CBO Financial Planning & Analysis 5

Question 1

A rolling forecast differs from a static annual budget primarily because it:

Accepted Answer

Extends continuously as each period passes, always covering a fixed horizon

Answer

A rolling forecast is updated regularly (e.g., monthly), always projecting the same number of months ahead, keeping the plan current.

Question 2

What is the primary purpose of a cash flow forecast for a small business operator?

Accepted Answer

To anticipate periods of cash surplus or shortage and plan accordingly

Answer

A cash flow forecast helps operators identify potential shortfalls in advance so they can arrange financing or adjust spending before a crisis occurs.

Question 3

Which of the following is an example of a capital expenditure (CapEx)?

Accepted Answer

Purchase of a delivery truck

Answer

Purchasing a delivery truck is a capital expenditure because it is a long-term asset that provides value over multiple periods.

Question 4

A company's quick ratio is 0.8. What does this suggest?

Accepted Answer

The company may struggle to meet short-term obligations without selling inventory

Answer

A quick ratio below 1.0 means liquid assets (cash + receivables) are insufficient to cover current liabilities without liquidating inventory.

Question 5

What does the term 'burn rate' refer to in financial planning?

Accepted Answer

The speed at which a company spends its cash reserves

Answer

Burn rate measures how quickly a company uses up its cash reserves, critical for startups and businesses in a cash-negative phase.

(CBO) Certified Business Operator Practice Test

(CBO) Certified Business Operator Practice Test

CBO Financial Planning & Analysis 5