Quiz 6

Something of value given or pledged as security for payment of a loan is called

Collateral

Tammy has just opened a donut shop called The Rabbit Hole. Given that The Rabbit Hole is in its start-up phase, which of these would be Tammy's immediate financial management need?

Conserving what little money the business has

Statement of cash flows is also referred to as the statement of financial position

False

The accounting equation is simply stated as Assets = Liabilities - Owner's Equity

False

The more debt that is included in the capital mix, the higher is the weighted average cost

False

Financial statements are defined as

Formal summaries of the content of an accounting system's records of transactions

When debt increases as a percentage of total investment, returns on equity

Increase at a decreasing rate

In the accounting equation, assets equal

Liabilities plus owner's equity

____________ is the most used item on the income statement

Operating income

The difference between assets and liabilities of a business is called its

Owner's equity

Of the following answer options, which is the most available funding source for new businesses?

Owners' equity investments

Which of the following is a drawback to financing with debt?

Payment is expected even if you have no money to make the payment

Which among the following is an example of a variable cost?

Shipping

Accounting is important for small businesses because investors will not even consider funding your concept unless you provide specific accounting information in an accepted format

True

During the start-up phase of a small business the emphasis is on conserving what little cash the new business has.

True

Investing in multiple businesses increases the chances of offsetting possible losses incurred from one business.

True

Liquidity is a measure of the ability of a business to meet both short-term and long-term obligations.

True

Money borrowed for the purpose of investment in a business is called debt capital

True

The usefulness of the income statement for managing a small business is related to the amount of detail available in the statement

True

Which of the following describes angel investors?

Wealthy individuals who invest in companies in relatively early stages of development