Entrepreneurship Exam 2

The rule of thumb for evaluating current ratio is that the minimum acceptable ratio is: A. 3.0. B. 1.0. C. 2.0. D. 4.0.

C

Which of the following is defined as the practice of "pocketing" money from customers and hiding the theft by not recording the sale? A. Embezzlement B. Larceny C. Skimming D. Phony disbursement

C

Which of the following is true of a differentiation strategy? A. It requires a firm to offer a combination of cost benefits that appeals to the customers. B. It is generally pursued by all small businesses. C. It is aimed at mass markets. D. It is used by businesses that pursue a very low cost operation.

C

Which of the following statements is true of the financial statements and reports found in a business plan? A. The financial statements include the balance sheet, cash flow, and expense accounts. B. The assumptions accompanying the financial statements are not as important as other components of the financials. C. For all types of business plans, a set of financial reports or projections are the central component of the Appendix. D. The assumptions are simply what you assume will happen in the first year.

C

Advertising is often used to support the corporate identity and value propositions that are established through public relations efforts.

T

Executive summaries are written in a formal style, suitable for investors, bankers, and lawyers to read.

T

Which of the following ways does borrowing help increase potential profits? A. By increasing the weighted average cost (WAC) of the business B. By allowing less debt to be included in the capital mix C. By providing capital funds for additional business opportunities D. By increasing the cost of capital of the business

C. By providing capital funds for additional business opportunities

Networking is a relatively low-cost, although time-intensive, method of recruiting.

T

Obtaining outside equity financing can only be done if your business is organized as: a partnership, a corporation, or a limited liability company.

T

One of the difficulties in understanding and interpreting the income statements is the dispute over when one should recognize revenues.

T

The best prevention method for avoiding a cash flow problem is attending to and understanding the operations of a business—its patterns of generating cash inflows and outflows.

T

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

T

Regular and systematic reduction in income that transfers asset value to expense over time is called _____. A. appreciation B. contribution margin C. depreciation D. benchmarking

C. depreciation

Activities through which cash is obtained from and paid to lenders, owners, and investors are called _____ activities. A. operating B. investing C. financing D. marketing

C. financing

Legal obligations to give up things of value in the future are known as _____. A. assets B. borrowings C. liabilities D. owners' equity

C. liabilities

The ratio of debt to equity that provides the maximum level of profits is called _____. A. cost of capital B. declining financial leverage position C. optimum capital structure D. weighted average cost

C. optimum capital structure

Variance Analysis

The process of determining the effect of price and quantity changes on revenues and expenses

Investing activities

The purchase and sale of land, buildings, equipment, and securities

Which of the following forms of business requires no government permission to set up? A. Limited partnerships B. C Corporation C. Professional corporation D. Sole proprietorship

D

Which of the following is a statistical technique that determines the size of inventory that a business must hold to minimize total inventory cost? A. Benchmarking B. Factoring C. Pull-push strategy D. Economic order quantity

D

_____ refers to business owners doing what they said they would do. A. Trendiness B. Cognitive dissonance C. Follow-up D. Follow-through

D

E-tailers have high overhead and limited shelf space.

F

Expenses are the value given up to obtain something that the owner wants.

F

Factoring is a method of borrowing against payables

F

Financial accounting is forward-looking and attempts to predict the results of management decisions.

F

For a small business, the amount and type of inventory held for resale is not important because the supply of inventory and demand of customers can be matched at all times.

F

Knowing one's personal worth is not important when starting a business.

F

Reviewing employees' performance is a one-time process done after the probationary period.

F

Selling your product or service in a limited area, for a limited time is known as parallel marketing.

F

The ADA Technical Assistance Program provides inspection and affirmation services to help small businesses.

F

The first step of the strategic planning process for small businesses is considering your customers and the benefits you want to offer them.

F

Variable costs decrease if output increases.

F

When financing with debt, small businesses should first apply for a Small Business Administration guaranteed loan before approaching their own bank as the SBA loans have lower interest rates.

F

Your magic number is the number of customers you can comfortably provide with your product or service.

F

The ADA Technical Assistance Program provides inspection and affirmation services to help small businesses.

F (False)

The advantage of legal protection methods for intellectual property is that there are multiple government agencies in each area that will assist a small business owner in maintaining their legal rights.

F (False)

Small businesses rarely experience cash flow problems.

False

F

Fidelity bonds are also known as surety bonds. A) True B) False

True

Giving a gift has tax implications.

Property of the Business

Involves SPECIFIC forms of risk Inventory can be stolen, machinery can break Buildings can be damaged or destroyed Land may become contaminated Patents may be infringed upon

Which of the following statements is true of joint ventures?

It does not require its partners to lose more than what each partner has invested in it.

What is true of the ADA Technical Assistance Program?

It provides specific advice to a business concerning how to comply with the pertinent requirements.

True

Reduced taxes are the most common form of institutional gift financing.

Retained Earnings

The sum of all profits and losses, less all dividends paid since the beginning of the business

FALSE

The valuation of a company can always be determined objectively.

Cost

The value given up to obtain something that you want

Which of the following is a difficulty that arises in understanding and interpreting the income statements?

There are disputes over when to recognize revenues.

All of these

Why should entrepreneurs know the value of their business?

Approximately 90 percent of small businesses that fail do so because of ________.

cash flow problems

Copyrights, trademarks, and patents provide automatic full protection to small business owners.

false

Factoring is a method of borrowing against payables.

false

A

help repay employers for losses caused by dishonest or negligent employees. A) Fidelity bonds B) Surety bonds C) Product liability insurance D) Credit insurance

A person or business entity that possesses a security is called a bearer.

true

An often overlooked cause of cash shortages is a surplus of good news: Your business has proven to be wildly successful, and sales are growing at an exponential rate.

true

Business interruption insurance provides funds to pay the ordinary operating expenses of your business if it is forced to close temporarily because of an insured event.

true

Commercial paper is transferable to other investors.

true

Contractual provisions of insurance policies that specify what risks the insurance company is assuming are called coverages.

true

Standard industrial classification system (SIC) codes have _____ digits. A. four B. six C. seven D. nine

A

The amount that revenues exceed expenses is referred to as _____. A. profit B. cash flow C. operating margin D. debt

A

The amount that revenues exceed expenses is referred to as _____. A. profit B. cash flow C. operating margin D. debt

A

Which of the following can be exercised only when presented with specified shipping records? A. A documentary draft B. A letter of credit C. A mail order D. A codicil

A

Which of the following describes angel investors? A. They are wealthy individuals who invest in companies in relatively early stages of development. B. They are individuals who act as brokers to help connect owners to organizations that provide funding. C. They are state-run organizations that buy stakes in companies in the early stages of development. D. They are government organizations that help small-scale companies grow.

A

Financial Accounting

A formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks and regulators

Balance Sheet

A statement of what a business owns (assets), what it owes to others (liabilities), and how much value the owners have invested in it (equity)

Income Statement

A statement that lists revenues and expenses and shows that amount of profit a business makes for a specified period of time

Maintaining an inventory helps a business to have an optimal level of cash flow by: A. increasing the cost of carrying inventory. B. reducing the cost of processing orders. C. reducing cash inflow due to being out of stock. D. increasing cash outflow due to waste resources.

