Question 1

________ is the most important, yet least productive, asset that a small business owns.

Accepted Answer

Cash is the most important asset for a small business because without it the business cannot pay bills, purchase inventory, or meet payroll. However, it is also the least productive asset because it does not generate any income on its own. Profit, inventory, and accounts receivable are also important assets, but they are generally considered more productive because they contribute to the business's revenue and growth.

Question 2

________ typically lead(s)sales; ________ typically lag(s)sales.

Accepted Answer

D

Question 3

A small company's cash balance is the difference between total revenue and total expenses.

Accepted Answer

A company's cash balance is determined by subtracting total expenses from total revenue, not the other way around.

Question 4

A common cause of business failures is that owners neglect to forecast how much cash their companies will need until they reach the point of generating positive cash flow.

Accepted Answer

Neglecting to forecast cash needs can result in a lack of funds to cover expenses and ultimately lead to business failure.

Question 5

Developing a cash forecast is essential for new businesses because early profit levels usually do not generate sufficient cash to keep the company afloat.

Accepted Answer

Developing a cash forecast helps new businesses to manage their finances more effectively and ensures that they have enough cash to cover their expenses and investments. Early profit levels may not be enough to sustain the business, so cash forecasting is a critical process to prevent cash shortages and ensure the long-term viability of the company.

Question 6

A highly profitable business is a highly liquid business.

Accepted Answer

Profitability and liquidity are different financial metrics; a business can be profitable but not necessarily have high liquidity, which refers to the ability to meet short-term obligations.

Question 7

Which of the following measures a company's liquidity and its ability to pay its bills and other financial obligations on time?

Accepted Answer

Cash flow is the measure of a company's liquidity and its ability to pay its bills and financial obligations on time. Cash budget and cash management are both important aspects of managing cash flow but they do not measure liquidity directly.

Question 8

Which of the following statements concerning cash management is false?

Accepted Answer

Fast-growing businesses are actually more likely to experience cash shortages because they typically require more cash to finance their growth. Therefore, statement C is false. A, B, and D are all true statements.

Question 9

The shorter a company's cash flow cycle, the more likely it is to encounter a cash crisis.

Accepted Answer

The shorter a company's cash flow cycle, the less likely it is to encounter a cash crisis. This is because a shorter cycle means that cash is coming in more frequently, allowing the company to meet its financial obligations more easily. A longer cash flow cycle, on the other hand, can lead to a situation where a company may struggle to pay its bills because its cash is tied up in inventory, accounts receivable, or other assets for longer periods of time.

Question 10

A highly profitable company rarely experiences cash flow problems.

Accepted Answer

While a highly profitable company may have a strong income stream, it is still possible for it to experience cash flow problems if it has high expenses, carries significant debt, or faces unexpected financial challenges. Profitability does not necessarily guarantee positive cash flow.

Question 11

Solid cash management enables a business owner to ________.

Accepted Answer

Solid cash management can help a business owner adequately meet the cash demands of the business, avoid retaining unnecessary large cash balances, and stretch the profit-generating power of each dollar the business owns. Therefore, all of the above options are correct.

Question 12

More companies fail for the lack of ________ than for the lack of ________.

Accepted Answer

Companies often fail due to cash flow issues, even if they are profitable on paper, because they cannot meet immediate financial obligations.

Question 13

Cash is the most important, yet least productive, asset a small business owns.

Accepted Answer

Cash is important because it allows a small business to pay its bills and make investments, but it does not generate income on its own. Other assets, such as inventory or equipment, can be used to create products or provide services that generate revenue.

Question 14

The objectives of cash management are to adequately meet the cash demands of the business, to avoid retaining unnecessarily large cash balances, and to stretch the profit-generating power of each dollar the business owns.

Accepted Answer

The statement accurately describes the objectives of cash management.

Question 15

It is likely that young companies and rapidly growing companies will experience cash flow difficulties.

Accepted Answer

Young companies and rapidly growing companies often have to invest heavily in their growth and may not have stable revenue streams, making it likely for them to experience cash flow difficulties.

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 first step in managing cash more effectively is ________.

