Lesson 3.5.4
3.5.4 Making financial decisions: improving cash flow and profits Quiz: AQA Business, Unit 5
20 questions
In partnership with Revision Ninja
Lesson 3.5.4, Making financial decisions: improving cash flow and profits: 20 multiple choice questions for the AQA Business (7132), Unit 5: Financial management, written with Revision Ninja.
Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.
The 20 questions
-
Which of these is a method of improving cash flow?
- Investing surplus cash in long-term fixed assets without planning
- Asking customers to pay deposits in advance
- Buying large quantities of stock on credit without a sales forecast
- Extending credit periods offered to customers to 90 days
-
Which is a method of improving profitability?
- Reducing variable costs per unit by negotiating better prices with suppliers
- Paying higher dividends to shareholders from profits
- Reducing the selling price below the variable cost
- Increasing fixed costs by taking on a larger premises
-
Factoring receivables can improve cash flow because it:
- Brings forward cash that would otherwise arrive only when customers pay
- Increases the business's gross profit margin
- Removes the need to pay suppliers at all
- Increases the number of customers who pay late
-
A difficulty when trying to improve cash flow by reducing inventory is:
- Lower stock prevents the business from producing any goods
- Stock shortages may lose sales if buffer stock is cut too far
- Stock reductions always increase costs by the same amount
- Reducing stock means the business must pay more tax
-
Which action reduces costs as a way of improving profit?
- Increasing the number of managers in each department
- Increasing spending on sponsorship without any sales target
- Launching a new product line with higher fixed costs
- Renegotiating supplier contracts for lower prices
-
Which is a difficulty of improving profit by raising prices?
- Higher prices always increase sales volume
- Higher prices reduce the risk of bad debts to zero
- Customers may switch to competitors if demand is price elastic
- Higher prices remove the need for any cost control
-
Improving cash flow by reducing payables days means:
- Increasing the interest paid on overdrafts
- Ignoring supplier invoices until the end of the year
- Paying suppliers more slowly, which keeps cash in the business for longer
- Paying suppliers sooner to keep cash in the business
-
A firm offers a 5% discount for payment within 10 days. What is the likely effect?
- Cash arrives later, but revenue increases
- Cash and revenue both rise, with no cost to the firm
- Cash is unaffected and revenue rises by 5%
- Cash arrives sooner, but the discount reduces revenue per sale
-
A firm cuts its annual advertising budget from 80,000 to 50,000 and sales stay the same. What is the likely effect on profit?
- Profit rises by 30,000 if sales and other costs remain unchanged
- Profit rises by 80,000, because the advertising budget is removed entirely
- Profit falls by 30,000, because advertising is always profitable
- Profit is unchanged, because costs do not affect profit
-
Which is a risk of cutting staff training to improve profit?
- Customers will not notice any change in service or quality
- Productivity always rises immediately after training stops
- Training costs are never tax deductible, so cutting them is illegal
- Productivity and quality may fall, reducing revenue and profit over time
-
A firm receives 60,000 of receipts each month but pays 70,000 in wages. What is its monthly cash position?
- A surplus of 10,000 each month
- A deficit of 130,000 each month
- A deficit of 10,000 each month
- No deficit, as wages are a fixed cost
-
Which action most directly improves short-term cash flow?
- Buying new machinery on a long-term loan
- Selling surplus stock quickly at a discount to convert it into cash
- Increasing the dividend paid to shareholders
- Expanding into new overseas markets with no funding
-
A business has revenue of 400,000 and costs of 340,000. It cuts its costs by 10%, with revenue unchanged. What is the new profit?
- 100,000
- 94,000
- 74,000
- 60,000
-
Why might a firm find it difficult to improve cash flow by offering shorter credit terms to customers?
- Shorter credit terms raise the cost of goods sold
- Customers always pay early without any encouragement
- Receivables reduce the business's cash balance by definition
- Shorter terms can push customers to competitors that offer longer credit
-
A business improves labour productivity so that the same output needs fewer workers. What is the likely effect on profit?
- Labour cost per unit falls, which can increase profit if sales are not lost
- Profit falls because productivity lowers revenue
- No change, since labour costs never affect profit
- Labour cost per unit rises, reducing profit
-
Evaluate: what is the strongest argument that cutting costs is not always the best route to higher profit?
- Costs are irrelevant to profit in every business
- Cuts may damage quality, morale or future growth, so revenue can fall and offset the savings
- Profit can only be raised by increasing fixed costs
- Cutting costs always increases revenue by the same amount
-
A business stretches its payables from 30 to 45 days on annual purchases of 730,000. How much cash does this release?
- 30,000
- 60,000
- 15,000
- 45,000
-
Evaluate: a firm raises prices by 10% and loses 15% of its customers. What is the best-supported conclusion?
- Profit always rises whenever prices rise
- Revenue is unchanged because the lost customers are offset
- Revenue rises by 10% because the price increased
- Revenue falls by about 6.5%, so total revenue is likely to decline
-
A business has sales of 250,000 and operating costs of 200,000. To reach a 25% profit margin with costs unchanged, what revenue is needed?
- 300,000
- About 266,667
- 250,000
- 225,000
-
Evaluate: which difficulty is most significant when trying to improve both cash flow and profit at the same time?
- Profit improvements always create cash flow instantly
- Cash flow and profit always move in the same direction
- Actions that improve one can harm the other, such as cutting stock to free cash but losing sales, so trade-offs must be managed
- Improving cash flow never affects profit
Related quizzes
- Setting financial objectives Quiz · 3.5.1 · 20 questions
- Budgets, cash flow forecasts and break-even analysis Quiz · 3.5.2.1 · 20 questions
- Profitability ratios and timings of cash flows Quiz · 3.5.2.2 · 20 questions
- Making financial decisions: sources of finance Quiz · 3.5.3 · 20 questions
- Understanding the nature and purpose of business Quiz · 3.1.1 · 20 questions
- Causes, types and value of change Quiz · 3.10.1.1 · 20 questions
- Understanding management, leadership and decision making Quiz · 3.2.1 · 20 questions
- Setting marketing objectives Quiz · 3.3.1 · 20 questions
- Setting operational objectives Quiz · 3.4.1 · 20 questions
- Setting human resource objectives Quiz · 3.6.1 · 20 questions