Why is understanding cash flow necessary for an entrepreneur?
Answer and explanation
Correct answer: To know when money is coming in and going out
Cash flow records the timing of cash receipts and payments. An enterprise may show sales or accounting profit but still lack cash to pay workers, suppliers, rent, or bills when they are due. Understanding inflows and outflows helps plan daily operations and avoid shortages; the other options contradict sound financial management.
Frequently asked questions
What is the correct answer to this question?
To know when money is coming in and going out
Why is this the correct answer?
Cash flow records the timing of cash receipts and payments. An enterprise may show sales or accounting profit but still lack cash to pay workers, suppliers, rent, or bills when they are due. Understanding inflows and outflows helps plan daily operations and avoid shortages; the other options contradict sound financial management.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Sources of Business Finance. Topic: Concept, nature and importance of business finance.
