Chapter 1 Multiple-choice questions

. Which of the following is not true about a cash budget?

A cash budget sets out all cash receipts and payments that a business expects to make over a period of time.

Cash budgets are usually prepared on a month-to-month basis.

Cash budgets show the expected bank balance at the end of the month.

Cash budgets include personal cash receipts and expenses.

. A cash budget for the six months ended 30 September shows an anticipated overdraft of approximately £9,500. Which of the following would reduce the expected overdraft?

Allowing customers two months' credit, instead of one month's credit, in which to pay.

Suppliers' purchases being made for cash, instead of one month's credit.

Assets being leased, rather than purchased for cash.

Charging depreciation on fixed assets at 25% on the straight-line basis, rather than 20%.

. Mark sells goods at a gross profit margin of 30%. Which of the following statements is true?

Goods sold for £800 will have cost Mark £240.

Goods sold for £800 will have cost Mark £560.

Goods sold for £800 will have cost Mark £320.

Goods sold for £800 will have cost Mark £392.

. James sells bicycles at a gross profit margin of 40%. Which one of the following statements is true?

Bicycles costing £500 will be sold for £1,250.

Bicycles costing £500 will be sold for £833.33.

Bicycles costing £500 will be sold for £700.

Bicycles costing £500 will be sold for £800.

. John has made the following predictions for his business for the first six months of trading to 30 June:
Sales in Jan, Feb and March= £20,000 per month
Sales in Apr, May and June= £35,000 per month
Sales will be on one month's credit
The total cash received from customers during the six months ended 30 June, will be:

£165,000.

£145,000.

£185,000.

£130,000.

. John has made the following predictions for his business for the first six months of trading to 30 June:
Sales in Jan, Feb, and March = £20,000 per month
Sales in Apr, May, and June = £35,000 per month
Sales will be on one month's credit.
The cash received in April will be:

£40,000.

£20,000.

£35,000.

£55,000.

. John has made the following predictions for his business for the first six months of trading to 30 June:
Sales in Jan, Feb and March = £20,000 per month
Sales in Apr, May and June = £35,000 per month
Sales will be on one month's credit
Purchases will be for cash.
If goods are sold at a gross profit margin of 40%, and goods are replaced as soon as they are sold, the amount payable to suppliers in March, will be:

£8,000.

£10,000.

£12,000.

£14,000.

. An extract from Eddie's Cash Budget is given below:

What is the expected bank overdraft at the end of July?

£(3,000).

£3,000.

£(1,000).

£1,000.

. An extract from Charlie's Cash Budget is given below:

Which of the following overdraft facilities would you advise Charlie to request for the three months ended 30^th November?

No overdraft facility is required.

An overdraft of a little over £5,000 is required.

An overdraft of a little over £8,000 is required.

An overdraft of a little over £20,000 is required.

. Which of the following statements are not true?

Cash sales are made when cash is received at the same time as the goods or services are delivered.

Credit sales are made when the payment is received after the goods or services have been delivered.

Cash purchases are those purchases for which cash payment will be made at the same time as the goods or services are received.

Credit purchases are where the goods or services have not yet been received by the business and payment has not yet been made.

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