Week 13 summary sheet questions

What is the term for an asset that is easily changed into cash?

• Overheads

• Cash flow forecast

• Liquid

• Drawings

What does the term 'overheads' refer to in business finance?

• The opening balance of cash

• Money taken out of the business for personal use

• Money that is regularly spent on rent, insurance, electricity, or other things to keep a business operating

• The prediction of expected receipts and expenses

What is a 'cash flow forecast'?

• The flow of money out of a business

• A prediction of all the expected receipts and expenses of a business over a future time period

• The closing cash balance from the month before

• Cash inflows minus cash outflows

What is the consequence for a business if it becomes insolvent?

• It has to pay all its debts immediately

• It can continue operating as usual

• It may have to shut down

• It receives additional funding from the government

Why do businesses need cash to pay for their overheads?

• To invest in new projects

• To pay bills for services received

• To expand their market reach

• To increase their product prices

What is a cash flow forecast?

• A historical record of past financial transactions

• A financial document that shows the expected cash inflows/outflows over a future period

• A summary of a company's assets and liabilities at a given point in time

• A detailed report of a company's sales volume

Which of the following is NOT a reason to use a cash flow forecast?

• To identify future shortfalls of cash

• To ensure the business can pay employees and suppliers

• To predict the exact amount of customer payments

• To help with financial decision-making

What is one of the limitations of cash flow forecasting?

• It provides exact figures for future cash flows

• Estimates can be wrong, reducing the reliability of the forecast

• It ensures that all customers will pay on time

• It eliminates the need for financial decision-making

What does the closing balance of one month become in the next month's cash flow forecast?

• Net cash flow

• Opening balance

• Total flow

• Unforeseen expenditure

How does a business control the cash within its business?

• By ignoring credit control systems

• By not keeping any financial records

• By producing accurate cash flow forecasts

• By only focusing on past transactions