Management 3360 Chapter 14

Delays in transferring money among banks due to internal procedures is referred to as:

Availability float

There are two primary causes of float:

Availability float and processing float

The ___ is the actual cash value of the account.

Bank available balance

The sum of deposits and withdrawals recorded in a bank's accounting records is called the:

Bank ledger balance

In ___ you may trade similar items without creating a taxable transaction.

Bartering

The practice of trading goods and services without the use of money is called:

Bartering

For small businesses, the key budget is the ___ budget.

Cash

Money that is immediately available to be spent is called:

Cash

Identify the budget that is a schedule of the amounts and timings of payments of cash out of a business.

Cash disbursements budget

Assets that may be quickly converted to cash is called:

Cash equivalent

Tammy insists that cash for her business can come from all of these sources. Her Son should point out that ___ is not one of the sources for Tammy's cash needs.

Cash flow from subsidies

Cash can come from all of these sources for a small business EXCEPT:

Cash flow from subsidy

Approximately 55 percent of small businesses that fail do so because of:

Cash flow problems with an immediate impact

The ___ is a schedule of the amounts and timing of the receipt of cash into a business.

Cash receipts budget

The basis to being able to control a business's money is to understand and be able to predict the patterns of cash flows. This is possible by preparing a:

Cash receipts budget

Tammy needs to know that the time that is required for her to acquire resources, convert them into craft products, sell the products, and receive cash from the sale is called:

Cash-to-cash cycle

The time that is required for a business to acquire resources, convert them into a product, sell the product, and receive cash from the sale refers to:

Cash-to-cash cycle

A reduction in the bank account of a merchant by a credit card company refers to:

Charge back

Which of theses refers to an entity that processes checks and electronic fund transfers for banks and other financial organizations?

Clearinghouse

___ are notes issued by credit-worthy corporations

Commercial papers

The ___ is the name given to the sum of cash inflows and cash outflows recorded in the firm's accounting records.

Company book balance

Which of the following is usually called the cash account?

Company book balance.

These are also referred to as master budgets.

Comprehensive budget

The practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold is called:

Consignment

The bills and coins printed by government to represent money refers to:

Currency

To factor your receivables your ___ must have good credit ratings.

Customers

_____ make up most of the non currency cash

Demand deposits

Cash payments received before product is completed or delivered is called:

Deposits and progress payments

When a business offers you a discount of 2 percent if you pay the bill in full withing 7 days, it is called:

Discount for prompt payments

___ is a method of borrowing against receivables.

Factoring

A person or business entity that possesses a security is called demand depositor

False

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

Consignment is the practice of trading goods and services without the use of money

False

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

Delays in transferring money among banks due to internal procedures is called processing float.

False

Factoring is a method of borrowing against payables account.

False

One technique to increase cash flow is to offer discounts for deferred payments.

False

Primary advantage of bartering is that it is essentially tax-free as long as no cash is involved.

False

The difference between revenue and expense is called sales.

False

The rule of thumb for trade discounts is that you should always capture 5 percent or more, if the billing period is less than 30 days.

False

Use of temporary agencies is the key factor that adds to the cost of employees.

False

While all money is currency; all currency is not money.

False

Which of these is NOT a strategy employed by small businesses for handling money shortages?

Filing for bankruptcy

Delays in the movement of money among depositors and banks is referred to as:

Float

Which of these is NOT a technique to increase cash inflows?

Foregoing receivables

Every business that maintains inventory has an optimal level that minimizes the total cost of all of the following EXCEPT:

Frequent purchases

Using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided is called:

Gaming the payment process

Which of the following is the term used for a financial crisis that is caused by a business growing faster than it can be financed?

Growth trap

Money in the end is a form of:

Informaton

___ are made up of stocks and bonds for which there is an active auction market.

Marketable securities

Revenue-producing tasks and activities related to, but no part of the primary strategy of a business is called:

Noncore projects

Which of these techniques is not one that Tammy can use to increase her cash inflows?

Offering discounts for deferred payments

A negative balance in a depositor's bank account is referred to as:

Overdraft

As Tammy always ended up writing more checks than the money she had in her checking account, her son recommended that she establish with her bank to ___ her account so that her checks could be paid

Overdraft

Amounts owed to vendors for merchandise or services purchased on credit is called:

Payables

The amount owed to vendors from whom Tammy purchased the craft merchandise on credit is called:

Payables

What is the term used for delays in delivering checks from the writer of the check to the recipient's bank?

Processing float

The difference between revenue and expense is called:

Profit

Amounts that are owed to a business for merchandise that was sold on credit refers to:

Receivables

Which of these refers to the accounting process that identifies the causes of all differences between book and bank balances?

Reconciling

___ must be paid in less than one year from the date of the financial statement on which it is reported.

Short-term debt

All of the following provides savings in cash outflows EXCEPT:

Taking on noncore paying projects

Information that the bank knows about your account that you do not know includes all of these EXCEPT:

The deposits you have made after bank closing

Accepting payments by credit card causes significant differences between the bank and book balances due to all of the following reasons EXCEPT:

The service provider records the gross amount of each credit card sale

Percentage discounts from gross invoice amounts provided to encourage prompt payment is referred to as:

Trade discount

An often overlooked cause of cash shortage is the growth trap.

True

Budgets are the essential starting point for all financial and accounting considerations in a small business.

True

Cash-to-cash cycle is also referred to as operating cycle

True

Currency is the most common form of cash

True

In December 2003, the supply of currency in circulation in the U.S. was $663 billion.

True

Many small businesses experience difficulty or even failure because of the mismatch in time between receiving cash and spending cash

True

Stock options or added vacation days are examples of non cash incentives.

True

The bank available balance is the actual cash value of the account and can vary significantly form the ledger balance.

True

The best prevention method, or approach for avoiding a cash flow problem is attending to and understanding your business operations.

True

The most simple and most effective way to obtain payments from customers is asking for your money.

True

There are tow factors of cash outflows that must be controlled: the amount and timing of cash being paid out.

True

When reconciling is done, the corrected bank balance and the corrected book balance will be identical.

True

The small business owners in the NFIB Foundation poll reported that all of these were causes of cash flow problems EXCEPT:

Unexpected increases in taxes

Which of these is the number one strategy employed by small businesses for handling money shortages?

Using personal money

The two forms of short-term financing are short term debt and:

commercial paper

Money held in checking and savings accounts are called:

demand deposits

Cash is composed of all of these forms of money that can be immediately used to make payments EXCEPT:

receivables

The most common noncash incentive(s) is/are:

stock options

There are two purposes of money:

to make exchanges and to keep track of wealth.