Small Business Exam 2
true
A C Corporation is a separate legal entity that, in the eyes of the law, is separate from its owners.
summary business plan
A business plan that is 10 - 15 pages and works best for companies that are very early in their development and are not prepared to write a full plan is known as a/an ___________.
operational business plan
A business plan that is commonly between 40-100 pages in length and used by some established businesses which is intended primarily for an internal audience. It is the blueprint for a company's operations is known as a/an ___________.
full business plan
A business plan that is typically 25 - 35 pages long and spells out a company's operations and plans in much more detail than a summary business plan, and it is the format that is usually used to prepare a business plan for an investor is known as a/an ___________.
Buyback Clause
A clause found in most founders' agreements that legally obligates the departing founderto sell to the remaining founders his or her interest in the firm if the remaining founders are interested.
inventory
A company's merchandise, raw materials, and products waiting to be sold.
Partnership Agreement
A document that details the responsibility and the ownership shares of the partners involved with an organization
a sources and uses of funds statement
A document that lays out specifically how much money a firm needs (if the intention of the business plan is to raise money), where the money will come from, and how the money is used is called ___________.
statement of cash flows
A financial statement summarizing the changes in a firm's cash position for a specified period of time and detailing why the changes occurred. Similar to a month end bank statement, it reveals how much cash is on hand at the end of the month as well as how the cash was acquired and spent during the month.
income statement
A financial statement that reflects the results of the operations of a firm over a specified period of time; prepared on a monthly, quarterly, or annual basis.
pro forma statement of cash flows
A financial statement that shows the projected flow of cash into and out of a company for a specific period.
pro forma income statement
A financial statement that shows the projected results of the operations of a firm over a specific period.
Working Capital
A firm's current assets minus its current liabilities.
True
A firm's geographic location and its facilities and equipment should be addressed in the firms operations plan.
General Partnership
A form of business organization in which two or more people pool their skills, abilities, and resources to run a business.
Code of conduct (or code of ethics)
A formal statement of an organization's values on certain ethical and social issues.
the organizational chart
A graphic representation of how authority and responsibility are distributed within the company is known as ___________. Question options:
profit margin
A measure of a firm's return on sales that is computed by dividing net income by average net sales.
Limited Partnership
A modified form of a general partnership that includes two classes of owners: general partners and limited partners. The general partners are liable for the debts and obligations of the partnership, but the limited partners are liable only unto the amount of their investment. The limited partners may not exercise any significant control over the organization without jeopardizing their limited liability status.
the board of advisors
A panel of experts asked by a firm's management to provide counsel and advice on an ongoing basis is known as ___________.
the board of directors
A panel of individuals elected by a corporation's shareholders to oversee the management of the firm is known as ___________.
Fictitious Business Name Permit
A permit that's required for businesses that plan to use a fictitious name, which is any name other than the business owner's name (also called dba or doing business as).
Mediation
A process in which an impartial third party (usually a professional mediator) helps thoseinvolved in a dispute reach an agreement.
sales forecast
A projection of a firm's for a specified period (such as a year); most firms though forecast their sales for two to five years into the future.
Nondisclosure Agreement
A promise made by an employee or another party (such as a supplier) to not disclose acompany's trade secrets
executive summary
A quick short overview of the entire business plan that provides a busy reader with everything he/she needs to know about the new venture's distinctive nature is known as the ____________.
Debt-to-Equity Ratio
A ratio calculated by dividing the firm's long-term debt by its shareholders equity.
Current Ratio
A ratio that equals the firm's current assets divided by its current liabilities.
Price-to-earnings, or P/E ratio
A simple ratio that measures the price of a company's stock against its earnings.
Ethical Dilemma
A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical.
balance sheet
A snapshot of a company's assets, liabilities, and owner's equity at a specific point in time.
mission statement
A statement that describes why a company exists and what its business model is supposed to accomplish (what it aspires to become) is called a/an _______________.
Federal Employee Identification Number (EIN)
A tax identification number; is used when filing various tax returns.
business plan
A written document describing all the aspects of a business venture, which is usually necessary to raise money and attract high quality business partners is known as a/an ___________.
Founders' Agreement
A written document that deals with issues such as the relative split of the equity amongthe founders of a firm, how individual founders will be compensated for thecash or the "sweat equity" they put into the firm, and how long the founderswill have to remain with the firm for their shares to fully vest (alsoshareholder's agreement).
intern
A/An ________ is a person who works for a business as an apprentice or trainee for the purpose of obtaining practical experience.
consultant
A/An ________ is an individual who gives professional or expert advice.
inside directors
A/an ______ is a person on a firm's board of directors who is also an officer of the firm.
Income is subject to double taxation
Advantages of C Corporations include all of the following except:
false
An LLC must be a public business - it can be publicly traded.
Noncompete Agreement
An agreement that prevents an individual from competing against a former employer for aspecific period of time
Operating Leverage
An analysis of a firms fixed versus variable costs is known as __________.
True
An investor who is able to identify weaknesses in a business plan or presentation does a favor for the entrepreneur because the entrepreneur can take the investor's feedback to heart and use it to improve the business plan and/or the presentation.
Fixed Assests
Assets used over a longer time frame, such as real estate, buildings, equipment, and furniture
current assets
Cash plus items that are readily convertible into cash, such as accounts receivable, inventories, and marketable securities.
Articles of Incorporation
Documents forming a legal corporation that are filed with the secretary of state's officein the state of incorporation
False
During the question and answer period of the business plan presentation, the investors are typically looking for a way to stump the entrepreneur because they want them to feel unprepared.
All of the above
Each management team member's profile should include all of the following except:
forecasts
Estimates of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.
pro forma balance sheet
Financial statements that show a projected snapshot of a company's assets, liabilities, and owner's equity at a specific point in time.
