Quiz 2 Business Principles 1301.401

_____ is a guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement.

A revolving credit agreement

Tinix is a well-established petrochemical company that holds excellent credit ratings in the market. It provides short-term financial capital to other big firms by issuing promissory notes that are collateralized by physical assets. Which of the following short-term financing options is being offered by Tinix in the given scenario?

Asset-backed commercial paper

Juxipi Inc. is well known for having a stronger credit score than its competitors. That is why, buyers are more willing to buy promissory notes from Juxipi than its competitors. Which of the following short-term financing options is being offered by Juxipi Inc. in the given scenario?

Commercial paper

Who among the following is the most appropriate person to start his or her own venture?

Gita, who has been an event manager for five years but discontinues her job as she wants to spend enough time with her one-year-old child

Which of the following pieces of information is found in the U.S Small Business Administration (SBA) resources?

Industry-specific statistics

Gemini Inc., a large conglomerate, offered Timothy's new logistics company the much required financial support in exchange for a 40% ownership in the company. It also provided Timothy with an experienced group of people to help him make crucial decisions for the company. In the given scenario, which of the following statements is true of Gemini Inc.?

It is a venture capital firm

Which of the following statements is true of a business plan?

It is absolutely crucial for obtaining outside funding.

Runion Bank is well-known for providing funds to start-ups. The bank lends money to an entrepreneur at an interest rate of 5%, which is to be repaid only after the business earns a sizable profit. If the business fails, then only the primary amount needs to be returned. In the given scenario, which of the following statements is true of Runion Bank?

It provides commercial loans.

Which of the following is a challenge faced by a franchisor?

Keeping all the franchisees satisfied

Which of the following categories of people is most likely to step into entrepreneurship?

People who have trouble being subordinates because of their personalities

Which of the following is an advantage associated with a sole proprietorship?

Retention of control

Svelter Corporation does not face the problem of double taxation as the Internal Revenue Service (IRS) does not tax the earnings of the company separately. Instead, taxes are only levied on the personal income of the stockholders. A limitation, however, is that the company is only allowed to have a maximum number of 100 stockholders at a time. Given this information, Svelter Corporation is a(n) _____.

S corporation

MVJ Corp., a market research firm, borrowed $2 million from Trimitium Bank. While negotiating with the bank, the firm signs a promissory note, which specifies that the firm must pay the borrowed amount in 90 days with interest. However, the bank also requires the firm's inventories and receivables to be pledged as collateral to back the loan. Which of the following short-term financing options is being offered by Trimitium Bank in the given scenario?

Short-term bank loans

Glen wants to find the stock prices of some of the large actively traded companies listed on the Tokyo Stock Exchange. Which of the following stock indices should Glen follow?

The Nikkei 225

Which of the following statements is true of money market mutual funds?

They are affordable for small investors.

Identify a true statement about current assets.

They are resources that a firm expects to convert into cash within a year.

Which of the following statements is true of stockholders of corporations?

They do not have to be individuals.

Identify a true statement about angel investors

They invest in promising start-up companies because they want to make money for themselves.

In the context of protecting your start-up, which of the following statements is true of growth hackers?

They know their customers inside and out.

In the context of small business opportunities, which of the following statements is true of market niches?

They tend to be quite attractive to small firms

Trumen House, a confectionary manufacturing company, orders its raw materials in bulk from Nesinbon. Nesinbon allows Trumen House to make the payment at a later date, as opposed to immediate payment. Which of the following short-term financing options is being offered by Nesinbon?

Trade credit

Which of the following is a difference between credit unions and commercial banks?

Unlike commercial banks, credit unions are not-for-profit organizations.

Small firms tend to be effective innovators for a number of reasons. Most importantly, their very reason for being often ties to:

a brand-new idea

Dividends of a company are:

a distribution of earnings that are paid to a corporation's stockholders.

Fiona, an external auditor reviewing a telecommunications company's accounts, finds that the company's internal accountants have entered false data in the company records. Instead of stating the actual figures, which would reveal the poor performance of the company, the accountants have overstated the company's earnings. In this case, Fiona is most likely to offer a(n) _____ in the independent auditor's report.

adverse opinion

Institutional investors:

amass huge pools of financial capital from various sources.

