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Understanding Cash and Cash Management

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Questions and Answers

What is the primary role of cash in a company, based on the text?

To increase production efficiency

To ensure strategic planning

To finance the company's activities (correct)

To manage human resources effectively

What does 'Cash is king' imply?

Cash has a negligible role in business operations

Cash should be used for long-term investments

Cash should be stored in a secure vault

Cash is the most valuable asset in the company (correct)

Who is ultimately responsible for managing cash within a company?

Managers

Accountant

Credit controller

Finance director (correct)

In the context of cash management, what is the main consequence of poor credit control?

Cash shortage Signup and view all the answers

How can a business prevent a cash shortage, as suggested in the text?

Utilizing cash flow forecasting Signup and view all the answers

What does a positive cash flow indicate about a business, based on the text?

Financial stability Signup and view all the answers

What is the main focus when trying to improve net cash flow?

Reducing expenses Signup and view all the answers

How does cash flow relate to the product life cycle according to the text?

New products replace declining ones to maintain cash flow Signup and view all the answers

Why is cash flow forecasting considered important for businesses?

To identify potential cash shortages and business problems Signup and view all the answers

What is working capital mainly used for in a business?

Covering day-to-day operational expenses Signup and view all the answers

Which of the following is NOT a factor that influences the accuracy of cash flow forecasting?

Advanced forecasting tools Signup and view all the answers

In the context of the text, what best describes profit?

Net income after all expenses are deducted Signup and view all the answers