Double Taxation
Form of taxation in which a corporation is taxed on its net income. When the same income is distributed to shareholders in the form of dividends, it is taxed again on the shareholders' personal income tax returns.
True
It is important to recognize that the plan will usually change as it is being written and as the business evolves. It is not intended to be a static document written in isolation at a desk.
true
It is often better for a start-up to lease a building instead of buying it because the entrepreneur can avoid giving up a large cash outlay and it allows the entrepreneur to postpone committing to the site before the business becomes a success.
budget
Itemized forecasts of a company's income, expenses, and capital needs that are also important tools for financial planning and control.
No double taxation
Many people elect to form their organization as an LLC. This is because it offers all of the following advantages except:
True
Most investors believe the process of writing a full business plan is important, even if they don't as for one initially.
long-term liabilities
Notes or loans that are repayable beyond one year, including liabilities associated with purchasing real estate, buildings, and equipment.
Current Liabilities
Obligations that are payable within a year, including accounts payable, accrued expenses, and the current portion of long-term debt.
true
One of the most important things the founders of an entrepreneurial venture can do is establish a strong ethical culture for their firms.
Shareholders
Owners of a corporation who are shielded from personal liability for the debts and obligations of the corporation.
pro-forma financial statements
Projections for future periods, based on a firm's forecasts, and typically completed for two to three years in the future.
ratio analysis
Ratios showing the relationships between items on a firm's financial statements that are used to discern whether a firm is meeting its financial objectives and how it stacks up against industry peers are known as a/an ___________.
Financial Ratios
Ratios showing the relationships between items on a firm's financial statements that are used to discern whether a firm is meeting its financial objectives and how it stacks up against industry peers.
historical financial statements
Reflect past performance and are usually prepared on a quarterly and annual basis.
Limited Partnership Agreement
Sets forth the rights and duties of the general and limited partners, along with thedetails of how the partnership will be managed and eventually dissolved
true
Some of the terminology used for an LLC differs from the other forms of business ownership. For example, the shareholders of an LLC are called "members," and instead of owning stock, the members have "interests."
pro forma
Statements that are at the heart of the financial section of a business plan are called ___________.
false
The LLC is less flexible than a subchapter S Corporation in terms of number of owners and tax-related issues.
competitor analysis
The __________ is a detailed analysis of a firm's direct, indirect, and future competitors.
market analysis
The __________ is an analysis that breaks the industry into segments and zeros in on the specific segment (or target market) to which the firm will try to appeal.
Industry analysis
The __________ is business research that focuses on the potential of an industry and should include data and information about various characteristics of the industry, such as its size, growth rate, and sales projections.
Liquidity
The ability to sell a business or other asset quickly at a price that is close to its market value; also, a company's ability to meet its short-term financial obligations.
Contibution Margin
The amount per unit of sale that's left over and is available to "contribute" to covering the business's fixed costs and producing a profit is known as __________.
True
The business's one-time start-up costs should be estimated and put in a table. These costs include legal expenses, fees for business licenses and permits, website design, business logo design, and similar one-time expenses. Normal operating expenses should not be included.
"Piercing the Corporate Veil"
The chain of effects that occurs if the owners of a corporation don't file their yearly payments, neglect to pay their annual fees, or commit fraud, which may result in the court ignoring the fact that a corporation has been established,and the owners could be held personally liable for actions for the corporation.
fixed costs
The costs that a company incurs in operating a business whether it sells something or not are known as __________.
variable costs
The costs that are not fixed that a company incurs as it generates sales are known as __________.
Owner's Equity
The equity invested in the business by its owner(s) plus the accumulated earnings retained by the business after paying dividends.
False
The main disadvantage of the LLC is that all partners enjoy limited liability.
Accounts Receivable
The money owed to a firm by its customers
the product design and development plan
The section in your business plan that focuses on the status of your development effort is known as ___________.
the operations plan
The section of the business plan that outlines how your business will be run and how your product/service will be produced is known as ___________.
company description
This section should explain where the idea for the company came from and the driving force behind its inception.
True
Unlike a board of directors, a board of advisors possesses no legal responsibility for the firm and gives nonbinding advice.
All of the above
What is not one of the things that an entrepreneur can do to build a strong ethical culture in their organization?
All of the above
Which of the following are financial management questions that a firm deals with on an ongoing basis?
Creating a Sole Proprietorship is easy
Which of the following is not a disadvantage of a sole proprietorship?
all of the above
Which of the following is not a way to segment markets?
internal reasons external reasons
Which of the following is not one of the two reasons to write a business plan?
all of the above
Which of the following is not true regarding Subchapter S Corporations?
a firms employees investors and other external stakeholders
Who are the primary audiences for a firm's business plan?
financial statement
Written reports that quantitatively describe a firm's financial health.
true
You shouldn't be alarmed if an investor asks you for a PowerPoint deck or the executive summary of your business plan rather than a complete plan because this is common. Then if their interest is piqued, he/she will ask you for more information.
profitability
_________ is the ability to earn a profit.
Efficiency
__________ is how productively a firm utilizes its assets relative to its rate of return.
Liquidity
__________ is the ability to sell a business or other asset quickly at a price that is close to its market value; also, a company's ability to meet its short-term financial obligations.
stability
__________ is the strength and vigor of the firm's overall financial posture.
Financial Management
___________ is the process of raising money and managing a company's finances in a way that achieves the highest rate of return.
market segmentation
___________ is the process of studying the industry in which a firm intends to compete to determine the different potential target markets in that industry (dividing the market into distinct segments).
Market Strategy
___________ is the strategy that refers to the firm's overall approach for marketing its products and services and typically boils down to how it positions itself in its market and how it differentiates itself from competitors.
