BA150 Ch.6 -8
angel investor
Audrey launched a start-up called Baintley Inc. Steven, her wealthy friend, believes that her company has high growth potential. He invests in Baintley Inc. in exchange for a share of ownership. In this scenario, Steven is a(n) _____.
internal locus of control
Colleen lost an important business project. According to her, she would not have lost the project if she had been organized in her work approach. This scenario indicates that Colleen most likely has a(n) _____.
Which of the following statements is true of managerial accounting?
It involves presenting customized information on request.
Which of the following statements is true of the Financial Accounting Standards Board (FASB)?
It is a private organization responsible for developing accounting rules.
In the context of the approaches to budget preparation, which of the following statements is true of participatory budgeting?
It is more resource intensive than the top-down approach.
Sole Proprietorship
Thiago has spent a long time working in various commercial establishments owned by some of his close relatives. He now wishes to establish his own business, a sporting goods retail store. Thiago plans to manage the store single-handedly. In the context of the various business ownership options, Thiago's store will be an example of a:
start-ups find it difficult to provide health insurance coverage to their employees
Two companies offer Gayle a job. The first is a successful, venture capital-backed, competently led start-up that has been operating for over a year. The second is a well-established corporation that has been running operations for 50 years. Gayle, after considering factors such as his family, decides to join the well-established corporation. This is most likely because:
It is a legal business entity that offers limited liability to all of its owners, who are called stockholders.
Which of the following statements best describes a C corporation?
It is a form of corporation that avoids double taxation by having its income taxed as if it were a partnership.
Which of the following statements best describes an S corporation?
Both allow owners to avoid double taxation.
Which of the following statements is a similarity between general partnerships and sole proprietorships?
They believe that the actions of others can control their fate.
Which of the following statements is true of people with an external locus of control?
They have more scope to provide personal customer service than large businesses.
Which of the following statements is true of small businesses?
Owner receives the entire share of the firms' profits.
Which of the following statements is true of sole proprietorships?
In the context of budget preparation, the document created in the final stage of an operating budget is referred to as a _____.
budgeted income statement
In the context of financial statements, _____ are debts that come due within a year of the date on the balance sheet.
current liabilities
Stockholders typically want to view a firm's accounting information to:
know if management has generated a strong-enough return on investment
The _____ of a firm organizes the operating and financial budgets into a unified whole, representing the firm's overall plan of action for a specified time period.
master budget
Mark, an accountant, is given the task to lead an external auditing project for a multinational company. In his spare time, Mark also acts as a consultant for Mayfair Hut Inc., a local company. In this scenario, Mark is a:
public accountant
Which of the following statements is true of management accountants?
they assist their superiors in preparing financial statements
If a firm's assets equal $18,000 and its liabilities equal $7,500, then the owners' equity is _____.
$10,500
its ability to raise large amount of financial capital.
A key advantage of a C corporation is:
Which of the following is a difference between a statement of retained earnings and a stockholders' equity statement?
A statement of retained earnings only shows how net income and dividends affect retained earnings, whereas a stockholders' equity statement also shows changes in stockholders' equity that arise from the issuance of additional shares of stock.
number of employees should range from fewer than 100 to 1,500.
According to the U.S. Small Business Administration (SBA), to officially count as a small business the:
necessity entrepreneur
Adrian recently lost his job and has been unsuccessful in finding a new one. To sustain himself and his family, he decides to open a small café. He believes that the café is his only economic option. Adrian is now trying to acquire funds from family and friends to open his café. In this scenario, Adrian is a(n) _____.
In the context of an independent auditor's report, which of the following is a difference between an unqualified opinion and a qualified opinion?
An unqualified opinion is given if the independent auditor does not find any problems with the way a firm's financial statements were prepared and presented, whereas a qualified opinion is given if the independent auditor identifies minor concerns but believes that on balance the firm's statements are a fair representation of the company's financial position.
business format franchise
Comfy Trend Inc., a clothing in the United States, licenses a garment manufacturing firm in Tokyo to operate under its name and trademark. The firm also buys the rights to use Comfy Trend Inc.'s production and business methods. This scenario is an example of a _____.
hostile takeover
Daynon Inc. buys Leeston Corp., a firm that makes shipbuilding components, despite the opposition from Leeston's board of directors and its top management. This acquisition exemplifies a _____.
Providing free business counseling and mentoring for small business owners
Derek, after retiring as the CEO of Solitaire Graces Inc., decides to donate his time and expertise to assist newly established small businesses. He learns about an organization called the Service Corps of Retired Executives (SCORE), which is supported by the Small Business Administration (SBA), and joins as a volunteer. As a SCORE volunteer, in which of the following activities is Derek expected to be involved?
lend all of a start-up's funding
Entrepreneurs must understand that no conventional lending source, whether private or government, will:
a high tolerance of uncertainty
Entrepreneurs who mortgage their homes for the business and stake their reputation on the success of an unproven product demonstrate:
feel that their success or failure is largely the result of their own actions.
