Question 1

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

Accepted Answer

Both the amount and timing of cash outflows must be controlled to manage cash flow effectively. This involves monitoring and managing expenses, payments to suppliers, and other cash outflows to ensure that they are not exceeding the company's available cash balance or causing liquidity problems. Timely payment of bills and expenses is also important to maintain good relationships with vendors and suppliers.

Question 2

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

Accepted Answer

A demand depositor is a person or business entity that has funds deposited in a demand deposit account, such as a checking account. They do not necessarily possess a security.

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.

Accepted Answer

The rule of thumb for trade discounts is not specifically about capturing 5 percent or more; it varies depending on the terms offered by the seller and the buyer's financial strategy.

Question 4

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

Accepted Answer

This is a factual statement and can be verified through historical data from the Federal Reserve. As of December 2003, the supply of currency in circulation in the U.S. was indeed $663 billion.

Question 5

The difference between revenue and expense is called sales.

Accepted Answer

The difference between revenue and expense is called profit or loss, not sales. Sales refer to the total amount of money received or earned from selling goods or services.

Question 6

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

Accepted Answer

Cash-to-cash cycle is another term for the operating cycle, which is the time it takes for a company to convert its inventory to cash.

Question 7

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

Accepted Answer

The available balance can vary from the ledger balance due to pending transactions, holds, or overdrafts that have not yet been processed.

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.

Accepted Answer

The statement is misleading as it suggests that less than 20 percent of small businesses experiencing money problems indicates their effectiveness, but financial challenges are common among small businesses, and the percentage is likely higher.

Question 9

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

Accepted Answer

When reconciling is done successfully, the corrected bank balance and the corrected book balance should match and be identical. This means that all discrepancies have been identified and resolved, and that the accounts are accurate and up-to-date. However, if there are still differences between the two balances after reconciliation, further investigation may be necessary to determine the cause and reconcile the accounts accordingly.

Question 10

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

Accepted Answer

This is a common cash flow problem for small businesses, where they may have to pay for expenses before receiving payment from their customers, leading to a cash flow deficit.

Question 11

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

Accepted Answer

Asking for payment directly and clearly is often the most straightforward and effective way to obtain payments from customers. This can be done through invoices, reminders or even direct communication.

Question 12

Currency is the most common form of cash.

Accepted Answer

Currency, such as bills and coins, is the most common form of physical cash used for transactions around the world.

Question 13

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

Accepted Answer

The answer of While all money is currency;all currency is...

Question 14

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

Accepted Answer

The answer of Delays in transferring money among banks due...

Question 15

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

Accepted Answer

Offering discounts for deferred payments would decrease cash flow, as it encourages customers to delay payments, reducing immediate cash inflow.

Question 16

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

Accepted Answer

Budgets provide a framework for planning and controlling a business's finances. They help in decision-making, forecasting, and monitoring the financial health of a business. Therefore, budgets are an 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.

Accepted Answer

The answer of Credit customers pay on average 10 percent...

Question 18

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

Accepted Answer

Stock options and added vacation days are both examples of non cash incentives that can be offered to employees as a way to increase motivation and retention.

Question 19

Factoring is a method of borrowing against payables account.

Accepted Answer

Factoring is a financial transaction where a business sells its accounts receivable to a third party (factor) at a discount, not borrowing against payables.

Question 20

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

Accepted Answer

By paying close attention to your business operations, monitoring your financial statements, and planning ahead, you can identify and address potential cash flow issues before they become a problem. This proactive approach can help you maintain a healthy cash flow and avoid financial stress.

Quiz 14: Cash: Lifeblood of the Business