Accepted Answer

Understanding the company's cash flow cycle is vital as it enables a business to plan its cash needs and determine the best course of action to take to ensure cash flows smoothly throughout the cycle. Building up an adequate cash reserve, paying off accounts payable promptly, and speeding up the collection of accounts receivable are also essential steps to effective cash management, but they are dependent on understanding the cash flow cycle.

Question 18

Profit is the difference between a company's total revenue and its total expenses.

Accepted Answer

Profit is indeed the difference between a company's total revenue and its total expenses.

Question 19

Compiling the total cash on hand, bank balance, summary of the day's sales, summary of the day's cash receipts, and a summary of accounts receivables collections into monthly summaries provides the basis for making reliable cash forecasts.

Accepted Answer

Compiling the mentioned financial data into monthly summaries can provide a good basis for making accurate cash forecasts.

Question 20

The goal of cash management is to maintain as much cash as possible on hand to meet any unexpected circumstances that might arise.

Accepted Answer

The goal of cash management is to optimize the amount of cash on hand, balancing liquidity needs with the opportunity cost of holding cash, rather than maximizing cash holdings.

Quiz 13: Managing Cash Flow

________ is the most important, yet least productive, asset that a small business owns.

typically lead(s) sales; typically lag(s) sales.

A small company's cash balance is the difference between total revenue and total expenses.

A common cause of business failures is that owners neglect to forecast how much cash their companies will need until they reach the point of generating positive cash flow.

Developing a cash forecast is essential for new businesses because early profit levels usually do not generate sufficient cash to keep the company afloat.

A highly profitable business is a highly liquid business.

Which of the following measures a company's liquidity and its ability to pay its bills and other financial obligations on time?

Which of the following statements concerning cash management is false?

The shorter a company's cash flow cycle, the more likely it is to encounter a cash crisis.

A highly profitable company rarely experiences cash flow problems.

Solid cash management enables a business owner to ________.

More companies fail for the lack of than for the lack of .

Cash is the most important, yet least productive, asset a small business owns.

The objectives of cash management are to adequately meet the cash demands of the business, to avoid retaining unnecessarily large cash balances, and to stretch the profit-generating power of each dollar the business owns.

It is likely that young companies and rapidly growing companies will experience cash flow difficulties.

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

The first step in managing cash more effectively is ________.

Profit is the difference between a company's total revenue and its total expenses.

Compiling the total cash on hand, bank balance, summary of the day's sales, summary of the day's cash receipts, and a summary of accounts receivables collections into monthly summaries provides the basis for making reliable cash forecasts.

The goal of cash management is to maintain as much cash as possible on hand to meet any unexpected circumstances that might arise.

Quiz 13: Managing Cash Flow

________ is the most important, yet least productive, asset that a small business owns.

________ typically lead(s) sales; ________ typically lag(s) sales.

A small company's cash balance is the difference between total revenue and total expenses.

A common cause of business failures is that owners neglect to forecast how much cash their companies will need until they reach the point of generating positive cash flow.

Developing a cash forecast is essential for new businesses because early profit levels usually do not generate sufficient cash to keep the company afloat.

A highly profitable business is a highly liquid business.

Which of the following measures a company's liquidity and its ability to pay its bills and other financial obligations on time?

Which of the following statements concerning cash management is false?

The shorter a company's cash flow cycle, the more likely it is to encounter a cash crisis.

A highly profitable company rarely experiences cash flow problems.

Solid cash management enables a business owner to ________.

More companies fail for the lack of ________ than for the lack of ________.

Cash is the most important, yet least productive, asset a small business owns.

The objectives of cash management are to adequately meet the cash demands of the business, to avoid retaining unnecessarily large cash balances, and to stretch the profit-generating power of each dollar the business owns.

It is likely that young companies and rapidly growing companies will experience cash flow difficulties.

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

The first step in managing cash more effectively is ________.

Profit is the difference between a company's total revenue and its total expenses.

Compiling the total cash on hand, bank balance, summary of the day's sales, summary of the day's cash receipts, and a summary of accounts receivables collections into monthly summaries provides the basis for making reliable cash forecasts.

The goal of cash management is to maintain as much cash as possible on hand to meet any unexpected circumstances that might arise.

typically lead(s) sales; typically lag(s) sales.

More companies fail for the lack of than for the lack of .