Chap014 - Chapter 14 - Cash: Lifeblood of the Business...

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Chapter 14 - Cash: Lifeblood of the Business Chapter 14 Cash: Lifeblood of the Business True / False Questions 1. (p. 446) According to a recent poll by NFIB Foundation, less than 20 percent of small businesses experience money problems indicating the importance and effectiveness of these businesses. FALSE Difficulty: Hard 2. (p. 447) Cash-to-cash cycle is also referred to as operating cycle. TRUE Difficulty: Medium 3. (p. 448) Many small businesses experience difficulty or even failure because of the mismatch in time between receiving cash and spending cash. TRUE Difficulty: Medium 4. (p. 449) While all money is currency; all currency is not money. FALSE Difficulty: Easy 5. (p. 450) The difference between revenue and expense is called sales. FALSE Difficulty: Easy 14-1
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Chapter 14 - Cash: Lifeblood of the Business 14-2
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Chapter 14 - Cash: Lifeblood of the Business 6. (p. 451) Currency is the most common form of cash. TRUE Difficulty: Medium 7. (p. 451) In December 2003, the supply of currency in circulation in the U.S. was $663 billion. TRUE Difficulty: Hard 8. (p. 451) A person or business entity that possesses a security is called demand depositor. FALSE Difficulty: Medium 9. (p. 453) The bank available balance is the actual cash value of the account and can vary significantly from the ledger balance. TRUE Difficulty: Medium 10. (p. 454) Delays in transferring money among banks due to internal procedures is called processing float. FALSE Difficulty: Medium 11. (p. 455) When reconciling is done, the corrected bank balance and the corrected book balance will be identical. TRUE Difficulty: Medium 14-3
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Chapter 14 - Cash: Lifeblood of the Business 12. (p. 456) Budgets are the essential starting point for all financial and accounting considerations in a small business. TRUE Difficulty: Medium 13. (p. 457) Credit customers pay on average 10 percent of what they owe in the month following the sale and 10 percent thereafter per month, which translates to minimum payment requirements. FALSE Difficulty: Hard 14. (p. 464) The best prevention method or approach for avoiding a cash flow problem is attending to and understanding your business operations. TRUE Difficulty: Hard 15. (p. 464) One technique to increase cash flow is to offer discounts for deferred payments. FALSE Difficulty: Medium 16. (p. 465) The most simple and most effective way to obtain payments from customers is asking for your money. TRUE Difficulty: Medium 14-4
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Chapter 14 - Cash: Lifeblood of the Business 17. (p. 465) Factoring is a method of borrowing against payables account. FALSE Difficulty: Easy 18. (p. 467) There are two factors of cash outflows that must be controlled: the amount and timing of cash being paid out. TRUE
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Chap014 - Chapter 14 - Cash: Lifeblood of the Business...

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