Entrepreneurs with an internal locus of control tend to:
Crowdfunding
Eugene Playem, a small firm that develops games, wants to raise capital to develop a new expensive video game. The firm's finance team plans to find several video game enthusiasts online, who can afford to invest money for the video game's development. In this scenario, which of the following funding options has Eugene Playem planned?
Corporation
Gerrilyn works for a business firm that manufactures breakfast cereal. The firm is owned by many individuals who are not personally responsible for any debts or losses incurred by it. Legally, the firm is considered a separate artificial person. In this scenario, Gerrilyn is working for a _____.
Tolerance of failure
Greg started a business of tire shops and one by one opened several shops in various parts of his hometown. However, he had to shut down all the shops because they failed to make profits. At 65 years of age, he raised capital and started Gregton Inc., which is now a well-known two-wheeler manufacturing firm in his country. Which of the following entrepreneurial traits most likely contributed to Greg's success?
Unlike preferred stockholders, common stockholders normally have the right to vote in stockholder meetings.
In the context of C corporations, which of the following is a difference between preferred stockholders and common stockholders?
Reducing risk by making a firm less vulnerable to adverse conditions in any single market
In the context of corporate restructuring, which of the following is a common objective of a conglomerate merger?
Providing tighter integration of production and increased control over the supply of crucial inputs
In the context of corporate restructuring, which of the following is a common objective of a vertical merger?
CEO
In the context of corporations, the _____ and other corporate officers manage the company on a daily basis.
Similar to the bylaws of a corporation, organizers of most LLCs draft an operating agreement.
In the context of formation, which of the following is a similarity between limited liability companies (LLCs) and corporations?
must be provided to the franchisee at least 14 calendar days before the franchise agreement is signed
In the context of franchising, a Franchise Disclosure Document (FDD):
Its sites are used to funds nonprofits.
In the context of funding options for small businesses, which of the following statements is true of crowdfunding?
It lends microloans through community nonprofit organizations.
In the context of funding options for small businesses, which of the following statements is true of the U.S. Small Business Administration (SBA)?
By displaying a refreshing lack of bureaucracy
In the context of how small businesses have contributed to the U.S. economy, in which of the following ways do small firms allow new thinking to take hold?
They offer more than enough potential for small, specialized companies.
In the context of small business opportunities, which of the following statements is true of market niches?
A high level of employment protection
In the context of small businesses and the economy of a country, which of the following factors can bring down entrepreneurship rates?
comprise more than 99% of inner-city business establishments.
In the context of the U.S. economy, small businesses:
franchise
In the context of the various forms of operating a business, instant brand-name recognition is a benefit ensured by a:
It has less opportunity for creativity.
In the context of various launching options when starting a new business, which of the following statements is a drawback associated with buying a franchise?
SBDCs provide a range of free services for small businesses, whereas SCORE provides free counseling for small businesses.
In the context of various strategies that can help you become a successful entrepreneur, which of the following is a difference between Small Business Development Centers (SBDCs) and the Service Corps of Retired Executives (SCORE)?
It takes about six months to write.
In the context of various strategies to become a successful small business owner, which of the following statements is true of an effective business plan?
LLC
Irina, Ron, and Benz want to start the business of designing the interiors of offices. All of them want to actively manage the company and do not want to be personally responsible for the debts and obligations of the company. Moreover, they do not want to hold regular board meetings. The three are most likely to form a _____.
confidence
Lindsay is planning to start a new seafood restaurant. She has considered the opinions of many consultants, friends, and family members about her business idea. Despite overwhelming negativity, Lindsay has faith in her abilities as she possesses five years of experience in this field. In this scenario, Lindsay displays the entrepreneurial characteristic of _____.
Which of the following is a difference between managerial accounting and financial accounting?
Managerial accounting is intended to provide information to internal stakeholders, whereas financial accounting is primarily intended to provide information to external stakeholders.
General Partnership
Max and Lucio start a retail store. They take turns to manage the store, and they share the profits equally. Max and Lucio understand that they are personally liable for any debts or losses that the store may incur in the future. This type of business venture exemplifies a _____.
entrepreneurs
People who risk their time, money, and other resources to start and manage a business are known as _____.
Gaining experience
Sheila wants to start her own business that would specialize in fashion accessories. However, she decides to continue with her current job at Potters Fashion Inc. as a fashion consultant for another three years to get to know the industry better. Which of the following entrepreneurial strategies is Sheila executing?
limited partnership
Silva and Ron start a taxi service together. Ron only invests money in the venture and does not actively participate in managing the business. Silva, on the other hand, manages the venture entirely. According to the agreement between Silva and Ron, Silva is personally responsible for the debts and losses while Ron takes responsibility of the debts only up to a certain amount. The agreement also mentions that Ron cannot participate in the management of the business. In this scenario, Ron and Silva have formed a _____.
fueling innovation.
Small businesses have contributed to the U.S. economy by:
In the context of financial statements, which of the following statements is true of long-term liabilities?
They are debts that don't come due until more than a year after the date on the balance sheet.
Bob, Tyron's rich uncle with whom he has a close relationship
Tyron needs financing for his new business venture. He feels that the best way to obtain the funds would be to tap his personal financial resources. In the context of this scenario, the most appropriate source of personal finance for Tyron would be:
are subject to less paperwork.
