Entrepreneurship-Financing a Business
5 most important financial documents that must be included in a business plan:
personal financial statement, startup cost estimate, income statement, balance sheet, cash flow statement
the amount of money that you borrow to start a business
principal
___________ is the amount of money that you borrow to start a business If you borrow money to start a business, you will have to repay the loan amount plus ___________
principal, interest
You want to measure how many days it takes to turn over inventory
stock turnover ratio
Austin is a jewelry designer/store owner who operates a sole proprietorship. His net sales are the amount left after gross sales (total sales) have been adjusted for returns and allowances
true
Five important documents to include in a business plan are: the personal financial statement, start-up cost estimate, income statement, balance sheet, and cash flow statement
true
The income statement is also called a "profit-and-loss statment"
true
Ex of variable expenses:
utilities
___________ expenses include a business;s operating expenses, such as advertising costs and utility expenses
variable
Chase has assets of $25,000, $14,500, $8,000, $2,725. His debts are $12,480 and $2,700. His net worth is _____________?
$35,045
Start-up costs for both small and large businesses are the same because these costs are basically fixed
false
net income from operations-other expenses (interest)
net profit (loss) before taxes
Total gross sales-returns and allowances
net sales
You want to determine the rate of profit as a percentage
profit margin on sales
_______________ ratios measure how well the company has operated during the past year
profitability
List 4/8 factors of the amount of start-up money:
proposed business, size, operating expenses, continuing costs
acid test ratio is aka:
quick ratio
You want to determine how well you are doing compared to other companies
rate of return on assets
projections of how much money a new business owner needs for the business's first year of operation
start-up costs
How would an entrepreneur know if he has a net profit after federal, state, and local taxes are subtracted?
the net profit after taxes shows a profit
Why do entrepreneurs have to include their personal financial statements when discussing business plan and financial statements for their new business?
they will need to invest their own money into the business
What is the primary goal for a new entrepreneur to prepare financial statements?
to determine the amount of money needed to borrow to startup and operate the new business
A company's payroll taxes are part of its fixed expenses
true
Gross sales are the total of all sales for a given period of time
true
If a lender wished to rate how quickly a business could turn its assets into cash, which type of system would it use?
activity ratio
anything of monetary value that you own
asset
A ___________ is anything of monetary value that you own A ___________ is a debt that you owe
asset, liability
Banks look at the _________ of a potential borrower because they can be sold if necessary to pay off a loan
assets
Formula to get net worth:
assets-liabilities
this summarizes a business's assets, liabilities, and owner's equity
balance sheet
Your income goal for your first year of operation should be to reach a ____________ point. This is reached when enough money is received to pay all operating expenses, including your salary, and to pay debt obligations.
break-even
What monthly plan helps a business owner track when cash is expected to come in and when it would be paid out?
cash flow statement
a monthly plan that tracks when cash is expected to come into the business and when it is expected to be paid out
cash flow statement
the total amount spent to produce or buy merchandise to be sold
cost of goods sold
Besides considering a borrower's assets, or collateral, and prospects for a successful business, lenders also examine a borrower's _______________ history
credit
___________ assets are cash or anything of value that can be converted into cash within a year ___________ assets are used over a period of years to operate your business
current, fixed
_____________ liabilities are the debts a business must pay during the upcoming business year _____________ liabilities are debts that are due after 12 months (mortgages or long-term loans)
current, long-term
Net worth or ____________ is calculated on a balance sheet
equity
net worth is also known as _________?
equity
Employers are not obligated to pay social security or medicare taxes on their employee's earnings because employees pay for those costs
false
Fixed expenses change every month based upon the needs of the business
false
The principal is the money paid for the use of money borrowed or invested
false
An asset that a business uses over a period of years, such as a desk or a building is referred to as a(n) ____________ asset
fixed
net costs-cost of goods sold
gross profit
_______________ are the total of all sales for a given period of time
gross sales
A summary of income and expenses during a specific period such as a month or year
income statement
Which would not be part of the start-up cost?
income statement
Ex of fixed expenses:
insurance
if you borrow money to start a business, you will also have to repay the loan amount plus __________?
interest
a debt that you owe
liability
Lenders use different types of ____________ ratios to determine a business's ability to meet its current debts
liquidity
the amount left after total expenses are subtracted from gross profit
net income
gross profit-operating expenses
net income from operations
_____________ is the amount left after total expenses are subtracted from gross profit ______________ is the total amount spent to produce or buy merchandise to be sold
net income, cost of goods sold
the amount that an employee receives after deductions for taxes, insurance, and voluntary deductions
net pay
this is the amount of money left over after federal, state, and local taxes are subtracted
net profit (loss)
Net profit (loss) before taxes-taxes
net profit (loss) after taxes
List 4/7 parts of the income statement:
net sales, gross profit, operating expenses, total expenses
Which shoes how to find gross profit?
net sales-cost of goods sold
the different between assets and liabilities
net worth
these are divided into variable and fixed expenses
operating expenses
What document summarizes a loan applicant's assets and liabilities?
personal financial statement
a summary of your current personal financial condition
personal financial statement
Current liabilities are cash and anything of value that can be converted into cash in a year
false
Carson has assets of $145,000 and debts of $90,000. What is his net worth?
$55,000
Sammy earns $18 per hour, and he received time-and a-half for each hour that he worked beyond 40 hours in a week. Last week, Sammy worked 48 hours. His deductions totaled $196.50. His net pay for the week was ____________?
$739.50
If a company had a gross profit of $126,532 and net income from operations of $45,945, what was the total amount of its operating expenses?
$80,587
You want to determine how quickly a business' assets can be turned into cash
accounts receivable turnover
You want to determine a business' ability to meet its short-term cash needs
acid test ratio
______________ ratios determine how quickly assets can be turned into cash
activity