Entrep. Chapter 14

A

(n) _____ is the removal of an amount from a business's account in the event of fraud or customer challenge. A) charge back B) set-aside C) trade discount D) overdraft

T

A short-term debt is any debt that must be paid in less than one year from the date of the financial statement on which it is reported. A) True B) False

C

A(n) _____ is the time required to move checks among payers, payees, and banks. A) availability float B) overdraft C) processing float D) charge back

D

According to the U.S. Chamber of Commerce, which of the following categories of employee theft is the most prevalent? A) Phony disbursements B) Larceny and embezzlement C) Shoplifting D) Skimming

F

Amounts that are owed to a business for merchandise that was sold on credit are called payables. A) True B) False

Bearer

Any person or business entity who posses a security

F

Bank ledger balance is the sum of money that has actually been received and paid out of a depositor's account. A) True B) False

Sources of Credit and Debt for Small Business

CREDIT CARDS used by small business

Cash flow from operations

Cash can be obtained by selling products and services

Cash flow from investing

Cash can be obtained from investments the business has made

Cash can be obtained by selling products and services Cash can be obtained from investments the business has made Cash through financing or borrowing

Cash can come from only three sources:

National

Chase, Wells Fargo "fit in box"

Bank

First step in managing cash flow is to understand how the banks idea of you business cash flow and your own view of the business cash flow differ

B

For small businesses, a(n) _____ identifies how much and when money will come into and go out of the business. A) charge back B) cash budget C) overdraft D) trade discount

T

Growth trap refers to a financial crisis that is caused by a business growing faster than it can be financed. A) True B) False

Financing

In the form of cash donated to the business in return for ownership or in the form of money bored from other entities

Marketable Securities

Made up of stock and bonds that are traded on the open market

Bank ledger balance:

Name given to the banks accounting system for all recognized transactions that affect the account The sum of deposits and withdrawals recored in a banks accounting records Balance may vary because of delays in collecting deposits and delays in making cash transfers

Credit Unions:

Nonprofit organization individuals get together Coopt.

Commercial Paper

Notes issued by credit worthy corporation Company with good credit can issue a note for cash to another company Issued to be paid to the bearer of the note, thus if fully transferable

Regional

Prosperity Easier to get money

Estimate the bank's available balance for the purpose of managing your cash flows Identifies any mistakes that were made by either the bank or by your own bookkeeper Checks the accuracy of both the bank and business records Lets you know about items on the bank statement that would not otherwise be included in the business's accounting records

Reconciliation serves four purposes:

Cash to cash cycle "Operating Cycle"

Repeating flow of money The time required for a business to acquire resources confer them into a product sell the product and receive cash from the sale

B

The difference between inflows of cash and outflows of cash recorded by a firm is called a(n) _____. A) bank ledger balance B) book balance C) trade discount D) bank available balance

C

The final step in preparing a master budget, and in preparing the pro forma financial statements for a business plan, is: A) forecasting cash flow out of the business. B) estimating the expected incomes and expenses. C) preparing a balance sheet for each accounting period. D) forecasting cash flow into the business.

Currency

The most familiar for of cash bill, coins that represent money

Company Book Balance

The name given to the sum of the companies internal accounting record of all transactions that affect cash Called CASH ACCOUNT The sum of cash inflows and cash outflows recored in the firms accounting records The difference between the inflows and outflows is either the _____ or simply book balance

Bartering

The practice of trading goods and services without the use of money Avoid taxes -Trading -common way of bootstrapping

Delays in transferring money due to internal procedures (availability float) Delays in delivering checks (processing float)

What are the 2 primary causes of float?

To make exchanges To keep track of wealth

What are the 2 purposes of money?

A

Which of the following is an example of the noncash incentive strategy to decrease cash outflow of a company? A) A newspaper editor offering benefits packages to employees who worked overtime B) A shop owner trading goods and services without the exchange of money C) A restaurant owner using temporary agencies to reduce the cost of employees D) A florist forgetting to sign the payment check to her vendor

A

Which of the following is one of the purposes of reconciling the differences in the bank and book balances? A) To estimate the bank's available balance for the purpose of managing the firm's cash flows B) To exclude items on a bank statement that are not included in a business's accounting records C) To provide an approximate value of cash held by a business D) To estimate the bank ledger balance for managing the cash flow of a business

D

_____ consist of marketable securities, commercial paper, and debt investments that mature in less than three months. A) Inventories B) Payables C) Receivables D) Cash equivalents

D

_____ is an accounting process that identifies the causes of all differences between book and bank balances. A) Factoring receivables B) Budgeting C) Benchmarking D) Reconciling

Demand Deposits

Make up most of the non currency cash Accounts that let you withdraw any amount of the balance immediately without any advance notice to the institution

Clearing House

An entity that processes checks and electronic fund transfers for banks and other financial organizations Result in receipts or disbursement sod mont only after some delay

Cash equivalent

Assets that may be turned into cash in a slightly longer time Marketable securities, commercial paper, debt investment

Kiting?

Checks- Floating money when its not there. Bank A to Bank B and Bank B to Bank A. intentionally writing a check for a value greater than the account balance from an account in one bank, then writing a check from another account in another bank, also with non-sufficient funds, with the second check serving to cover the non-existent funds from the first account. the act of misrepresenting the value of a financial instrument for the purpose of extending credit obligations or increasing financial leverage. a form of check fraud, involving taking advantage of the float to make use of non-existent funds in a checking or other bank account. In this way, instead of being used as a negotiable instrument, checks are misused as a form of unauthorized credit.

Reconciling bank balances with company book balances

key is knowing how much cash is available to you at the moment

Difficulty collecting money due Seasonal variation in sales Unexpected decreases in sales

What are the 3 Primary causes of cash flow problems: 55% small business fail do so because of cash flow problems with an immediate impact not because of lack of profitability

Bootstrapping

-efficient with your money -don't buy things you don't need

Money Federal Bank definition

In the end is a form of information Medium of exchange accepted by the community, meaning its what people buy things with and sell things for Provides a standard for measuring value so that the worth of different goods and services can be compared Store of value that can be saved for later purchases Is a medium of exchange, store of value, and measure of wealth Profit is NOT money in your hand

Cash

Is money, but only one form of money Immediately available to spend

Bank Available balance

Key measure The sum of money that has actually been received and paid out of a depositors account actual cash value of the account

Gaming the System

Method of controlling cash outlfows Simply not paying a bill when it is due to sending checks that you've forgotten to sign sending chekcs in payment and then stopping payment after the payment has been recorded, but the check has not yet cleared. Using methods to appear to be paying bills on time when in fact payment is being delayed or avoided.

Over Draft

a negative balance in a depositor's bank account Banks allow established customers to ____ their account by paying a check when the available balance is not sufficient to cover the check amount but the ledger balance is.

F

cash disbursements budget is a schedule of the amounts and timings of the receipt of cash into a business. A) True B) False

Float

describes the delay in movement of money among depositors and banks Processing float and availability float

Local:

just in one community Knows the people borrowing Easier to get money

Cash FLow

2/3 of all small businesses have money problems 1/5 of small business managers reported that cash flow is a continuing problem What is money: U.S. Dallas Federal Reserve MEDIUM EXCHANGE excepted by the community