Adult-Gerontology Clinical Nurse Specialist (CNS) Practice Exam

Which of the following is NOT a major activity affecting working capital in a cash budget?

1. Purchasing of resources

2. Production and sale of service

3. Bad debt

4. Billing

The correct answer is: Bad debt

In a cash budget, working capital management focuses on the elements that directly influence cash inflows and outflows. Major activities impacting working capital typically include the purchasing of resources, production and sale of goods and services, and billing processes, all of which directly affect cash availability. Bad debt, however, does not constitute a direct cash flow activity in the context of a cash budget. While managing bad debt is important for overall financial health and can affect the accounts receivable balance, it is considered an indirect influence on cash flow rather than a direct activity that impacts working capital. Bad debt refers to amounts that are unlikely to be collected, which ultimately affects the profitability and accounts receivable, but it does not directly involve the day-to-day cash transactions captured in cash budget activities. In summary, while bad debt is a significant concern for financial management, it does not represent an immediate working capital activity in the context of a cash budget. The other activities listed involve direct transactions that impact cash flow and working capital management.