B

Money contributed to businesses in return for part ownership of the business is called a(n) _____. A. debt B. equity capital C. gift D. loan

B

Orion Inc. was started as a small organization with five employees. After the first year's profits were made, the owners decided to invest the profits in expanding the business. This is an example of financing the business using _____. A. benchmarking B. bootstrapping C. piggybacking D. outside equity

B

The most common strategy employed by small businesses for handling money shortages is _____. A. adjusting scheduled payments B. using personal money C. selling investments D. laying off employees

B

The percentage amount that the payout of an investment differs from original cost is known as: A. dividend on capital. B. gain on investment. C. risk on investment. D. interest on the principle.

B

Which of the following is true of financial management for a business exit? A. Its main emphasis is on conserving what little cash the business has. B. Its main emphasis is on maximizing the value of the business for successors. C. Its main emphasis is to obtain increasing amounts of cash inflows to pay for added inventory. D. Its main emphasis is on increasing amounts of cash inflows to pay for added inventory, productive assets, and employees.

B

_____ is a measure of the amount of debt relative to total investment. A. Cost of capital B. Financial leverage C. Optimum capital structure D. Financial risk

B

When an entrepreneur gets funding for his business from an account that his family had initially set up for his future education or a first home, it is referred to as _____. A. piggybacking B. accelerated cash-out C. free use D. overpayment

B. accelerated cash-out

A _____ describes the difference between the original acquisition cost of capital assets and the amount of depreciation expense that has been recognized to date. A. fair market value B. disposal value C. book value D. replacement value

C

A _____ is an agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements. A. business interruption insurance B. credit insurance C. surety bond D. fidelity bond

C

According to the IRS, to be an independent contractor the person must: A. decide how the work must be done in consultation with an employer. B. have all his expenses paid for by an employer. C. perform a service that is not central to the operation of the business. D. not be employed for a distinct term or project.

C

Industry analysis is defined as the technique used to: A. determine the magic number in a particular industry. B. determine the extent to which a product is similar to another product. C. study the dynamics and trends of an industry.

C

Marketing data gathered by simple observation - seeing what customers do, rather than asking them is: A. secondary research. B. a focus group. C. ethnographic research. D. branching.

C

Percentage of concession in gross invoice amounts provided to encourage prompt payment are called _____. A. receivables B. noncash incentives C. trade discounts D. charge backs

C

Private businesses that are authorized to make SBA insured loans to start-ups and small businesses are called _____. A. community development organizations B. accelerators C. small business investment companies D. LLCs

C

Putting two or more of the same or different products or services together and selling for a price somewhat under the products' individual prices is _________. A. partitioned pricing B. product line pricing C. bundling D. prestige pricing

C

Restrictions imposed by loan contracts on the operations of a business, such as requiring that a specific minimum net worth be maintained, a specific debt-to-equity ratio not be exceeded, no dividends be paid to stockholders and so on, are known as _____. A. loan amortizations B. loan yields C. loan covenants D. credit assurance

C

Sales promotion techniques used to introduce your brand to customers without an immediate call to purchase are _____________ techniques. A. loyalty B. discounting C. contest D. introductory

C

Government

Which of the following is NOT a small business administration loan program?

The two largest governmental grant programs that are specifically intended for small business are: A. SBIR and STTR. B. SBA and SBDC. C. EDA and DBED. D. EDA and SBA.

A. SBIR and STTR

Which of the following is an example of a cash equivalent? A. Currency B. Commercial paper C. Demand deposit D. Traveler's check

B. Commercial paper

_____ is the idea that it is cheaper (per item) to make many of an item than few. A. Inventory turnover B. Economy of scale C. Breakeven point D. Historical value

B. Economy of scale

Which of the following is true of an LLC? A. LLCs are the same as partnerships. B. LLCs have a choice of being taxed as either corporations or partnerships. C. LLCs are a legal form of business that have no flexibility regarding taxes. D. LLCs are the same as S-corporations.

B. LLCs have a choice of being taxed as either corporations or partnerships.

Total costs equal gross revenue.

Breakeven point is the point at which:

FALSE

Debt financing does not require collateral and offers the investor some form of ownership position in the venture.

Brochures and flyers are types of promotional novelties.

F

loss of key employees

Employees whose experience and skills are critical to the success of the business

7

How many sections does the JOBS Act include?

T

Internal control is the primary method of ensuring honesty in employees. A) True B) False

False

Knowing one's personal worth is not important when starting a business.

Pro Forma

Latin for "in the form of" when used to describe financial statements, indicates estimated or hypothetical information

True

Majority of small business start-ups are funded by bootstrapping.

Life Insurance

Most common kind of coverage on key person Only specific events, including disability, death are INSURED EVENTS

Which of the following should be included in an employee contract for a key employee?

Offer rewards for providing adequate termination

TRUE

Private companies do not have to adhere to the SEC disclosure rules and regula-tions

A lease is simply a rental agreement that specifies a minimum period of time for which one must make rental payments.

T

A sole proprietorship is not considered as a separate legal entity from its owner.

T

A common reason people leave a company is if they feel they are not developing professionally.

T

Which of the following is the formula for calculating owner's return on equity (ROE)? A. Net Income/Average Investment B. Net Income/Owner's Equity Investment C. Total Liabilities/Total Owner's Equity D. Total Liabilities/Total Assets

B. Net Income/Owner's Equity Investment

____ analysis is based on the concept that a dollar to be received right now has more utility than does a dollar to be received at some time in the future. A. Liquidity B. Net present value C. Financial strength D. Budget

B. Net present value

Which of the following statements is true about fixed costs? A. They can be assigned to a specific item sold or manufactured. B. They are unaffected by changes in output. C. They increase as the number of units produced increases. D. They include expendables.

B. They are unaffected by changes in output.

The two forms of short-term financing are short-term debt and _____. A. bonds B. commercial paper C. marketable security D. demand deposit

B. commercial paper

Hugh starts his own animation company by borrowing funds from his parents. His parents tell him that he can repay them when the business is generating profits. This is an example of _____. A. accelerated cash-out B. deferral C. free work D. free use

B. deferral

A negative balance in a depositor's bank account is referred as a(n) _____. A. availability float B. overdraft C. ledger balance D. charge back

B. overdraft

A(n) _____ is a legal obligation to pay money in the future. A. equity capital B. stake C. debt D. gift

C

Which of the following is a management philosophy of selecting and promoting people based solely on their being the most capable person for the job? A. Nepotism B. Capitalism C. Meritocracy D. Democracy

C

Which of the following statements is not true of psychological contracts? A. Small business owners often implicitly or explicitly communicate conflicting terms when making psychological contracts. B. To avoid breaking a psychological contract, denote strict limits on what you promise employees. C. Putting a psychological contract in writing is unnecessary and ill-advised. D. A psychological contract refers to an employees' beliefs about the promises between the employee and the company.

