C) It is factoring all receivables.
D) It is taking on noncore paying projects.

Question 80

Tammy is talented at craft but lacks the cash flow management skills required to run a business.She opens a store,Tammy's Craft Corner,with the help of her son David-a business major-who manages the budgets and expenses of the business.Within a few months,David notices problems in cash flow.Although not the primary strategy of her business,Tammy takes up craft projects for kindergarten schools in an effort to increase cash inflow.This kindergarten project is an example of a(n)_____.

A) consignment
B) noncore project
C) charge back
D) arraignment