Chapter 7-10

__________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

In the context of various funding options for small businesses, which of the following statements is a difference between angel investors and venture capital firms?

Angel investors are wealthy individuals, whereas venture capital firms are companies.

_____ is a management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period.

Budgeting

_____ are safe and highly liquid assets that many firms list with their cash holdings on their balance sheet.

Cash equivalents

Which of the following is a difference between managerial accounting and financial accounting?

Financial accounting is governed by a set of generally accepted accounting principles, whereas managerial accounting uses procedures developed internally that are not required to follow generally accepted accounting principles.

Which of the following is an intimidating obstacle that small businesses face?

High health insurance costs

Which of the following is a drawback of buying a franchise?

If the national brand suffers, so does the business.

In the context of balance sheets, which of the following is a difference between liabilities and owners' equity?

Liabilities indicate the claims outsiders have against the firm's assets, whereas owners' equity refers to the claims the owners have against their firm's assets.

_____ measure the ability of an organization to convert assets into the cash it needs to pay off liabilities that come due in the next year.

Liquidity ratios

__________is the profit or loss a firm earns in the time period covered by the income statement.

Net income

_____ are local offices—affiliated with the U.S Small Business Administration—that provide comprehensive management assistance to current and prospective small business owners.

Small Business Development Centers

Felix lost his job at an investment firm because of downsizing during a period of recession. To keep himself financially stable, he opened a food truck that became a huge success. Which of the following advantages of entrepreneurship initially motivated Felix to start the food truck?

Survival

_____ forecasts the types and amounts of assets a firm will need to implement its future plans and help financial managers determine the amount of additional financing the firm must arrange in order to acquire those assets.

The budgeted balance sheet

In the context of accounting, which of the following best defines cost?

The value of what is given up in exchange for something else

__________is a spontaneous financing granted by sellers when they deliver goods and services to customers without requiring immediate payment.

Trade credit

James is always keen on putting his ideas into action regardless of the outcome. He perfects his craft by trying out different possibilities. If he is dissatisfied with the result, he tries out a different method but does not give up. Which entrepreneurial characteristic is highlighted in the given scenario?

Vision

A high inventory turnover ratio is good because it indicates that:

a firm can continue its daily operations with a small amount of inventory on hand.

In the event that a large company has to downsize, the middle-aged workers who are laid off find it difficult to find new jobs. When such workers decide to start their own businesses, they:

are called necessity entrepreneurs.

In the context of opportunities and threats, overhead costs for small businesses:

are often lower than big companies.

In the context of the U.S. economy, small businesses:

are often the first to contract when times are tough.

In the context of balance sheets, resources owned by a firm are known as__________.

assets

The three kinds of basic financial statements that are prepared in financial accounting are:

balance sheet, income statement, and statement of cash flows.

Costs are deducted from revenue in several stages to show how net income is determined. The first step in this process is to deduct:

costs of goods sold.

In the context of balance sheets, accounts receivable is an example of__________.

current assets

Small business start-ups are likely to find that getting commercial loans are:

difficult because lenders are reluctant to give loans to firms that do not have a track record.

In the context of statement of cash flows, cash flows from operating activities show the amount of cash that flowed into the company from:

dividends

The primary reason people choose to become entrepreneurs is to:

earn more money.

People with an external locus of control:

feel buffeted by forces such as random luck.

Financial capital refers to the:

funds a firm uses to acquire its assets and finance its operations.

In the context of budgeting, a flexible budget:

is designed to show the appropriate budgeted level of costs for each different level of sales.

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

One of the major sources of equity financing for corporations is _____.

retained earnings

In the context of the income statement of an organization, accountants use accrual-basis accounting when recognizing _____.

revenues

Buying an established business is a better plan than starting your business from scratch because:

the organizational structure is in place.

Financial managers emphasize the goal of maximizing the market price of stock because:

they have a fiduciary duty.

If an auditor doesn't find any problems with the way a firm's financial statements were prepared and presented, the report will offer a(n) _____ opinion.

unqualified