Lesson 3.5.4

3.5.4 Making financial decisions: improving cash flow and profits Quiz: AQA Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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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.

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The 20 questions

  1. Which action immediately improves short-term cash flow for a business?

    • Requesting customer deposits
    • Buying fixed assets
    • Decreasing payables days
    • Extending credit terms

  2. How can a business directly improve its profit margin on individual sales?

    • Extending customer credit
    • Delaying customer invoices
    • Increasing inventory levels
    • Negotiating supplier discounts

  3. How does debt factoring help a business to improve its cash flow?

    • Increases profit margins
    • Eliminates interest fees
    • Reduces unit costs
    • Provides immediate cash

  4. What is a major risk of reducing inventory levels to improve cash flow?

    • Stock shortage risk
    • Reduced supplier credit
    • Increased interest charges
    • Higher storage costs

  5. Which method directly reduces operating expenses to boost overall profit?

    • Extending customer credit
    • Renegotiating supplier prices
    • Offering trade discounts
    • Raising marketing spend

  6. What is the main risk of raising prices to improve profitability when demand is elastic?

    • Lower sales volume
    • Increased tax liabilities
    • Higher fixed costs
    • Shorter payment terms

  7. What does increasing trade payables days achieve for a business's cash flow?

    • Accelerates cash inflows
    • Delays cash outflows
    • Increases sales revenue
    • Reduces supplier costs

  8. What is the primary drawback of offering early settlement discounts to customers?

    • Higher bad debts
    • Reduced revenue margin
    • Slower cash inflows
    • Increased inventory costs

  9. A firm cuts costs by £30,000 while revenue stays constant. What is the effect on profit?

    • Unchanged
    • Rises by £50,000
    • Falls by £30,000
    • Rises by £30,000

  10. What is a major long-term risk of cutting staff training to boost short-term profit?

    • Higher tax liability
    • Lower product quality
    • Increased cash outflow
    • Higher fixed costs

  11. A business receives £60,000 cash in and pays £70,000 cash out monthly. What is its net cash flow?

    • £10,000 surplus
    • £10,000 deficit
    • £130,000 deficit
    • £60,000 surplus

  12. Which action provides the most immediate improvement to a business's cash flow?

    • Extending customer credit
    • Delaying tax payments
    • Selling surplus stock
    • Buying fixed assets

  13. 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

  14. What is a key drawback of shortening credit terms given to trade customers?

    • Lower unit costs
    • Loss of customers
    • Increased bad debts
    • Higher interest costs

  15. Increasing labour productivity while maintaining output typically causes unit costs to do what?

    • Remain unchanged
    • Decrease
    • Double
    • Increase

  16. Why might aggressive cost cutting fail to raise overall profit in the long run?

    • Higher tax rates
    • Lower interest rates
    • Reduced sales revenue
    • Increased working capital

  17. 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

  18. A firm raises prices by 10% but sales volume drops by 15%. What happens to total revenue?

    • It doubles
    • It remains unchanged
    • It decreases
    • It increases

  19. 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

  20. Why can improving short-term cash flow conflict with improving long-term profit?

    • Trade-offs exist
    • Costs always double
    • Sales automatically fall
    • Taxes automatically rise

All AQA Business quizzes