Multiple Choice: Cash Flows Select the best answer for each of the following:

1. Which of the following factors is (are) important in managing cash resources?

a. Knowing the source of cash flows.

b. Knowing when cash flows will occur.

c. Knowing the amount of cash flows.

d. All of the above.

2. A company is considered to be insolvent if:

a. It is unable to sell all of its output in a given period.

b. It is unable to pay its debts.

c. It has more long-term debt than short-term debt.

d. Its debt exceeds the amount of its stockholders’ equity.
3. The cash or operating cycle refers to:

a. The length of time that elapses between an outlay of cash for resources and the receipt of cash from the sale of goods or services.

b. The length of time that elapses between the time an item is purchased and payment is made.

c. The length of time it takes to collect receivables from customers who have been extended special credit terms.

d. The length of time it takes to collect receivables from customers who have been extended normal terms.
4, Businesses generally prefer to collect money from customers quickly because:

a. The longer an account is unpaid, the less is the likelihood of collecting it.

b. Forecasting and managing cash flows is easier if cash is collected within a specified period of time.

c. There is a time value of money.

d. All of the above.