Unlike corporations, limited liability companies (LLCs):
the logistics can be challenging
When starting a business from scratch, _____.
confidence
Which of the following is a characteristic of successful entrepreneurs?
Unlimited liability
Which of the following is a disadvantage of general partnerships?
The company legally ceases to exist if the owner withdraws.
Which of the following is a disadvantage of sole proprietorship?
It may entail inheriting the previous owner's mistakes.
Which of the following is a drawback of buying an established business?
Restrictions on sale
Which of the following is a drawback of franchising?
They provide strong unemployment insurance to their citizens.
Which of the following is a reason why many members of the European Union have low entrepreneurship rates?
Both put in money in exchange for a share of ownership.
Which of the following is a similarity between angel investors and venture capital firms?
Both find getting financing less challenging.
Which of the following is a similarity between buying an established business and buying a franchise?
A bigger regulatory burden compared to large businesses
Which of the following is a threat to small businesses?
Lower overhead costs
Which of the following is an advantage for small businesses?
Ease of formation
Which of the following is an advantage of sole proprietorships?
The entrepreneur gets to build his or her own business concept and structure.
Which of the following is an advantage of starting a business from scratch?
Independence
Which of the following is an advantage of starting one's own business?
flexible schedule
Which of the following is an appealing benefit that entrepreneurs enjoy?
Kickstarter.com
Which of the following is one of the largest crowdfunding sites in terms of traffic?
A nation that places complex regulations on businesses
Which of the following nations is most likely to have the lowest percentage of entrepreneurs?
Jill who has a degree in landscaping has started her own landscaping service business and has hired several employees under her supervision.
Which of the following scenarios illustrates entrepreneurship?
Venture capital firms
_____ are companies that invest in start-up businesses with high growth potential in exchange for a share of ownership.
Angel investors
_____ are individuals who finance start-up companies with high growth potential in exchange for a share of ownership.
Market niches
_____ are small segments of a market with fewer competitors than the market as a whole.
energy
_____ is a characteristic that most successful entrepreneurs possess.
Financial accounting:
addresses the needs of stockholders, creditors, and government regulators
The top managers of Promedium Inc. are creating a master budget for the company. They require a statement of the budget goals from each of its departments to be able to make an appropriate master budget. Karren, the manager of the sales department, overstates her needs in the budget and presents the statement to the top managers. The outcome of Karren's actions is known as _____.
budgetary slack
Frank is a loan officer who approves loans for small businesses. One factor he looks at carefully when making loan decisions is the amount of outstanding debt a firm already has—an information that he can find in the firm's:
balance sheet
The major responsibilities involved in financial accounting are the preparation of the:
balance sheet, income statement, and statement of cash flows
In the context of comparative financial statements, comparative balance sheets:
can be used to check if the owners' equity had increased
The accountants at Gamone Phones, a cell phone manufacturing company, discover that the firm has performed poorly over the last two quarters, leading to negative financial implications. Instead of stating the actual figures, the managers decide to wrongly present the firm's debts and overstate its earnings. The aspect of financial accounting that should be emphasized to avoid such incidents of accounting fraud is:
ethics in accounting
In the United States, the Securities and Exchange Commission (SEC) has delegated the responsibility for developing accounting standards to a private organization called the _____.
financial accounting standards board
In the context of financial statements, the specific accounts listed in the stockholders' equity section of a balance sheet depend on the:
form of business ownership
Nusreen, a financial manager in a company, compares the operating budgets from the past three years to identify trends in the cost of materials purchased and to learn whether the company's net expenses have increased or decreased over the time span. Nusreen is using _____ to compare the financial statements.
horizontal analysis
Lecona, a start-up company, failed to acquire any major funding from potential investors. Therefore, the owners of the company set up their office in an unoccupied apartment owned by one of them. In this scenario, the company most likely incurred a(n) _____.
implicit cost
_____ work within their organizations to detect problems such as waste, mismanagement, embezzlement, and employee theft.
internal auditors
Companies that are not publicly traded:
obtain external audits at their own discretion.
In the context of managerial accounting, _____ are usually easy to measure because they involve actual expenditures of money or other resources.
out-of-pocket costs
Generally accepted accounting principles (GAAP) are a set of accounting standards that is used in the:
preparation of financial statements
Lance signs a contract with Gerove Corp. to perform an external audit for the company. In his audit, he finds certain minor issues in the firm's financial statements but is of the view that the statements are, nevertheless, an accurate representation of the firm's financial status. In this scenario, Lance is most likely to issue a(n) _____ opinion.
qualified
In the United States, the ultimate legal authority to set and enforce accounting standards lies with the _____.
securities and exchange commission
As a shareholder of Syder Corporation, Carl wants to know whether the company had earned a profit over the last financial year. He begins by looking into the net income of the company to know if it has sufficient amount of money to pay off the workers and suppliers and also the amount of money remaining with the owners. In this scenario, Carl is looking at Syder Corporation's _____.
statement of cash flows
