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    Exam Style Questions Page 266

    Uploaded by

    Arounny Corwin
    The document contains sample exam-style questions and answers about cash flow management and working capital for a business called Cards4U. Specifically: - Question 1 discusses working capital, calculating amounts from a cash flow statement, concerns over negative balances in early months turning positive in March, and ways to improve cash flow through forecasting and interpreting statements. - Question 2 defines reasons for needing cash, calculates net cash flow and opening/closing balances from a sample cash flow statement, benefits of managing working capital like ensuring liquidity and regular materials supply, and why a positive cash flow is preferable to a negative one. - The questions and answers provide examples of financial concepts and calculations that may appear on an exam, focusing on

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    Exam Style Questions Page 266

    Uploaded by

    Arounny Corwin
    951 views2 pages
    The document contains sample exam-style questions and answers about cash flow management and working capital for a business called Cards4U. Specifically: - Question 1 discusses working capital, calculating amounts from a cash flow statement, concerns over negative balances in early months turning positive in March, and ways to improve cash flow through forecasting and interpreting statements. - Question 2 defines reasons for needing cash, calculates net cash flow and opening/closing balances from a sample cash flow statement, benefits of managing working capital like ensuring liquidity and regular materials supply, and why a positive cash flow is preferable to a negative one. - The questions and answers provide examples of financial concepts and calculations that may appear on an exam, focusing on

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    exam stlye business

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    The document contains sample exam-style questions and answers about cash flow management and working capital for a business called Cards4U. Specifically: - Question 1 discusses working capital, calculating amounts from a cash flow statement, concerns over negative balances in early months turning positive in March, and ways to improve cash flow through forecasting and interpreting statements. - Question 2 defines reasons for needing cash, calculates net cash flow and opening/closing balances from a sample cash flow statement, benefits of managing working capital like ensuring liquidity and regular materials supply, and why a positive cash flow is preferable to a negative one. - The questions and answers provide examples of financial concepts and calculations that may appear on an exam, focusing on

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    951 views2 pages

    Exam Style Questions Page 266

    Uploaded by

    Arounny Corwin
    The document contains sample exam-style questions and answers about cash flow management and working capital for a business called Cards4U. Specifically: - Question 1 discusses working capital, calculating amounts from a cash flow statement, concerns over negative balances in early months turning positive in March, and ways to improve cash flow through forecasting and interpreting statements. - Question 2 defines reasons for needing cash, calculates net cash flow and opening/closing balances from a sample cash flow statement, benefits of managing working capital like ensuring liquidity and regular materials supply, and why a positive cash flow is preferable to a negative one. - The questions and answers provide examples of financial concepts and calculations that may appear on an exam, focusing on

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    of 2

    NAME: KHIENG

    EXAM-STYLE QUESTIONS PAGE 266


    1.
    a. Working capital is the capital needed to finance the day-to-day running
    expenses and pay short-term debts of a business.

    b. A= 1060-640= 42, B= -180=390=210

    c. The owners of Cards4U should be concerned about the results shown in


    the cash flow forecast because the closing balance in March is the highest
    number compare to other months (January and February) which is
    negative, and the closing balance in March is positive and the number
    increase a lot, but the net cash flow in April is negative. The good things is
    that in January, February and March the opening balance is negative but
    in April the opening balance is positive which make the company doing
    better than before which is a positive things.

    d. The two ways the owners of Cards4U could improve the cash flow of their
    business are cash-flow forecast and interpreting cash-flow statements.
    For cash-flow forecast all the business activity results in either a flow of
    cash into the business or a flow of cash out of the business. The survival of
    any business depends on the cash inflows being greater than the cash
    outflows. For interpreting cash-flow statements the most important on
    any cash-flow statement is the one containing the closing balance. If a
    business cash position is forecast to become negative for a short period of
    time, management might decide to finance this with an overdraft.
    However, overdrafts can be very expensive source of finance.

    e. I disagree with Charlotte view that there is no need for cash management
    because most business operate cash-flow management, which means that
    they have the finance whenever they need it to pay their employees, or
    their suppliers, and so on. Managing a businesss cash flow involves
    making sure that enough cash is coming in to the business to cover the
    cash that goes out of the business. Cash management is very important it
    provide us many things and it make us prepare to pay for the bills and
    know how much money do we use to pay for things, buying things and
    keeping for retain profit or capital, so I strongly disagree with Charlotte
    view that there is no need for cash management.

    2.
    a. The two reasons why businesses need cash are to pay for its employees
    wages and to its supplier for goods and services.

    b. Net cash flow is a cash inflow minus cash outflow.

    c. March: Net cash flow= -30, Opening balance= -10, Closing balance= -40
    April: Net cash flow= 20, Opening balance= -40, Opening balance= -20
    NAME: KHIENG

    d. The two benefits to ABC of managing working capital are working capital
    measures the liquidity of a business. Liquidity is the ability of a business
    to pay its short term-debts. A business, which does not have enough
    working, will be illiquid. That means it cannot pay its short-term debts. If
    this happens the business may have to borrow the finance require.
    Another benefits is regular supply of raw materials, it ensures regular
    supply of raw materials and continuous production.

    e. It is better to have a positive cash flow as any temporary cash shortage


    may cause any problems for the business and result in an increase in
    borrowing costs. To prevent a negative net cash flows businesses need an
    accurate forecast of the size and timing of cash inflows and cash outflows.
    This cash-flows forecast enables businesses to identify any future time
    periods when cash shortages may occur. If they want their company to do
    better they need to make the closing balance become positive again by
    reducing the payments and they need to promote their company well so
    the credit sales increase and more profit coming into their company.

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