C

Which of the following ways does borrowing help increase potential profits? A. By increasing the weighted average cost (WAC) of the business B. By allowing less debt to be included in the capital mix C. By providing capital funds for additional business opportunities D. By increasing the cost of capital of the business

C

_____ is a strategic action. A. Increasing marketing efforts B. Using new distribution channels C. Acquiring a competitor D. Increasing prices

C

_____ is provided by state and local governments, primarily to encourage specific activities that are expected to improve the blighted areas or provide additional employment. A. Debt capital B. Venture investment C. Tax abatement D. Equity capital

C

_____ measure a management's effectiveness in using the invested capital of the business to provide profits. A. Profitability ratios B. Gross margin ratios C. Return on investments D. Return on equity

C

_____ ratios measure how productive a particular asset is in producing sales movement. A. Current B. Profitability C. Activity D. Leverage

C

_____ ratios measure the relative risk that a business setback could cause bankruptcy. A. Liquidity B. Gross margin C. Leverage D. Profitability

C

legal "artificial" entity that is formed by filing specific documents with a state government is called a _____. A. sole proprietorship B. partnership C. corporation D. general partnership

C

A _____ budget is also referred to as a master budget.

C. comprehensive

Using methods to appear to be paying bills on time, when in fact the cash outflow is being delayed or avoided is called _____.

C. gaming the payment process

The rule of thumb for evaluating current ratio is that the minimum acceptable ratio is: A. 3.0. B. 1.0. C. 2.0. D. 4.0.

C. 2.0.

Which of the following accounting functions has been accurately described? A. Investments records help produce accurate billing of customers, and thus help to maintain good customer relations. B. Payroll records track if your business keeps surplus cash invested in securities. C. Accounts payable records help to make timely payments in order to capture prompt pay discounts and to maintain a good credit rating for the business. D. Credit card sales function enables that payroll and employment taxes are kept current.

C. Accounts payable records help to make timely payments in order to capture prompt pay discounts and to maintain a good credit rating for the business.

_____ ratios measure how productive a particular asset is in producing sales movement. A. Current B. Profitability C. Activity D. Leverage

C. Activity

Which of the following is a strategy to handle cash shortfalls in small businesses? A. Purchasing investments B. Increasing payables C. Borrowing money D. Retaining employees

C. Borrowing money

Aaron, a businessman, has a method of keeping track of accounts receivable by sorting them into groups of those that are 30, 60, 90, and over 90 days past due. Which of the following actions will the collection agency which buys the delinquent account from Aaron do? A. Collect the entire amount owed and return it to Aaron. B. Sell it back to Aaron after collecting the entire amount owed. C. Collect the entire amount owed and keep all the money it obtains. D. Take mild actions and collect a token amount.

C. Collect the entire amount owed and keep all the money it obtains.

_____ is a formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators. A. Tax accounting B. Managerial accounting C. Financial accounting D. Forensic accounting

C. Financial accounting

Which of the following is true of managerial accounting? A. It is used to produce tax returns and schedules. B. It is a rule-based system intended primarily for absentee owners. C. It is forward-looking in nature. D. It is primarily for bankers, investors, and regulators.

C. It is forward-looking in nature.

_____ ratios measure the relative risk that a business setback could cause bankruptcy. A. Liquidity B. Gross margin C. Leverage D. Profitability

C. Leverage

Which of the following reconciles the net increase or decrease with the beginning cash balance and the ending cash balance? A. Net effect of foreign exchange rates B. Noncash investing and financing C. Net change in cash balance D. Noncash operating activities

C. Net change in cash balance

Which of the following is a technique used by a small business to increase cash inflows? A. Making deposits and progress payments B. Forgoing any receivables C. Offering discounts for prompt payment D. Refusing any noncore paying projects

C. Offering discounts for prompt payment

After successfully operating for five years, Tina plans to sell her computer service center. Which of the following would be Tina's main financial management need as she exits the business through sale? A. Obtaining increasing amounts of cash inflows B. Building her wealth and conserving assets C. Optimizing capital structure for profits D. Conserving the money that the business has

C. Optimizing capital structure for profits

Which of the following accounting functions ensures that the employment taxes are kept current? A. Leasehold records B. Investments records C. Payroll records D. Accounts receivable records

C. Payroll records

_____ refers to a type of formal gift where someone buys something on behalf of the entrepreneur's business and lets the entrepreneur benefit from it. A. Overpayment B. Accelerated cash-out C. Picking up the tab D. Piggybacking

C. Picking up the tab

Which among the following is an example of a variable cost? A. Lighting B. Security C. Shipping D. Cleaning

C. Shipping

Which of the following is defined as the practice of "pocketing" money from customers and hiding the theft by not recording the sale? A. Embezzlement B. Larceny C. Skimming D. Phony disbursement

C. Skimming

Lenders use operating income as: A. a measure of how well management achieved sales. B. an indication of future sales. C. a measure of how much debt a business can support. D. an indication of a business's ability to control costs.

C. a measure of how much debt a business can support.

The sum of money that has actually been received and paid out of a depositor's account is termed _____. A. bank ledger balance B. company book balance C. bank available balance D. overdraft balance

C. bank available balance

Sharon handles a home-made gifts business which has gained popularity in her town. After Sharon moved into a big city, however, her marketing efforts could barely help her get just enough revenue to meet her costs. This means Sharon's business is at: A. economy of scale. B. monopoly. C. break-even point. D. bankruptcy.

C. break-even point.

The _____ is a schedule of the amounts and timings of payments of cash out of a business. A. comprehensive budget B. capital budget C. cash disbursements budget D. cash receipts budget

C. cash disbursements budget

Checking and savings accounts are the most common forms of _____. A. commercial papers B. marketable securities C. demand deposits D. debt investments

C. demand deposits

Formal summaries of the content of an accounting system's records of transactions are called _____. A. financial securities B. financial instruments C. financial statements D. financial derivatives

C. financial statements

The emphasis of financial management during the _____ phase is to obtain increasing amounts of cash inflows to pay for added inventory, productive assets, and employees. A. start-up B. exit C. growth D. operations

C. growth

Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business, are called _____. A. discount projects B. charge backs C. noncore projects D. consignments

C. noncore projects

The level of probability that an investment will not produce expected gain is called _____. A. interest B. dividend C. risk D. diversification

C. risk

The first step in preparing a master budget is to prepare a _____ budget. A. production B. direct materials C. sales D. direct labor

C. sales

Private businesses that are authorized to make SBA insured loans to start-ups and small businesses are called _____. A. community development organizations B. accelerators C. small business investment companies D. LLCs

C. small business investment companies

Direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria are referred to as _____. A. tax abatements B. grants C. tax credits D. debts

C. tax credits

Percentage of concession in gross invoice amounts provided to encourage prompt payment are called _____. A. receivables B. noncash incentives C. trade discounts D. charge backs

C. trade discounts

Unemployment Insurance

Collected by the IRS and state agencies as a percentage of tax upon payroll Amount collected varies among industries and among business within an industry Seasonal layoffs pay HIGH amount of unemployment premiums than do those that have stable employemtn

Coverage

Contractual provisions of insurcacne policies that specify what risks the insurance company is assuming The most common MANDATORY insurance coverages are: liability for damages caused by vehicle accidents and illness and injury caused by employment Determine which risks are to be covered Vehicle liability Worker's compensation General liability Various types of malpractice coverage

A _____ is an example of a low customer contact business. A. retail establishment B. medical or legal office C. restaurant D. manufacturing business

D

A just-in-time (JIT) inventory system attempts to reduce inventory levels to the absolute minimum by: A. purchasing and accepting inventory before it is sold to a customer. B. delaying the shipment of the completed product to the customer. C. keeping safety stock in case the estimate exceeds the demand. D. assembling the product in the absolute minimum time possible.

