Chapter 15

11. Using outside equity in your business A. will increase your own exposure to financial loss. B. will protect it from increased costs in the form of interest. C. is inexpensive. D. solves problems of control and decision-making.

B. will protect it from increased costs in the form of interest

19. Which of these is a government organization that works to increase economic activity in the form of job opportunities within a specific geographic area? A. Small Business Administration B. Center for regional progress C. Economic development agency D. Rural economic enterprise agency

C. Economic development agency

3. "Profits are secondary to cash flow" is a financial management need in which phase of business? A. Financing for growth B. Financing for exit C. Financing for start-up D. Financing for operations

C. Financing for start-up

24. As Joyride Graphics moves into the growth phase, which of these would more likely become its dominant financial management need? A. Cash flow "smoothing" B. Investing to build equity and firm value C. Productivity D. Cash for marketing

D. cash for marketing

7. LLCs have a choice, under federal tax law, of being taxed as either a corporation or as a A. sole proprietorship. B. limited liability company. C. independent, single person business. D. partnership.

D. partnership

1. Which of these represent the number one source for small business financing? A. Owners B. Angel investors C. Government programs D. Banks

A. Owners

12. Identify the organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area. A. Community development organization B. Accelerator C. Small business investment companies D. Limited partnerships

A. community development organization

4. Angel investors provide _____ financing in the _____ phase of business. A. equity; financing for start-up B. debt; financing for growth C. gift; financing for exit D. equity; financing for operations

A. equity; financing for start-up

10. The primary concern for equity investors is A. growth potential. B. protecting the principal. C. interest. D. repayment.

A. growth potential

8. In general, all the forms of business organizations can be categorized along two dimensions: (1) how much responsibility owners have for the organization's liabilities, and (2) A. how the business is taxed. B. how the business is financed. C. who the target market is. D. whether it is a manufacturing or service organization.

A. how the business is taxed

9. A charge for the use of money, usually figured as a percentage of the principal is called A. interest. B. dividend. C. tax. D. risk.

A. interest

16. The amount that revenues exceed expenses is known as A. profit. B. cash flow. C. operating margin. D. goodwill.

A. profit

21. This ratio is the measure of how much money can be made available very quickly to pay obligations within the fiscal year. A. Current ratios B. Acid test ratios C. Activity ratios D. Leverage ratios

B. acid test ratios

17. The _____ of the business is the most important single factor for being able to borrow significant amounts of money. A. character B. capacity C. condition D. collateral

B. capacity

20. _____ refers to the percentage cost of obtaining future funds. A. Risk B. Cost of capital C. Financial leverage D. Optimum capital structure

B. cost of capital

2. When you sell part of your business, the money you receive is A. debt. B. equity capital. C. gift. D. tax credit.

B. equity capital

23. Given that the Joyride Graphics is in a start-up phase, which of these would represent its financial management need? A. Building owner's wealth B. Profits being secondary to cash flow C. Investing to build equity and firm value D. Cash for building inventory levels

B. profits being secondary to cash flow

5. Which of these sources of equity financing is available during all four phases of business? A. Angel investors B. Friends and family C. Venture capital D. Self generated funds

C. Venture capital

25. If Johnny wants limited liability with Joyride Graphics, he can consider any of these legal forms EXCEPT A. a corporation. B. a limited partnership. C. a sole proprietorship. D. an LLC.

C. a sole proprietorship

15. _____ is judged largely by the owner's personal credit rating and by that of the business. A. Capacity B. Collateral C. Character D. Condition

C. character

6. A legal "artificial" entity that is formed by filing specific documents with a state government is called a A. sole proprietorship. B. partnership. C. corporation. D. general partnership.

C. corporation

18. Direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria are called as A. tax abatements. B. grants. C. tax credits. D. debts.

C. tax credits

22. During the start-up phase of a small business the "3-F investors" are all of these EXCEPT A. friends. B. family. C. fools. D. foundations.

D. foundations

13. Accelerators are also called as A. LLCs. B. corporations. C. partnerships. D. incubators.

D. incubators

14. Which of the following statements is true regarding the Fair Credit Reporting Act? A. It requires that consumers investigate and report any inaccuracies to all nationwide CRAs. B. It provides CRAs with 60 days to investigate cases of inaccurate information. C. It requires that CRAs independently confirm information. D. It requires that all information reported by CRAs be accurate.

D. it requires that all information reported by CRAs be accurate