Entrep187 Final Exam PT7 (Ch14)

After being in business for 24 months, Paul's auto spare parts company Chromson Inc. grows to a relatively stable size. Which of the following would be Paul's primary financial management need at this stage?

Building owner's wealth

Tammy has just opened a donut shop called The Rabbit Hole. Given that The Rabbit Hole is in its start-up phase, which of these would be Tammy's immediate financial management need?

Conserving what little money the business has

A legal obligation to pay money in the future is called equity capital.

FALSE

In the U.S., government programs are the number one source for financing small businesses.

FALSE

Knowing one's personal worth is not important when starting a business

FALSE

When financing with debt, small businesses should first apply for a Small Business Administration guaranteed loan before approaching their own bank as the SBA loans have lower interest rates.

FALSE

When a business enters a phase of rapid growth, one of the challenges it faces is that very few sources of money are available to support its growth

False

_____ refers to the value of a business that exceeds the sum of the value of all individual assets but that cannot be sold separately from

Goodwill

Jacob has started a graphic design company called Interon Graphics. As Interon Graphics moves into the growth phase, which of the following would be Jacob's dominant financial management need?

Obtaining increasing amounts of cash inflows

_____ is money from selling part of a business to people who are not and will not be involved in the management of the business.

Outside equity

_____ measure a management's effectiveness in using the invested capital of the business to provide profits.

Return on investments

During the start-up phase of a small business the emphasis is on conserving what little cash the new business has.

TRUE

Equifax is one of the four primary CRAs in the United States.

TRUE

Investing in multiple businesses increases the chances of offsetting possible losses incurred from one business.

TRUE

Money borrowed for the purpose of investment in a business is called debt capital.

TRUE

Obtaining outside equity financing can only be done if your business is organized as: a partnership, a corporation, or a limited liability company.

TRUE

Payments of profits to the owners of corporations are called dividends

TRUE

The SBIR and the STTR programs require that every U.S. agency that makes research grants provide a minimum of 2 percent of its grant budget to small businesses, as defined by the SBA.

TRUE

The majority of small business start-ups are funded by bootstrapping.

TRUE

People who buy ownership rights but are not part of the management of the business are known as outside equity investors.

True

The majority of small business start-ups are funded by bootstrapping

True

Orion Inc. was started as a small organization with five employees. After the first year's profits were made, the owners decided to invest the profits in expanding the business. This is an example of financing the business using _____.

bootstrapping

Money contributed to businesses in return for part ownership of the business is called a(n) _____.

equity capital

Uncertainty of returns in a business is referred to as _____.

financial risk

There are two general sources of gift financing:

institutional and personal.

The amount that revenues exceed expenses is referred to as _____.

profit

The weighted average cost (WAC) refers to:

the expected average future cost of funds.