Business Finances

Financial statements and management reports do not reflect current financial conditions when using the cash method are...

the correct accounting systems

Banks usually limit long-term borrowing for businesses to _____ of the capitalization (debt ratio).

50%

Although employers report social security (FICA) tax to the IRS, what are the appropriate shares paid by the employee and employer?

50% employer and 50% employee

Contractors who work in sales and use tax districts in California and purchase fixtures or materials are subject to what percentage of tax?

A certain percentage based on supplies used at the job site differs between tax districts

Which of the following shows how far past-due each customer's payment is?

Accounts receivable aging report

Which agency can allow a company to switch their accounting method?

IRS

A business must use an electronic funds transfer (EFT) to make all federal tax deposits. Generally, an EFT is made using the Electronic Federal Tax Payment System (EFTPS). Which of the following is FALSE about EFTPS?

Cannot enroll into EFTPS if a third-party service prepares your tax payments

Which of the following costs do NOT contribute to the direct labor burden?

Company use of personal vehicles

Subtracting expenses from revenues

Company's profits calculated formula

Liabilities are broken down into two major categories:

Current and long-term

Only fixed assets can be ___.

Depreciated

The decrease in value of a fixed asset due to wear and tear, passage of time, or obsolescence

Depreciation

An employer is required to file quarterly state tax returns with the:

Employment Development Department

Where would depreciation appear on the Balance Sheet?

Fixed asset section

Assets which are normally kept for more than one year

Fixed assets

What is the difference between fixed cost and overhead cost?

Fixed costs fall under the overhead

If a construction company buys a new car for general use by the sales staff, to which of the following accounts would the depreciation of the car be charged?

General and administrative costs

It represents the amount of money the owner has invested in the company as well as the profits the company has retained. It tells how much of the company's assets belong to the owner.

Importance of a balance sheet

Which financial statement gives a picture of the business over a period of time?

Income Statement

Which of the following should show a profit in order for a financial institution to easily give the company a loan?

Income statement

If John, a contractor, decides to take out a loan to pay for a truck, he should obtain

Intermediate term loan to be paid in 1-7 years

Employers must report and pay federal unemployment (FUTA) tax to which agency?

Internal Revenue Service

Which of the following statements is correct regarding the quick ratio? (1)

It considers only assets that can be quickly converted to cash

Which of the following statements is correct regarding the quick ratio? (2)

It excludes inventories

Which of the following statements is correct regarding the quick ratio? (3)

It is more conservative than the current ratio

Any debt that extends for more than 1 year

Long term liability

Another term for "stockholders equity'' on a balance sheet is:

Net worth

When should a contractor maintain large inventories?

Never

It represents the amount of money it costs to run a company and is important in determining accurate bids

Overhead importance to a contractor

State unemployment insurance taxes are:

Paid by employers

A fixed cost is ___.

Part of the overhead

Current assets minus inventory divided by current liabilities

Quick Ratio formula

Accrual method is the ___ method to use.

Recommended

Which of the following is the best method of bookkeeping for a construction company?

Record expenses and income (paid/earned)

Bob Hunter, a contractor, wants to bid on several large jobs. The only significant debt Bob has, is a mortgage on his shop building. After discussing loans with several banks, Bob decides to try equity funding as a source of financing. Equity funds are:

Supplied by investors who acquire some control of the business and a share of the profits. The funds stay in the business.

The term "net worth" on a corporate balance sheet represents:

The claim of the owners on the assets of the business

Planning/forecasting tool, loan or investor document, benchmarking/management tool

The key functions of a business plan are:

If a contractor wanted to show funding to a financial institution, what would be the LEAST applicable thing to show?

Vehicle depreciation

How often should income statements be prepared?

Whenever profit or loss are to be reviewed

The ___ shows net worth at a particular point in time, while the ___ shows profit earned over a period of time.

balance sheet, income statement