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Exam 6: Analyzing Cash Flow and Other Financial Information

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Question 21

Multiple Choice

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In the context of balance sheets, the current assets of a firm minus its current liabilities are referred to as the ________.

A) organizational budget
B) variable costs
C) working capital
D) break-even point

E) B) and D)
F) All of the above

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Question 22

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A cash flow statement is the same as a budget.

A) True
B) False

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Question 23

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In the context of cash flow statements and budgets, what is a sensitivity analysis? Why is it important when developing a new business idea?

________ is the difference between when the money goes out and when it comes in.

________ is a tool for the estimation of when a business's income exceeds its expenses.

A sensitivity analysis of cash flows should show the best-case and the worst-case scenarios.

A ________ can easily be converted to cash, such as accounts receivable and notes receivable.

In the context of business tools, a sensitivity analysis examines a new firm's vulnerability to its competitors.

Describe fixed costs and variable costs.Give one example of each type of cost.

An example of a(n)________ asset is a delivery truck used by a florist to deliver flowers to customers.

A budget details all the expenses incurred by a company within a specified period.

Sarah is the founder of a small business.At the start of the business year, she makes a list of all the possible expenses that the business might incur over the following year.She totals the expenses and spreads out the expenses evenly across the following 12 months.In this context of cash flow analysis, Sarah is determining the ________ for her business.

Current liabilities that are owed by a company need to be paid in 18 months.

A ________ analysis is an analytic tool that identifies the differences between the predicted and the actual performance of a company over time.

In a large firm, when there is a separation between managers and ownership, profits are a useful measure to evaluate a manager's performance.

The focus of an income statement is on ________ rather than on cash.

Float is the difference between the money going out and the money coming in.

The ________ of money is calculated on the value of an investment in time and money, if the owner did not do the proposed venture.

In the context of financial activities, new firms typically have only investing activities and financial activities.

Ingrid is the owner of an entrepreneurial firm.She makes an estimate of the assets and liabilities of the firm.She then uses these estimates to plan the future activities of the firm.In this scenario, Ingrid creates a