Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What does managing finances in a business entail?

1. Setting product prices

2. Handling cash, invoices, and financial documentation

3. Creating marketing strategies

4. Recruiting financial staff

The correct answer is: Handling cash, invoices, and financial documentation

Managing finances in a business primarily involves handling cash, invoices, and financial documentation. This encompasses the processes that ensure the business has the necessary cash flow to meet its obligations, such as paying suppliers, employees, and covering operational costs. It also includes managing accounts receivable and accounts payable, which are crucial for maintaining liquidity and financial stability. Proper financial management ensures that all transactions are accurately recorded and tracked, which helps in preparing financial statements, conducting audits, and facilitating budget planning. Financial documentation plays a significant role in demonstrating compliance with regulations and supports decision-making processes within the business. While setting product prices, creating marketing strategies, and recruiting financial staff are all important aspects of running a business, they fall outside the core responsibilities of managing finances directly. Setting prices affects revenue generation, marketing strategies drive sales, and recruiting impacts overall business operations, but they do not encapsulate the management of the financial resources themselves.