#1
Which of the following is a common reason for a negative cash flow?
Increase in expenses
ExplanationHigher spending reduces available cash.
#2
What is the primary purpose of a cash budget?
To forecast cash inflows and outflows
ExplanationIt predicts the movement of money in and out of a business.
#3
What is the purpose of a cash flow statement?
To provide information about a company's sources of cash
ExplanationIt details where a company's money comes from and goes to.
#4
Which of the following is an example of a cash outflow?
Purchase of inventory
ExplanationMoney leaving the company for goods or services.
#5
Which of the following is an advantage of using cash flow statements?
They provide information on cash movements
ExplanationThey offer insights into how cash is generated and used.
#6
Which of the following is a characteristic of effective cash flow management?
Avoiding short-term borrowing
ExplanationIt minimizes reliance on borrowed funds for day-to-day operations.
#7
What does a positive cash flow from operations indicate?
The company is profitable
ExplanationEarnings exceed operating expenses.
#8
What is the formula to calculate free cash flow?
Operating cash flow - Capital expenditures
ExplanationIt measures cash available after essential expenses and investments.
#9
Which of the following is NOT a benefit of effective cash flow management?
Increased risk of bankruptcy
ExplanationIt reduces the likelihood of financial collapse.
#10
Which of the following is a key component of cash flow management?
Forecasting future cash flows
ExplanationAnticipating cash movements helps with planning and decision-making.
#11
Which financial statement is most useful for analyzing cash flow?
Statement of cash flows
ExplanationIt shows how money moves in and out of a company.
#12
What does a negative cash flow from financing activities indicate?
The company is effectively managing its debt
ExplanationIt means the company isn't relying heavily on loans or issuing shares.
#13
What is the primary goal of cash flow management?
Ensuring sufficient liquidity
ExplanationTo maintain enough cash to cover operational needs and emergencies.
#14
How does positive cash flow affect a company's ability to invest?
It expands investment options
ExplanationHaving surplus cash enables exploration of more investment opportunities.
#15
How does cash flow management contribute to financial stability?
By ensuring sufficient liquidity
ExplanationIt helps maintain a healthy balance of cash to meet obligations and seize opportunities.