D

A(n) _____ refers to a set of goods or services that consists of only one or a few items. A. in-process inventory B. macro inventory C. just-in-time inventory D. micro inventory

D

According to the six factors most valuable to employees, which of the following is a reason employees leave a company? A. Being put through different types of training B. Being asked to make on-the-spot decisions for the companies' best interest C. Being shown that the decisions employees make and the work they perform have a direct impact on the product or service provided D. Being denied professional development and learning opportunities to expand their job responsibility

D

Business owners can figure how to better target ads or promotions to particular types of customers if: A. they track sales of their competitors. B. they identify the defects in their products. C. they use the diversification strategy rather than the product expansion strategy. D. they link sales and purchase basis to the type of customer.

D

Consider a product that costs $5 to make, and is sold for $15. What is the productivity ratio? A. 2:1 B. 1:1 C. 1:3 D. 3:1

D

Crowdfunding refers to: A. approaching several foundations to acquire grants to fund a business. B. approaching several commercial banks to fund a business. C. funding a business through partnerships with several companies. D. funding a business online through gifts made to the business.

D

Diversification is a strategy whose goal is growth, based on: A. selling more of the firm's product or service to the existing customer base. B. selling in areas or to groups previously not served by the business. C. selling existing customers a product or service they have never bought before. D. adding new products or services to the firm's existing collection of offerings.

D

Gifts of money made to a business for a specific purpose are referred to as _____. A. equities B. debts C. tax credits D. grants

D

If Connie gets her family and friends involved as investors, which of the following is most likely to be their concern? A. Cash flow and cash cycle B. Intellectual property protection C. Monitoring compliance D. Amounts and schedules for returns

D

If financed using unsecured debt, which of the following is not one of the ways a lender can collect any unpaid loan payments? A. By forcing you into bankruptcy B. By using court actions C. By filing a lawsuit against you D. By seizing specific assets

D

In _____, the earnings of the business are distributed to the business owners and those owners pay individual tax on the earnings. A. check the box taxation B. double taxation C. single taxation D. pass through taxation

D

Michael Porter identifies five different threats of competition for any business. Which of the following choices is not one of Michael Porter's five threats? A. Rivals B. Suppliers C. Substitutes D. Investors

D

Responsibility for the actions of another is referred to as: A. direct liability. B. limited liability. C. exculpatory clause. D. vicarious liability.

D

The primary purpose of managerial accounting is to ________. A. help managers perform the control function B. aid in staffing decisions C. make manager's lives easier D. support good decision making

D

The total cost of obtaining an asset, including such costs as purchase price, transportation, installation, testing, and calibrating in order to ready it for its first productive use is termed as _____. A. replacement cost B. cost of operating C. cost of disposition D. acquisition cost

D

The weighted average cost (WAC) refers to: A. a legal reduction in taxes by the government. B. the average equity capital costs incurred by a firm per year. C. the percentage cost of obtaining future funds. D. the expected average future cost of funds.

D

Trendiness refers to: A. a concept in public interest which alludes to events with a broad appeal within the market or population. B. a concept in public recognition which alludes to how close the issue being discussed is to you, your family or business. C. a concept in public interest which alludes to the graphic interest held by an event. D. a concept in public recognition which alludes to the fit of the topic to current fashion or public interest.

D

When your product or service already exists but your firm is the first of its kind in your market, it is considered a(n) _____ business. A. entry-level B. pioneering C. substitutive D. new entrant

D

Which of the following businesses requires a stake in the company and is good for brainstorming with other entrepreneurs? A. Empowerment zone B. Manufacturing business C. Remote location service D. Business incubator

D

Which of the following explains the difference between limited partnership and general partnership? A. In limited partnerships, all partners are equally liable to the firm's debt unlike general partnerships. B. In limited partnerships, partners incur single taxation on earnings unlike general partnerships. C. In general partnerships, whenever the mix of partners is changed, that partnership is dissolved unlike limited partnerships. D. In general partnerships, no government permission is required for the setup and maintenance of business unlike limited partnerships.

D

Which of the following is a disadvantage of leasing? A. It requires a considerably high initial cash outlay than building or buying. B. It is expensive than building or buying a property that are of the same value. C. Lease expenses are not deductible business expenses. D. Renovation options are limited in a leased property.

D

Which of the following is not one of the three tests of the approach when crafting a customer-focused value proposition? A. How many customer pains can you solve? B. How many customer gains can you provide? C. How closely does your product or service fit the customer's job? D. How does your price compare to competitors' prices?

D

Which of the following is not something a manager needs in order to make good decisions? A. Methods to help compare alternatives. B. Efficient ways to condense information so it is understandable. C. Good information. D. A good support system.

D

Which of the following is true of 401(k) plans? A. They refer to the leave policies which make no distinction between sick, vacation, and personal days and allow employees a set number of days off each year. B. They are compensation plans which take no more than 3 percent of the annual personnel budget. C. They allow the employee to have no control over the amount of their contribution and how the money is invested. D. They are typically easier to administer and are less expensive than traditional pension plans.

D

Which of the following is true of insurance? A. All risks are insurable. B. An insurance company only charges a fee for large businesses with over 100 employees. C. Insurance companies make profits by requiring a relatively large fee compared to the amount of loss that is possible. D. The insurance company makes a profit by collecting premiums from many businesses for the same set of risks.

D

Which of the following policies is a minimum standard for managing customer credit? A. Providing cash discounts to customers who delay payments B. Continuing credit sales to customers who become significantly late in paying C. Authorizing credit sales without any credit check to every individual customer D. Filing suits and liens against the assets of customers who default on payment

D

Which of the following statements is not true concerning marketing and marketing plans? A. For start-ups, marketing plans help define how the firm will build its brand and relationship with customers. B. When building your marketing plan, there is low-cost help available in several ways. C. For established businesses, a marketing plan helps the company maintain customer relationships. D. Not all business plans have a marketing section.

D

Which of the following statements is not true of target customers? A. Target customers are described in terms of demographics. B. What target customers are looking for should be based on discussions with potential customers. C. Hopefully the desires of your target customers closely match the value benefits your product offers. D. Usually you only have one type of target customer.

D

Which of the following statements is true regarding the Fair Credit Reporting Act? A. It requires that consumers investigate and directly report any inaccuracies to the source of the inaccurate information. B. It provides CRAs with a period of one year to investigate cases of inaccurate information. C. It requires that CRAs independently confirm information. D. It requires that the CRA forward copies of all relevant information to the source of the inaccurate information.

