HB358 Exam 2

The most notable SBA program available to small businesses is the A. SBA 1060 guaranty B. Code 604 guaranty program C. 7(A) guaranty program D. SBA 101 program E. Small business 401 program

7(A) guaranty program

Name two advantages to founding a firm as a team rather than as an individual.

A team brings more talent, resources, ideas, and professional contacts to a new venture. The psychological support that cofounders of a new business can offer one another is an important element in the firm's success

Name one common sources of equity funding and one common source of debt financing.

Angel investors, private placement, venture capital, and initial public offering are the most common sources of equity funding. The most common sources of debt financing are commercial bank loans, the Small Business Administration (through its SBA 7(A) Guaranty Loan Program), and any loan that must be paid back over time with interest (Family, friends, and credit cards for example).

Corporations are organized as either: A. permanent corporations or temporary corporations B. C corporations or subchapter S corporations C. general corporations or limited corporations D. voluntary corporations or statutory corporations E. regular corporations or limited liability corporations

C corporations or subchapter S corporations

What is the difference between equity funding and debt financing?

Equity funding means exchanging partial ownership in a firm, usually in the form of stock, for funding. Debt financing is getting a loan, which must be paid back (most commonly) with interest.

When describing what is meant by a "limited partnership" and a "general partnership" it can be stated that a limited partnership is a form of business organization where two or more people pool their skills, abilities, and resources to run a business. While a general partnership is a modified form of a limited partnership. A. True B. False

False

__________ depict relationships between items on a firm's financial statements. A. Financial proportions B. Fiscal relations C. Fiscal projections D. Monetary balances E. Financial ratios

Financial ratios

According to the legal principle referred to as the corporate opportunity doctrine, key employees and skilled employees owe a special duty of loyalty to their employer. A. True B. False

True

Prior entrepreneurial experience, relevant industry experience, and networking are attributes that strengthen the chances of a founder's success. T/F

True

Yvonne Wilson owns a seafood restaurant in Houston. She is currently owed $12,000 by a corporation that she catered a meeting for and $4,000 on an overdue account. Yvonne has $16,000 in: A. accounts receivable B. liquidity C. accounts payable D. owners' equity E. inventory

accounts receivable

If a new venture organizes as a corporation, it is legally required to have a ______, which is a panel of individuals who are elected by a corporations shareholders to oversee the management of the firm. A. board of advisors B. review team C. team of advisors D. accountability panel E. board of directors

board of directors

Debbie Pike just opened a soup and salad restaurant new Michigan Avenue in Chicago. Rather than borrow money or raise funds from investors, Debbie used her creativity and ingenuity and figured out how to get her business up and running without the need for external funding. Debbie is utilizing a technique referred to as: A. networking B. reaching C. scrounging D. prospecting E. bootstrapping

bootstrapping

A __________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest. A. entrepreneurs' agreement B. creators' agreement C. founders' agreement D. initiators' agreement E. originators' agreement

founders' agreement

In the context of boards of directors, a ____ is a person who is also an officer of the firm. A. outside director B. junior director C. inside director D. expert director E. senior director

inside director

A _______ is a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments A. assurance B. loan C. guarantee D. warranty E. lease

lease

John Clancy owns a hotel and travel website support company. Although John's web and database designers and programmers are very good, it takes 2-3 years to develop a good website with an underlying database. This example illustrated the need for funding or financing referred to as: A. personnel costs B. marketing costs C. costs associated with building a brand D. lengthy product development cycles E. cash flow challenges

lengthy product development cycles

The fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a track record with outside buyers and sellers, is referred to as the: A. liability of preparedness B. liability of newness C. burden of novelty D. burden of freshness E. millstone of innovation

liability of newness

All of the following is an advantage of a sole proprietorship except: A. creating one is easy and inexpensive B. the owner maintains complete control of the business C. it is not subject to double taxation D. limited liability E. business losses can be deducted against the sole proprietor's other sources of income

limited liablility

Venture-capital firms are _____ of money managers who raise money in funds to invest in start-ups and growing firms. A. limited partnerships B. finance associations C. consortium D. collations E. strategic partnerships

limited partnerships

A company's ability to meet its short-term financial obligations is referred to as: A. efficiency B. effectiveness C. liquidity D. stability E. profitability

liquidity

The ability to sell a business or other asset quickly at a price that is close to its market value is referred to as: A. smoothness B. elasticity C. flexibility D. malleability E. liquidity

liquidity

A firm's profit margin, or return on sales, is computed by dividing: A. net income by net sales B. gross profit by net sales C. net income by gross profit D. net income by cost of sales E. operating income by gross profit

net income by net sales

The three numbers that should receive the most attention when evaluating an income statement are: A. depreciation, interest income, and income tax expense B. cost of sales, gross profit, and operating expenses C. gross profit, net sales, and incomes tax expense D. gross profit, other income, and net income E. net sales, cost of sales, and operating expenses

net sales, cost of sales, and operating expenses

Rachael just took a job with Hyatt. As part of her employment agreement, Hyatt required Rachael to sign an agreement, which states that if she leaves Hyatt, she will not work for any firm that has hotels comparable to Hyatt for at least one year. The agreement that Rachael signed is called a: A. nondisclosure agreement B. nonparticipate agreement C. nonchallenge agreement D. noncompete agreement E. noncontend agreement

