Why is understanding cash flow necessary for an entrepreneur?
Answer and explanation
Correct answer: To manage payments and expenses on time
Cash flow records the timing of money entering and leaving the enterprise. A business may show accounting profit but still face difficulty if cash arrives late while rent, wages, supplier bills, loan instalments, or utilities are due. Monitoring inflows and outflows helps plan working capital, avoid missed payments, and decide when spending can be made safely. It is a core part of daily financial control.
Frequently asked questions
What is the correct answer to this question?
To manage payments and expenses on time
Why is this the correct answer?
Cash flow records the timing of money entering and leaving the enterprise. A business may show accounting profit but still face difficulty if cash arrives late while rent, wages, supplier bills, loan instalments, or utilities are due. Monitoring inflows and outflows helps plan working capital, avoid missed payments, and decide when spending can be made safely. It is a core part of daily financial control.
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.