D

_____ are classic strategies for businesses of all types and they include differentiation, cost, and focus. A. Personalization strategies B. Altruistic strategies C. Retrenchment strategies D. Generic strategies

D

_____ exist for the purpose of addressing some identified social need that cannot be adequately met by market forces. A. SBAs B. Limited Liability Companies C. EDAs D. Foundations

D

_____ is an accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service. A. Differential revenues and expenses B. Net present value analysis C. Cost-volume-profit analysis D. Activity-based cost estimates

D

_____ is an arbitrary, but regular and systematic, method used to take asset value as an expense for the purpose of calculating net income or loss. A. Inventory valuation B. Capital budgeting C. Benchmarking D. Depreciation

D

_____ is money from selling part of a business to people who are not and will not be involved in the management of the business. A. Dividend B. Bond C. Equity capital D. Outside equity

D

_____ means having a way for the person who has failed to meet a metric, or made a mistake, or is facing firing to have their side of the story heard. A. Job basics B. Job metrics C. Benchmarking D. Line of appeal

D

_____ measures the extent to which a business can meet its obligations for the long haul. A. Profitability ratio B. Current ratio C. Return on investment D. Debt-to-equity ratio

D

_____ ratios measure management effectiveness in creating wealth from sales and from invested funds. A. Liquidity B. Activity C. Leverage D. Profitability

D

________ information and reports are used when planning, organizing, staffing, directing, and controlling. A. Variance analysis B. Financial accounting C. Cost-volume-profit analysis D. Managerial accounting

D

Which of the following strategies is used by a business to decrease cash outflows?

D. Avoiding the wastage of resources

Debt investments that mature in less than three months are an example of _____.

D. cash equivalents

Which of the following maintains a record of the inflows and outflows in a cash account? A. Overdraft balance B. Bank available balance C. Bank ledger balance D. Company book balance

D. Company book balance

_____ measures the extent to which a business can meet its obligations for the long haul. A. Profitability ratio B. Current ratio C. Return on investment D. Debt-to-equity ratio

D. Debt-to-equity ratio

_____ make up most of the noncurrency cash which is available immediately. A. Marketable securities B. Debt investments C. Commercial papers D. Demand deposits

D. Demand deposits

_____ is a method that employees use to steal cash after it has been received and recorded in the company books. A. Racketeering B. Phony disbursement C. Skimming D. Embezzlement

D. Embezzlement

_____ exist for the purpose of addressing some identified social need that cannot be adequately met by market forces. A. SBAs B. Limited Liability Companies C. EDAs D. Foundations

D. Foundations

Which of the following is true of the debt-to-equity ratio? A. It measures the relative risk that a business setback could cause bankruptcy. B. It is calculated using the formula: Total Liabilities/Total Assets. C. If the ratio is lower, it indicates lesser solvency. D. If the ratio is greater, it indicates increased business risk.

D. If the ratio is greater, it indicates increased business risk.

Which of the following is true of the differential revenues and expenses method? A. It is used to increase the magnitude and complexity of the information that must be considered in making an appropriate investment decision. B. It is estimated by only using cash flows. C. It is based on the concept that a dollar to be received right now has more value than does a dollar to be received at some time in the future. D. It comprises of estimating the changes in revenues and expenses from current operating results that will occur if an alternative is chosen.

D. It comprises of estimating the changes in revenues and expenses from current operating results that will occur if an alternative is chosen.

_____ is money from selling part of a business to people who are not and will not be involved in the management of the business. A. Dividend B. Bond C. Equity capital D. Outside equity

D. Outside equity

_____ ratios measure management effectiveness in creating wealth from sales and from invested funds. A. Liquidity B. Activity C. Leverage D. Profitability

D. Profitability

Which of the following terms refers to the accounting process that identifies the causes of all differences between book and bank balances? A. Clearing house B. Float C. Charge back D. Reconciling

D. Reconciling

Accurate and timely _____ are essential for making decisions concerning the extension of credit. They also help produce accurate billing of customers, and thus help to maintain good customer relations. A. payroll records B. leasehold records C. accounts payable records D. accounts receivable records

D. accounts receivable records

Crowdfunding refers to: A. approaching several foundations to acquire grants to fund a business. B. approaching several commercial banks to fund a business. C. funding a business through partnerships with several companies. D. funding a business online through gifts made to the business.

D. funding a business online through gifts made to the business.

A crisis in which there is a shortage of cash for expanding a business after an exponential increase in sales is termed _____. A. nonsufficient funds B. reconciling C. charge back D. growth trap

D. growth trap

An organization, usually associated with universities, that supports start-up technology businesses by providing inexpensive office space, a variety of support services, and resources is called a(n) _____. A. LLC B. community development organization C. small business investment company D. incubator

D. incubator

Amounts owed to vendors for merchandise or services purchased on credit are called _____. A. receivables B. deposits C. charge backs D. payables

D. payables

Availability float and _____ float are the two primary causes of float. A. bank ledger B. reconciling C. charge back D. processing

D. processing

A _____ is a form of money that can be immediately used to make payments. A. debt investment B. marketable security C. commercial paper D. traveler's check

D. traveler's check

Fidelty Bonds

Dishonesty Bonds REpay employers for losses caused by dishonest or negligent employees Cover losses from employee fraud, theft, forger, and embezzlement Purchased only for EMPLOYER benefits

True

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

Jacob often manipulates charges on his travel expenses to indicate higher amounts when he travels for the company he works for. Trent, the accounts manager, accepts fake bills and assists Jacob in deceiving the company. They split the profits made this way. This is an example of theft by:

Employee collusion.

True

Equifax is one of the four primary CRAs in the United States.

T

Errors and omissions insurance cover claims made by clients of attorneys, accountants and other consultants.

A direct mail approach needs major inventory investment.

F

A legal obligation to pay money in the future is called equity capital.

F

A process is what a business does when it takes some raw material and converts it into a valuable output. This does not apply to service businesses.

F

A screening plan provides information on the company, product/service, market, and critical risks to prospective business.

F

Advertising costs are usually based on cost per hundred thousand.

F

All business contracts have to be in writing to be enforceable.

F

All businesses within an industry have to pay the same amount, as decided by the state, as unemployment insurance.

F

All money is considered currency, but all currency is not considered money

F

Contingency fees are a fixed amount paid for a certain task.

F

Disposal value is based on determining the price of either a new asset or a used asset for which there is an organized market.

F

Distributors and wholesalers prefer taking on start-up products as there are no setup charges involved.

F

Everyone responds differently to risk. When it comes to business risk, small business owners are mostly risk seeking rather than risk averse.

F

Formal summaries of the content of an accounting system's records of transactions are called financial instruments.

F

Imitation minus one degree of similarity is the business equivalent of an innovative strategy.

F

In the U.S., government programs are the number one source for financing small businesses.

F

In the case of mediation, the dispute is put to a neutral third party who has the powers of a judge.

F

In the context of a business plan, a firm's responsiveness to customers is a key concern of bankers.

F

It is preferable to hire a moderately qualified person if there is an immediate need for someone.

F

Of the strategies employed by small businesses for handling money shortages, the three most common, in order of use, are (1) sell investments, (2) sell receivables, and (3) lay off employees.

F

Personal selling decreases business owners' flexibility in their presentation.

F

Planning, organizing, and staffing are primarily the responsibility of operations management.

F

Press relations are a form of communication that encourage the customer to take immediate action.

