Test Your Acumen Knowledge
1. Only about 35% of startups make it 5 years. What is the number 1 reason that companies fail?
They choose bad business locations
They underestimate their cash needs
They fail to create an innovative product or service
They have poor customer service
2. Which of the following scenarios NEGATIVELY impacts cash flow?
John incentivizes his sales team to hit their quota faster than last quarter while maintaining current pricing
Joanne researches different paper suppliers to find a cheaper vendor who provides equal services
Maria renegotiates a vendor contract to extend payment by 15 days
Yolanda calls to find out why customers are past due on their payments
Joseph pays invoices before they're due so he can focus on other work
3. You are the CEO of your company. Which of the following methods of generating cash flow would you prefer the most?
You sell one of your office buildings for $100,000
You get investors to put $100,000 into the business
You generate $100,000 from operating activities
You sell of unused assets for $100,000
You find $20 in a pair of old jeans
4. What is the difference between profit and cash flow?
Profit is generally recorded when the sale is made and cash flow is recorded when the money is received
Cash flow is generally recorded when the sale is made and profit is recorded when the money is received
Cash flow is the inflows & outflows of money over a period of time and profit is the cash a company has on hand
Profit is the inflows & outflows of money over a period of time and cash flow is the cash a company has on hand
There is no difference between profit and cash flow
5. You are an employee for ACME Company. Which of the following is NOT a way you can help increase company profits?
You accelerate your accounts payable so that you pay them off before they are due
You up-sell to your customers where it makes sense
You research the market and find a supplier with similar quality materials for a cheaper price
You raise the price of a product while continuing to sell the same amount of units
All of the above are ways to increase a company's profits
6. You are an employee at Apple and have the responsibility of managing the inventory in your local retail store. Which of the following is NOT considered a challenge of having excess inventory?
Inventory carrying costs
The inventory can become obsolete or outdated
Customers don't like it
It ties up cash
7. Which of the following is NOT considered a sign of a company growing too fast
Declining Asset Strength
8. You work at ACME Company and your CEO says that the company is going to focus on growing its revenues inorganically. This could mean...
ACME is going to focus on selling more of its products
ACME is going to open more stores
ACME is going to acquire another company
ACME is going to enter new geographical markets
9. What is the one thing that is hardest to replicate in a company?
A company's strategy
A company's product
A company's culture
A company's structure
10. Use the simple income statement below to calculate the company's Net Profit Margin
11. Given the following financial information, calculate the company's Return on Assets