Cash Management and Capital Investment Quiz

• A cash deficit is a shortage of available funds to satisfy current obligations.
• A cash surplus is a the value of cash over and above what is reqired to satisfy current obligations.
• A cash surplus may arise from seasonal factors, so that surpluses generated in good months are used to cover shortfalls later.
• The mere existence of a surplus in one or two months in a row is no guarantee of liquidity in the long term.
• Both Drif Co and Guide Co have cash surpluses, but Drif Co's surplus is more persistent due to its reliance on overdraft finance.
• In order to make a capital investment, a company may need to borrow money.
• Different types of debt have different risks for the company attached to them.
• A 'surplus' can sometimes be created by the way in which financial information is presented.
• It is often necessary to distinguish different kinds of cash transactions (eg capital payments).
• The company's cash requirements can fluctuate from month to month.

Test your knowledge of cash management, cash deficits, surpluses, capital investments, and financial risks associated with different types of debt.