Lesson 2.1.4

2.1.4 Business plans and cash-flow forecasts Quiz: Pearson Edexcel Business, Unit 2

20 questions

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Lesson 2.1.4, Business plans and cash-flow forecasts: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 2: Managing business activities, written with Revision Ninja.

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The 20 questions

  1. What document sets out a business's objectives, strategies, and financial forecasts for potential lenders?

    • Business plan
    • Balance sheet
    • Cash-flow forecast
    • Income statement
  2. What is the main reason banks examine a business plan before approving a loan?

    • To assess viability
    • To calculate tax
    • To manage operations
    • To appoint directors
  3. What financial document predicts future cash inflows and outflows over a specific period?

    • Balance sheet
    • Income statement
    • Cash-flow forecast
    • Profit matrix
  4. A business forecasts cash inflows of £25,000 and cash outflows of £30,000 in a month. What is the net cash flow?

    • £5,000
    • -£5,000
    • £55,000
    • £25,000
  5. Which item represents a cash inflow on a cash-flow forecast?

    • Commercial rent payments
    • Staff salary costs
    • Supplier bill payments
    • Customer sales receipts
  6. A business's opening cash is £4,000. Its net cash flow for the month is -£1,500. What is the closing cash balance?

    • £2,500
    • £4,000
    • -£1,500
    • £5,500
  7. What is a major limitation of a cash-flow forecast?

    • Unreliable estimates
    • Fixed overhead costs
    • Double entry errors
    • Historical data bias
  8. What action should a business take if a future cash deficit is forecasted?

    • Extend credit terms
    • Increase dividends
    • Pay off loans
    • Arrange an overdraft
  9. Why can a profitable business still experience cash flow failure?

    • High gross margin
    • Poor cash timing
    • Declining asset values
    • Excessive retained profit
  10. Which action directly improves a business's short-term cash flow?

    • Paying dividends early
    • Buying new machinery
    • Negotiating supplier credit
    • Giving customer discounts
  11. What is the primary cash-flow risk of offering trade credit to customers?

    • Lower sales revenue
    • Higher fixed costs
    • Delayed cash inflows
    • Reduced profit margins
  12. How does a business plan help an enterprise secure bank finance?

    • Eliminates market risk
    • Demonstrates repayment ability
    • Replaces financial audits
    • Guarantees business success
  13. What should a business do if expected cash inflows drop unexpectedly?

    • Issue share capital
    • Stop financial planning
    • Update cash forecasts
    • Increase selling prices
  14. What is a main limitation of relying on a business plan?

    • Inaccurate market forecasts
    • Guaranteed zero risk
    • Mandatory tax audits
    • High legal costs
  15. A cash-flow forecast shows inflows of £18,000 and outflows of £26,500 in a quarter. What is the net cash flow for the quarter?

    • -£44,500
    • £8,500
    • -£8,500
    • £44,500
  16. Which item represents a cash outflow for a retail business?

    • Capital investment injected
    • Bank loan received
    • Rent payments
    • Customer cash sales
  17. What is the main purpose of preparing scenario-based cash-flow forecasts?

    • Eliminating business risk
    • Reducing tax liabilities
    • Calculating exact profit
    • Assessing cash sensitivity
  18. How should a seasonal business manage high summer cash inflows?

    • Stop marketing completely
    • Distribute all cash
    • Build cash reserves
    • Cut product prices
  19. Which element of a business plan matters most to potential lenders?

    • Staff holiday policies
    • Social media links
    • Cash-flow forecast
    • Brand logo design
  20. A cash-flow forecast gives opening cash of £2,000, inflows of £9,000 and outflows of £10,500. What is the closing balance?

    • £1,500
    • £500
    • -£500
    • £21,500

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