Cash Flow Management Flashcards
15 cards from real Financial Management for Project Managers practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 15 Cash Flow Management flashcards as text
Business cash flow.
Answer: Cash Flow
Cash flow refers to the total amount of money being transferred into and out of a business. It measures the liquidity of a company over a period, indicating its ability to generate cash to meet its obligations and fund operations.
Business investor funds are an example.
Answer: cash inflow
Cash inflow represents money coming into the business. Investor funds are a prime example, as they bring capital into the company, increasing its available cash and strengthening its financial position.
selling an asset
Answer: cash inflow
Selling an asset, such as equipment or property, generates revenue for the company. This transaction results in money flowing into the business, thus classifying it as a cash inflow.
buying an asset
Answer: cash outflow
Buying an asset, such as new machinery or property, requires the business to spend money. This expenditure results in cash leaving the company, making it a cash outflow.
Ideal net cash flow is
Answer: positive
An ideal net cash flow is positive, meaning that a business has more cash coming in than going out over a period. A positive cash flow indicates financial health and the ability to cover expenses, invest, and grow.
Reducing _____ could help a company increase cash.
Answer: Outflows
To increase its available cash, a company needs to either increase its cash inflows or decrease its cash outflows. Reducing outflows means spending less money, which directly contributes to a higher net cash position and improved liquidity.
Why is this firm's cash rising?
Answer: There is more cash inflow compared to outflows
A firm's cash rises when the total amount of money flowing into the business (cash inflows) exceeds the total amount of money flowing out (cash outflows). This positive net cash flow indicates an increase in the company's cash reserves.
How much does a company make if they sell 400 units at $15 each?
Answer: $6,000
To calculate the total amount a company makes from selling units, multiply the number of units sold by the price per unit. In this case, 400 units multiplied by $15 per unit equals $6,000 in total revenue.
500 units cost $2,000 to make. What is their average total production cost?
Answer: $4 per unit
Average total production cost is calculated by dividing the total cost of production by the number of units produced. In this scenario, dividing the total cost of $2,000 by 500 units yields an average cost of $4 per unit. This metric is crucial for understanding the cost efficiency of manufacturing on a per-unit basis.
Companies spend $50. What's the company's fixed cost if its variable cost is $20?
Answer: $30
Total cost in a business is composed of fixed costs and variable costs. To find the fixed cost, you subtract the variable cost from the total spending. Given a total spending of $50 and a variable cost of $20, the fixed cost is $50 - $20, which equals $30. This fundamental accounting principle helps in cost analysis.
Which would solve the cashflow forecast problem?
Answer: delay paying suppliers
A cash flow forecast problem typically indicates a shortage of liquid funds. Delaying payments to suppliers is a common strategy to improve immediate cash flow by extending the period before cash leaves the business. This action helps retain cash longer, alleviating short-term cash deficits and improving the company's liquidity position.
Cash flow is which?
Answer: It is different from profit
Cash flow refers to the actual movement of money into and out of a business, reflecting its liquidity. Profit, conversely, is an accounting measure calculated by subtracting expenses from revenues, which can include non-cash items or credit transactions. A business can be profitable but still face cash flow issues, or vice versa, demonstrating that these two financial metrics are distinct.
Cash flow forecasts: why?
Answer: To find out whether a business has enough cash to pay their bills
Cash flow forecasts are vital financial planning tools designed to predict future cash inflows and outflows. Their primary purpose is to determine if a business will have sufficient liquid funds to meet its short-term financial obligations, such as paying bills, salaries, and suppliers. This helps prevent insolvency and ensures operational continuity.
Which explanation best explains a business's cash-flow issues?
Answer: allowing customers a long credit period
Allowing customers a long credit period means the business provides goods or services but delays receiving cash payment. This ties up the company's working capital in accounts receivable, slowing down cash inflow. Consequently, the business may experience a shortage of readily available cash to cover its own operational expenses, leading to cash flow problems.
Which is not a cash-flow forecast use?
Answer: They indicate how much profit the business will make
Cash flow forecasts are primarily concerned with tracking the movement of actual money, focusing on a business's liquidity and solvency. Profit, however, is an accrual-based accounting measure that considers revenues earned and expenses incurred, regardless of when cash changes hands. Therefore, a cash flow forecast's direct purpose is not to indicate how much profit a business will make.