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Understanding Cash Management in Business

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Understanding Cash Management in Business

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Questions and Answers

What is the main purpose of cash in a company?

To exchange goods, debt, or services (correct)
To invest in long-term projects
To pay employees' salaries
To purchase equipment

Who is primarily responsible for managing cash within a company?

Credit controller
Cashier
Accountant (correct)
CEO

What is the most effective way to overcome a cash shortage?

Ignore the shortage and wait for it to resolve itself
Decrease cash flow forecasting
Negotiate longer credit terms with suppliers (correct)
Expand the business rapidly

Which of the following factors could contribute to a cash shortage in a business?

Lack of planning (A) Signup and view all the answers

What does positive cash flow mean for a business?

More money is coming into the business than going out (D) Signup and view all the answers

How can a company prevent a cash shortage?

By wisely using cash flow forecasting (C) Signup and view all the answers

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

Increase cash inflows (A) Signup and view all the answers

What is the relationship between cash flow and product life cycles?

Ignoring product life cycles could lead to serious consequences for cash flow (D) Signup and view all the answers

Why is cash flow forecasting important for businesses?

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

What is working capital in a business context?

The capital needed for day-to-day operational expenses and short-term debts (C) Signup and view all the answers

How can a business improve its working capital?

Reducing the time taken to receive payments from customers (A) Signup and view all the answers

What is the difference between gross profit and net profit?

Gross profit subtracts expenses from revenues, while net profit deducts all costs from revenues (C) Signup and view all the answers