F

Small businesses typically use the strategy of innovativeness rather than imitativeness.

F

Something that is essential to how you live and does not have many substitutes or alternatives is called an elastic product.

F

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

F

The accounting equation is simply stated as Assets = Liabilities - Owners' Equity.

F

The advantage of legal protection methods for intellectual property is that there are multiple government agencies in each area that will assist a small business owner in maintaining their legal rights.

F

The employee referral method is an example of an overused, high-cost recruitment method.

F

The method of advertising is least likely to be used by businesses to convey their message to potential customers.

F

The primary advantage of bartering is that it is essentially tax-free as long as no cash is involved

F

The process of dividing the market into smaller portions of people that have certain common characteristics is called stereotyping.

F

The purchasing process is the term applied to the schedule and the process for setting the schedule for making purchases by an individual or an organization.

F

The total product is the most general description of a business, and the one which captures the smallest amount of what is special about a business.

F

When a business enters a phase of rapid growth, one of the challenges it faces is that very few sources of money are available to support its growth.

F

When coming up with a new idea in the product development process, the focus is on the pains and gains of customers.

F

When interviewing a promising prospective employee, it is best to only have one interviewer. This helps you be sure that you understand the individual as well as possible. F

F

When the fear appeal used by a marketing message is a too strong, it always causes the audience to react positively.

F

Everyone responds differently to risk. When it comes to business risk, small business owners are mostly risk seeking rather than risk averse.

F (False)

All businesses within an industry have to pay the same amount, as decided by the state, as unemployment insurance.

False

All money is considered currency, but all currency is not considered money.

False

Business risk is the probability that the future state of the business will be better than planned.

False

Cash flow management only involves steps to increase cash outflows.

False

Copyrights, trademarks, and patents provide automatic full protection to small business owners.

False

Customers can never be a source of risk for businesses.

False

Everyone responds differently to risk. When it comes to business risk, small business owners are mostly risk seeking rather than risk averse.

False

Expendables are necessarily fixed costs.

False

Expenses are the value given up to obtain something that the owner wants.

False

Financial accounting is forward-looking and attempts to predict the results of management decisions.

False

Formal summaries of the content of an accounting system's records of transactions are called financial instruments.

False

Surety bonds repay employers for losses caused by dishonest or negligent employees.

False

The ADA Technical Assistance Program provides inspection and affirmation services to help small businesses.

False

The OSHA is a commission established to enforce the provisions of the Equal Employment Opportunity Act.

False

The accounting equation is simply stated as Assets = Liabilities - Owners' Equity.

False

The primary advantage of bartering is that it is essentially tax-free as long as no cash is involved.

False

True or False: bank available balance and the bank ledger balance will always show the same value.

False

True or False: flow management only involves steps to increase cash outflows.

False

True or False: money is considered currency, but all currency is not considered money.

False

True or False: term debts are not transferable to other investors.

False

____ are used to pay losses that are not covered by other liability insurance.

General liability insurance

GAAP

Generally accepted accounting principles are the standardized rules for accounting procedures set out by the Financial Account Standards Board and used in all audits and submissions of accounting reports to the government

CREDIT CARDS

IT Increases sales for the business Restaurants, clothing retailers barbers and beauticians face relatively low risks of loss form NONPAYMENT because most of them produce CREDIT only by accepting credit cards, which REDUCES the risk of nonpayment

Theft insurance

Insurance on physical assets, Greatest threat of loss because of employee dishonesty is the misappropriation of cash CASH can NOT be insured Require all employees with access to money or to accounting for money to be BONDED normally included in insurance on physical assets

Key Person

Insurance protects you in the event that key employee dies or is disabled and connote work life insurance used to cover this

True

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

Deductible

Is the amount you have to pay out-of-pocket for expenses before the insurance company will cover the remaining costs. For example, if you get into an accident and your medical expenses are $2,000 and your deductible is $300, then you would have to pay the $300 out-of-pocket first before the insurance company paid the remaining $1,700. However, if your accident only resulted in $300 in medical expenses, then you would pay the $300 deductible and the insurance company would pay nothing

Which of the following is true of theories based on the bounded rationality models?

It assumes that people are inefficient processors of information.

Which of the following is true of the ADA Technical Assistance Program?

It provides specific advice to a business concerning how to comply with the pertinent requirements.

All of these factors should be considered when performing a valuation.

James is the owner of a biotechnology company and wants to conduct a valuation. He should include all of the following factors in his valuation EXCEPT:

Tax Codes

Laws and regulations that specify the requirements of taxation Responsibility on YOU not the IRS. Fraud different than penalties. Get in trouble for payroll tax not fraud

Which of the following steps would help decrease business risks?

Making specific plans for and arrangements to deal with foreseeable events

limit your exposure

Managing risk from violations of tax regulations by _____ Keep complete, accurate accounting records: Control access to accounting system File all source documents Establish a relationship with both an accountant and lawyer who are expert in tax issues Make paying your taxes your first financial priority

Vehicle Liability Insurance

Mandated by the legislatures of all the states and territories of the US Min amount of coverage are specified for proerty damage caused by the vehicle and for injury suffered by anyone other than the driver of the vehicle

True

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

Axion Inc. is a small business started by Robert. As the business grew, he decided to implement new company policies that would ensure that his employees are not encouraged to set up competition against Axion. Which of the following techniques should he adopt to achieve this?

Negotiate contracts with key employees that limit their freedom to go into competition

Disability Insurance

Part of life insurance Most common provides the insured person with funds to replace income lost because of inability to work The probability of shorter periods of disability is MUCH HIGHER Most common- BuyOut Insurance

t

Payment for injury or damage that occurs during the use of a business's products is referred to as product liability. A) True B) False

True

Payments of profits to the owners of corporations are called dividends.

True

People who buy ownership rights but are not part of the management of the business are known as outside equity investors.

What should be undertaken in order to reduce a business's exposure to the risk of violating tax regulations?

Reconcile the cash register tape to the cash register contents every day

Which of the following should be undertaken in order to reduce a business's exposure to the risk of violating tax regulations?

Reconcile the cash register tape to the cash register contents every day

Martin, an employee at a boutique store, is required to handle store displays and also ensure that all the sales records tally at the end of each business day. However, he committed fraud by recording fake sales and then keeping the products to himself. Which of the following managerial concepts would have helped the store avoid this deception?

Separation of duties

A _____ is an agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements.

Surety bond

A job description defines and discusses all the essential knowledge, skills, and abilities that are needed to fill a position.

T

A product can include goods, services, and ideas.

T

Adverse possession occurs when an owner of real property does not enforce property rights and allows a non-owner to use the property as if it were his or her own.

T

All capital assets cause you to incur four costs over time: (1) the cost of acquiring the asset, (2) the cost of owning the asset, (3) the cost of operating the asset, and (4) the cost of disposing of the asset.

T

An arm's length transaction is a business deal where the parties have a prior relation or affiliation, but where the business is conducted as if they were unrelated.

T

An often overlooked cause of cash shortages is a surplus of good news: Your business has proven to be wildly successful, and sales are growing at an exponential rate.

T

Cash flow statements can be either direct statements or indirect statements.

