ENT Exam #2

Which of the following are sources of nonequity capital to start a business?

Grants, Debt

Which of the following must be formally addressed by both Subchapter C and Subchapter S Corporations?

Holding annual board meetings Reporting standards to local, state, and federal authorities Authorization of more shares of stock

One disadvantage of the Subchapter S Corporation is the limitation to the number of shareholders, which is currently set at a maximum of Blank______shareholders.

100

Which form of funding is used by a business to conserve cash and maintain the latest versions of whatever equipment is available?

Asset lease

What is the generic term used to describe any type of nonequity funding tied to the business?

Debt

Which of the following typically issue grants?

Private foundations, Government

An accrual-based accounting system

Subchapter C corporations, partnerships, or trusts use this system

A more complex business form that has two or more people sharing unlimited liability in a new business venture is called a general

partnership

Besides banks, finance companies, and friends and family, another source of nonequity loans comes from:

the founders

Which of the following are true regarding the accounts payable?

A record of payment toward each invoice should be included. The record should include date paid, amount paid, and check number or tracking number. All invoices received should be recorded

A copyright can be claimed on creative materials generated. Identify the examples of such materials.

Advertising copy Books and magazines

What report creates a listing of all checks that have been written and all that have cleared through the bank?

Check register

True or false: According to the contract law, the term length of lease contracts involving new businesses must be more than two years.

False

True or false: The greater the insurance coverage obtained by a new business, the lower the cost.

False

True or false: There is no need to treat a loan from family as a contractual agreement.

False

Which of the following items should be included on the payroll record?

Number of hours worked Base pay and overtime pay rate Taxes Benefit deductions

A cash-based accounting system

Only the smallest businesses use this system

What is the initial value at which the firm's shares are offered?

Par value

Which accounting record tracks time for hourly workers and attendance for salaried employees?

Payroll

Which account operates much like a bank savings account using a register to track the amount in the box?

Petty cash register

Which type of legal business organization is characterized by the fact that the person who owns the business and the business itself are treated as the same entity?

Sole proprietorship

Which of the following is NOT a common example of a license or a permit?

Trademark permit

True or false: A partnership will be governed by either the Uniform Partnership Act or the Revised Uniform Partnership Act if the partnership agreement is not developed and signed

True

An inventory record will include:

an item number the quantity of the item a description of the item a unit and total cost

A(n) ______ investment is funds received by a business in exchange for a percentage ownership of the business

equity or stock

A Subchapter C Corporation has a _____ that is equal to the par value times the number of shares distributed.

floor value

______ credit is a form of nonequity funding for physical assets as well as the actual supplies purchased.

supplier

Which of the following are true with regard to managing the flow of data in the context of businesses?

Data are obtained in a timely manner. Data are tied to the strategic needs of the business

Identify the true statements about equity investment.

Equity investment involves selling a percentage of the business to an outside party In the case of dissolution, each investor is entitled to the percentage of the break-up value equal to their investment percentage

An advantage of the Subchapter ____ , Corporation is that it allows the owners to report their income or losses on their personal income tax returns, thus avoiding double taxation.

S

Which of the following business forms are required to hold annual board meetings and file reports to local, state, and federal authorities?

Subchapter C Corporation Subchapter S Corporation

Which of the following are true about the Uniform Partnership Act and the Revised Uniform Partnership Act?

They are an effective means to handle the basics of partnership. Their provisions do not cover issues like noncompete agreements.

Which of the following are true about loans as a source of funding for new businesses?

They are secured by assets or a personal guarantee. They are often repaid monthly from cash flow.

When someone provides funding in return for some ownership in the new business, it is referred to as a(n) _____.

equity investment

Which type of funding involves a contractual agreement whereby the business receives some amount of money that must be repaid over a specified period of time at a specified interest rate?

Loan

Which of the following are disadvantages associated with Subchapter S Corporations?

May require a lawyer to process paperwork Expensive, complex formation compared with sole proprietorships Limitation on the number of shareholders

Which form of business involves two or more individuals sharing unlimited liability in a business venture?

General partnership

What method of inventory control seeks to minimize excess capital investment in inventory by having it present only shortly before it is used?

Just-in-time inventory

True or false: When considering funding, a firm needs to evaluate not only the amount provided but also the sources of that funding.

True

Banks have traditionally been a major source of funds for:

established firms

In the long run, the cost of capital for nonequity funding is generally ______ that of equity investment

less than