10 questions
Which of the following is NOT a reason why a business needs money?
to start the business
to expand the business
to deal with a negative cash-flow problem
to increase prices of its products
Which of the following is an example of external finance for a limited company?
retained profits of the company
selling shares
sale of assets no longer used in the business
reducing stocks
An advantage that an overdraft has over a bank loan is that:
it has a fixed rate of interest
it is paid back over a fixed time period
no dividends have to be paid to shareholders as with a loan
the size of the overdraft varies with the needs of the firm
An advantage to a business of leasing computers rather than buying them outright is that:
the loan never has to be repaid
the computers will never go out of date
the total cost of leasing is less than buying the computers
it doesn't have to find a large cash sum to buy computers
Which of the following business decisions is likely to need long-term finance?
increasing stocks of goods for the summer season
hiring a car for the sales manager
building a new factory
paying creditors for goods supplied
Which of the following is an example of a cash out-flow for a business?
payments to creditors
sale of goods
payment from debtors
receiving a loan from the bank
Which is the best explanation for a business running into cash-flow problems?
demanding quick payment from customers
allowing customers a long credit period
delaying payments to suppliers
producing goods when demanded by customers
Which of the following is NOT a use of cash-flow forecasts?
They indicate how much cash is available for paying bills
They show how much the bank needs to lend to stop insolvency
They indicate whether the business is holding too much cash
They indicate how much profit the business will make
Business cash flow forecasts are of use in all of the following situations except:
calculating last year’s profit or loss
finding out how much cash will be needed to start a business
keeping informed about the liquidity of the business
helping the manager to plan when to borrow money
A firm is forecast to have a negative closing bank balance. Which would reduce the problem?
sell more goods on 4 months credit
produce more goods
ask customers to pay in cash and not sell goods on credit
ask suppliers if the firm can pay for goods in cash