T

Clients and attorneys start with a natural conflict of interest related to money.

T

Contractual provisions of insurance policies that specify what risks the insurance company is assuming are called coverages.

T

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

T

In managing risk from violation of tax regulations, small business owners should make paying taxes their first financial priority.

T

In the context of a business plan, product quality, its benefits, service quality, and the competitive advantage are the primary concerns of potential customers.

T

Intangibility, inseparability, and perishability are the three characteristics of services that impact operations choices and decision making.

T

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

T

It is customary for a small business to concentrate its efforts on one target market at the beginning and consider secondary ones later.

T

It is good to opt for distributors when a whole line of products need to be bought or warehoused.

T

It is nearly impossible to design a message that will appeal universally or to find media that will reach all consumers.

T

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

T

Making training an ongoing process is a good way to encourage dialog with employees when their learning curve goes flat.

T

Managing risks to tools, equipment, inventory, and other physical assets is largely a function of developing and enforcing appropriate business policies and procedures.

T

Many small businesses experience problems in cash flow management because of the mismatch between the timing of the receipt of cash and the timing of the need to expend cash.

T

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

T

Operational plans and private placement memos are the only two types of plans that add material to a full business plan.

T

Patents are essentially monopolies granted to inventors by the U.S. government giving patent owners the exclusive rights to make, use, or sell that invention for a certain period of time.

T

Payments of profits to the owners of corporations are called dividends.

T

People who buy ownership rights but are not part of the management of the business are known as outside equity investors.

T

Risk from loss of key personnel and former employees setting up competition against your business can be managed by negotiating employment contracts with those key employees.

T

Skimming, odd-even pricing, and price lining are three possible pricing strategies available to small businesses.

T

Small-claims courts work only when a person or firms are owed money that can be proved and have exhausted other procedures like calls and letters to the customer.

T

The concept of total product includes how customers describe one's good or service.

T

The final goal for developing and testing your value proposition is how it stacks up against and will compete against the other offering available to your customers.

T

The financial statements in a business plan include income statements, cash flow, balance sheet, and their respective assumptions.

T

The goal of appendixes is to provide supporting information that helps detail or support the key selling points of a business plan.

T

The majority of small business start-ups are funded by bootstrapping.

T

The new product development process is likely to be easier for services than for innovative goods.

T

The primary reason to acquire and use a computerized accounting system in your business is to ensure the accuracy of your accounting information.

T

The total cost of keeping inventory is the sum of the cost to buy the inventory, the cost to store, protect, and maintain inventory, and the cost of making an order to purchase inventory.

T

When pitching your business plan to an influential person they are likely looking at your passion for the business; your expertise about the business and the plan; how professional you are in your work; and how easy it would be to work with you.

T

When pricing your product, the optimum price is the highest price that will produce your desired level of sales in your intended market.

T

Your estimated number of prospective customers multiplied by your hit rate multiplied by the amount of each sale equals your sales forecast.

T

Your hit rate is how many prospects or leads you need to approach in order to make one sale. Also called the conversion rate.

T

Risk from loss of key personnel and former employees setting up competition against your business can be managed by negotiating employment contracts with those key employees.

T (True)

F

The Equal Employment Opportunity Commission was established to enforce the provisions of the Americans with Disabilities Act of 1990. A) True B) False

10%; $100,000

The JOBS Act states in title III that investors cannot invest more than ___ of their annual income if their income is greater than ____________?

True

The SBIR and the STTR programs require that every U.S. agency that makes research grants provide a minimum of 2 percent of its grant budget to small businesses, as defined by the SBA.

purchases

The _____ budget shows the number of units that are expected to be acquired during the budget period.

Financial Strength

The ability of a business to survive adverse financial events

Going Concern Concept

The accounting concept that a business is expected to continue in existence for the foreseeable future

Insurable Value

The amount of an asset for which a company will write an insurance policy

Business entity concept

The concept that a business has an existence separate from that of its owners

Articulate

The concept that information flows from the income statement through the statements of retained earnings and owners' equity to the balance sheet

sales

The first step in preparing a master budget is to prepare a _____ budget.

Collusion

The greatest threat of loss from employee dishonesty occurs when to or more employees _____. Aggree together to defraud your business Most common is theft of cash and inventory Chas is most usually stolen by making false disbursements Inventory stolen through false employee sales

TRUE

The higher amount of leverage (debt/total assets), the greater the risk in the ven-ture.

Economy of Scale

The idea that it is cheaper (per item) to make many of an item than few

What is true of insurance?

The insurance company makes a profit by collecting premiums from many businesses for the same set of risks.

Which of the following is true of insurance?

The insurance company makes a profit by collecting premiums from many businesses for the same set of risks.

False

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

Which of the following is true of financial statements?

The overall content and form of financial statements have been made standard by long usage.

Accounting Equation

The statement that assets equal liability plus owners' equity (A = L + E)

What is true of insuring the property of a business?

The value of the historical significance of a building often cannot be insured.

Which of the following is true of insuring the property of a business?

The value of the historical significance of a building often cannot be insured.

Which of the following represents the problem with legal protection methods for intellectual property?

There is no governmental agency that will assist small business owners in maintaining their legal rights.

Variable Costs

Those costs that change with each unit produced, for example, raw materials

Fixed Costs

Those costs that remain constant regardless of quantity of output, for example, rent

All of these are correct

Title I of the JOBS Act included a series of amendments to the all of the following EXCEPT:

net present value

To perform _____ analyses, only cash flows are considered.

Adverse possession occurs when an owner of real property does not enforce property rights and allows a non-owner to use the property as if it were his or her own.

True

Cash flow statements can be either direct statements or indirect statements.

True

Cash-to-cash cycle is also referred to as operating cycle.

True

Contractual provisions of insurance policies that specify what risks the insurance company is assuming are called coverages.

True

Currency is the most common form of cash.

True

Financing may be in the form of cash donated to a business in return for ownership.

True

Identifying risks is the first task to be completed before a comprehensive insurance program can be developed for a business.

True

In managing risk from violation of tax regulations, small business owners should make paying taxes their first financial priority.

True

Joint ventures are partnerships through which two or more businesses combine to undertake a specific economic activity.

True

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

True

Managing risks to tools, equipment, inventory, and other physical assets is largely a function of developing and enforcing appropriate business policies and procedures

True

Managing risks to tools, equipment, inventory, and other physical assets is largely a function of developing and enforcing appropriate business policies and procedures.

True

Many small businesses experience problems in cash flow management because of the mismatch between the timing of the receipt of cash and the timing of the need to expend cash.

True

Noncash employee incentive is a strategy to decrease cash outflow.

True

One of the difficulties in understanding and interpreting the income statements is the dispute over when one should recognize revenues.

True

One reason why accounting is important to a small business is that it shows how much your business is worth.

True

Risk from loss of key personnel and former employees setting up competition against your business can be managed by negotiating employment contracts with those key employees.

True

The best prevention method for avoiding a cash flow problem is attending to and understanding the operations of a business—its patterns of generating cash inflows and outflows.

True

The primary reason to acquire and use a computerized accounting system in your business is to ensure the accuracy of your accounting information.