noncompete agreement

A __________ is a promise made by an employee or another party to not disclose the company's trade secrets. A. noncompete agreement B. non breach-of-trust agreement C. statutory disclosure agreement D. binding confidentiality agreement E. nondisclosure agreement

nondisclosure agreement

The statement of cash flows is divided into three separate activities: A. profitability activities, stability activities, and investing activities B. stability activities, earning activities, and financing activities C. operating activities, capital activities, and liquidity activities D. spending activities, earning activities, and capital activities E. operating activities, investing activities, and financing activities

operating activities, investing activities, and financing activities

Match the financial term with its proper definition. A. forecasts/depict relationships between items on a firm's financial statements B. forecasts/written report that quantitatively describes a firm's financial health C. budgets/itemized forecasts of a company's income, expenses, and capital needs D. financial ratios/written report that quantitatively describes a firm's financial health E. financial statements/an estimate of a firm's future income and expenses

budgets/itemized forecasts of a company's income, expenses, and capital needs

Emily Barrett is 55 years old, has succeeded as an entrepreneur, has a MBA degree from Michigan State, and has 250k a year in retirement income. Emily is at the point in her life where shes interested in investing 10k to 500k per firm of her own money in start up companies. Emily is an: A. venture capitalists B. institutional investor C. capital asset provider D. business angel E. banker

business angel

In startup firms, inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? A. cash flow challenges B. marketing costs C. personnel costs D. capital investments E. lengthy product development cycles

cash flow challenges

If a firm determines it can use the percentage-of-sales method and it follows the procedure described in the textbook, then the net result is that each expense item on its income statement (with the exception of those items that can be individually forecast) will grow at the same rate as sales. This approach is called the: A. continuous percentage method of forecasting B. stable fraction method of forecasting C. regular proportion method of forecasting D. constant ratio method of forecasting E. steady percentage method of forecasting

constant ratio method of forecasting

A separate legal entity organized under the authority of a state is referred to as a: A. limited partnership B. conglomerate C. general partnership D. sole proprietorship E. corporation

corporation

According to the textbook, the limited liability company combines the limited liability advantage of the __________ with the tax advantages of the __________. A. partnership, sole proprietorship B. corporation, sole proprietorship C. corporation, partnership D. sole proprietorship, corporation E. partnership, corporation

corporation, partnership

A firm's working capital is its: A. inventory and accounts receivable minus its current liabilities B. current assets minus its current liabilities C. total assets minus its total liabilities D. cash and cash equivalents minus its current liabilities E. accounts receivable minus its total accounts payable

current assets minus its current liabilities

The members of heterogeneous teams are A. diverse in terms of their abilities and experiences B. diverse in terms of their abilities, but very similar in terms of their experiences C. similar in terms of their abilities D. diverse in terms of their experiences, but very similar in terms of their abilities E. sometimes diverse in terms of their abilities and experiences and sometimes similar along the same dimensions

diverse in terms of their abilities and experience

A brief carefully constructed statement that outlines the merits of a business opportunity is called an: A. subway speech B. sway speech C. bootstrap speech D. teaser speech E. elevator speech

elevator speech

Kathy Andersen has spent the past several days pouring over her historical financial statements and her projections for future sales periods based on forecasts. Kathy's objective is to develop a set of financial statements that she can how to an investor, which will reflect the projected financial status of her firm for the next two-three years. Kathy is working on creating a set of __________ financial statements. A. ad-hoc B. pro forma C. comprehensive D. comparable E. concurrent

pro forma

1. The four main financial objectives of a firm are: A. efficiency, effectiveness, strength, and flexibility B. power, success, efficiency, effectiveness C. control, effectiveness, liquidity, and power D. success, strength, liquidity, and profitability E. profitability, liquidity, efficiency, and stability

profitability, liquidity, efficiency, and stability

There are two common types of loans: A. single purpose and multiple purpose B. multiple purpose and venture capital C. private placements and lines of credit D. single purpose and lines of credit E. one time purpose and venture capital

single purpose and lines of credit

A ____ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist A. expertise report B. talent profile C. abilities summary D. skills profile E. talent summary

skills profile

The most prevalent form of business organization are: A. limited liability companies B. single asset companies C. sole proprietorships D. C corporations E. Subchapter S Corporations

sole proprietorships

Bob Manning's startup, which is in the energy bar snack industry, was launched on March 1, 2014. However, prior to its formal launch, Bob spent many hours working on his business, particularly during the feasibility analysis stage. The time and effort that entrepreneurs put into their venture, that can't be easily measured from a financial point of view, is referred to as: A. effort equity B. intangible equity C. sweat equity D. worry equity E. fret equity

sweat equity

A financial statement is a(n): A. written report that quantitatively describes a firm's financial health B. set of ratios which depict relationships between a firm's financial items C. itemized forecast of a company's income, expenses, and capital needs D. hybrid statement of cash flows E. estimate of a firm's future income and expenses

written report that quantitatively describes a firm's financial health