Marcus is a venture capitalist who invests in start-ups and small businesses. He is interested in investing in an online start-up company that has been in business for a year. Before making a decision, Marcus does some research on the value of the company's assets and liabilities. In this scenario, Marcus is most likely analyzing the company's:

balance sheet

Rolette Clemens is a financial institution that provides loans to businesses. It rejects a textile company's request for a loan after it reviews the value of the company's assets, liabilities, and owners' equity and finds them to be unsatisfactory. In this scenario, Rolette Clemens most likely analyzed the company's _____ to assess its financial condition.

balance sheet

The _____ of a firm uses information from the sales budget and various cost budgets to develop a forecast of net earnings for the planning period.

budgeted income statement

A _____ is a formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives.

business plan

Through the establishment of a set of generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (FASB) aims to ensure that financial statements are:

comparable.

In a sole proprietorship, any debts the company incurs are:

considered to be the owner's personal liabilities.

The government of Brunasia issues bonds with a guarantee to make periodic interest payments on the par value. The government offers a 6.5% interest on its bonds. In this case, the percentage of interest offered by the government of Brunasia is called the _____.

coupon rate

Lina, along with ten of her colleagues, starts a financial cooperative to financially assist each other. The members pool their savings in the cooperative, and they can also take loans from it on a low interest rate. Members of the cooperative benefit from higher returns on savings and lower rates on loans. In this scenario, the cooperative started by Lina and her colleagues exemplifies a(n) _____.

credit union

In the context of managerial accounting, _____ are costs that are incurred as the result of some specific cost object.

direct costs

When a company issues and sells new stock or uses retained earnings to meet its financial needs, it is using _____.

equity financing

The _____ summarizes the financial results of a firm's operations over a given period of time.

income statement

Futures Life Insurance is an insurance company in South Africa. The insurance company uses its large pool of financial capital, which it accumulates by collecting premiums from its policyholders, to purchase corporate stocks of different multinational companies. In this scenario, Futures Life Insurance is a(n) _____.

institutional investor

While performing a financial analysis for his organization, Morris discovers that there has been mismanagement of employee funds over the past three months. He immediately reports this to his supervisors. In this scenario, Morris is most likely a(n) _____.

internal auditor

The _____ measures how many times a firm's stock is sold and replaced each year

inventory turnover ratio

Since sole proprietorships are extensions of their owners, they:

lack permanence.

A(n) _____ is a form of business ownership that offers both restricted responsibility to its owners and flexible tax treatment.

limited liability company

Davis frequently trades on the NASDAQ exchange. He has made a commitment to constantly buy and sell the stocks of Ossani & Gautier, an automobile manufacturing company that is listed on the exchange. He competes for customer order flow by quoting the bid price and the ask price for a number of shares. The information given in the scenario indicates that Davis is a(n) _____.

market maker

In low-income countries, a high percentage of entrepreneurs are considered _____.

necessity entrepreneurs

In the context of financial statements of a company, cash flow statements commonly begin with _____.

net income

Almost all firms that go public enlist the help of an investment bank that specializes in helping firms issue new securities. Under a best efforts approach, the investment bank:

provides advice about pricing and marketing the securities and assists in finding potential buyers.

Hopins, a medium-sized firm, has total assets whose value is equivalent to the sum of the funds provided by its owners and the loans taken by the firm from several financial institutions to purchase those assets. In this context, it can be said that:

the balance sheet of Hopins satisfies the accounting equation

In the context of the various strategies for investing in securities, investors who favor value investing:

try to find stocks that are undervalued in the market.

The Securities and Exchange Commission (SEC) has the authority to go after individuals who engage in illegal insider trading, which is the practice of:

using inside information to profit unfairly from trading in a company's securities.

A large film production company merges with a popular sound processing studio, resulting in the formation of a new company out of the two previously independent firms. This is most likely an example of a _____.

vertical merger