True

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

True

To ensure your accounting information is accurate, reliable, and useful, the accounting system you choose should easily and efficiently maintain an internal "audit trail".

True

True or False: Currency is the most common form of cash.

True

True or False: cash cycle is also referred to as operating cycle.

True

True or False: growth trap can cause a cash shortage.

True

All of these choices are correct

Types of Crowdfunding include

General Liability Insurance

Umbrella Policy Success protector Policy Exist to pay losses that are not covered by other liability insurance

_______ is collected by the IRS and state agencies as a percentage of tax upon payroll.

Unemployment insurance

All of these are correct

Valuation Methods fall into which category:

Sharing Risk

Very effective method to reduce and to control business risk is to share that risk with other entities By forming joint ventures, by joining industry groups, and by obtaining government grants and guarantees

Franchise or Corporation Tax income tax employee taxx sales and use tax

What are 4 types of taxes imposed on small business. 15% of tax paying business are not complying with the rules

Internal Revenue Service EEOC OSHA

What are the 3 regulations that most small business have trouble with?

Insurable value Deductible loss Co insurance Loss of limits of the policy

What are the 4 categories that determine the cost of property insurance

Reward, donation, equity, lending

What are the 4 types of crowd funding mentioned in class?

Violation of Government Regulation

What has become a source of significant business risk over the last 30 yearS? stategies for compliance Stay small enough so rules do not apply Indifference proactive

In the event of an unsuccessful campaign (didn't reach goal) you can choose to take the money on Indiegogo, while you can't on Kickstarter.

What is a major difference between Kickstarter and Indiegogo?

Payroll records

Which of the following accounting functions ensures that the employment taxes are kept current?

Fixed asset accounting

Which of the following accounting functions focuses the most on automatically calculating and accumulating depreciation?

Articulate concept

Which of the following concepts assume that information flows from the income statement through the statement of retained earnings, the statement of owners' equity to the balance sheet?

D

Which of the following individuals does the OSHA Act cover? A) George, a self-employed entrepreneur B) Will, a miner C) Tracy, a police officer D) Julie, a salesperson at a cosmetic store

It produces financial reports that meet legal requirements.

Which of the following is a disadvantage of a computerized accounting system?

there is a 3-5-, or 7-year payback period.

Which of the following is not a con of debt financing?

It is forward-looking in nature.

Which of the following is true of managerial accounting?

Inventory accounting facilitates maintenance of appropriate levels of inventory and aids in calculation of appropriate stocking and reorder levels.

Which of the following is true of typical accounting functions used in businesses?

D

Which of the following represents the first task to be completed before a comprehensive insurance program can be developed for a business? A) Determining which risks are to be covered B) Developing a business plan C) Assessing internal weaknesses D) Identifying risks

it's values are considered as historical values.

Which of the following statements is true regarding the balance sheet?

Title III

Which title of the JOBS Act established the rules under which an entrepreneurial firm can raise investment capital from the general public?

F

Worker's compensation insurance is mandated by the legislatures of all the states and territories of the United States.

FALSE

You can expect a crowdfunding campaign to fully cover the costs of bringing a product to market

A

_____ are an agreement between two or more entities to pool resources in order to complete a project. A) Joint ventures B) Sole proprietorships C) S-corporations D) LLCs

Economy of scale

_____ is the idea that it is cheaper (per item) to make many of an item than few.

Financial strength

_____ refers to the ability of a business to survive adverse financial events.

A financial plan for the future based on a single level of operations is called a(n):

budget

Cash that can be obtained by selling the products and services of a business and collecting cash from customers is called:

cash flow from operations.

Liability insurance protects a business against:

claims from harm caused by inadvertent consequences of actions of the business or its employees.

The two forms of short-term financing are short-term debt and _____.

commercial paper

Fidelity bonds help to:

cover losses incurred by the employer due to employee embezzlement.

Checking and savings accounts are the most common forms of _____.

demand deposits

Financial flexibility of a business is a matter of judgment, whereas financial strength is an objective assessment.

false

One technique to increase cash inflow is to offer discounts for delayed payments.

false

Short-term debts are not transferable to other investors.

false

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

false

The advantage of legal protection methods for intellectual property is that there are multiple government agencies in each area that will assist a small business owner in maintaining their legal rights.

false

The bank available balance and the bank ledger balance will always show the same value.

false

Medical Coverage

most highly desired form of insurance for most employees Strong retention incentive for employees obtain reduced rates an can include yourself and your family least expensive way to obtain key person insurance is part of a comprehensive medical insurance plan that covers all employees

Business Risk

probability that the future state of the business will be less successful than planned The level of probability that the future economic state of the business will be wise than expected The level of probability that the future economic state of the business will be worse than expected It is the probability that the future state of the business will be less successful than planned, resulting in the loss of value of business assets.

Susan, who is a florist, purchases her flowers on credit. Lucy, a customer, takes eight bouquets and promises to pay Susan within two weeks. The amount that Lucy owes Susan is termed _____.

receivables

Working proactively to ensure that your physical place of business is (1) free of potential hazards and (2) _______ will prevent on-premises injuries and violations of EEOC or OSHA rules.

secure from intruders

The primary purpose of managerial accounting is to ________.

support good decision making

A _____ is an agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements.

surety bond

Current Ratio

the value of current assets divided by current liabilities

Employees whose experience and skills are critical to the success of a business are called key employees.

true

To prepare a cash flow statement, the cash inflows and outflows are categorized under cash from operations, cash from investing, and cash from financing.

true

A charge for the use of money, usually figured as a percentage of the principal is called _____. A. interest B. dividend C. tax D. chargeback

A

Which of the following ratios is determined by dividing total liabilities by total assets? A. Debt to assets ratio B. Debt to equity ratio C. Return on assets ratio D. Gross margin ratio

A

Which of the following ratios measures the percentage of sales revenue available to pay operating costs and to provide profits after paying for inventory? A. Gross margin ratio B. Profit margin ratio C. Quick ratio D. Debt to assets ratio

A

Which of the following statements is true of sales forecasting? A. In many cases, the best sales forecast you can come up with is an educated guess. B. It is better to have a high sales projection initially and adjust as actual sales happen. C. Using traditional retailers and distributors does not change the price you set at the factory. D. Ignore your capacity when identifying your potential market as you will not be serving the entire potential market.

A

Which of these is a disadvantage of a corporation? A. It incurs relatively high incorporation fees and high taxes. B. It requires its owners to have unlimited liability to the firm's debt. C. It is considered a separate, legal entity from its owner. D. It is automatically terminated upon the death of its owner.

A

__ is a measure of how much money can be made available to pay obligations within the fiscal year. A. Current ratio B. Return on investment C. Return on equity D. Profitability ratio

A

Favorable/Unfavorable Variance

A label applied to variances to indicate their effect upon the income statement; favorable variances would result in profits being greater than budgeted, all other things being equal; unfavorable variances would result in profits being less than budgeted, all other things being equal

The company's stage of entrepreneurship

A solid valuation contextual factor analysis should include the following factors except

All of these

A solid valuation contextual factor analysis should include which of the following factors:

_____ refers to the value of a business that exceeds the sum of the value of all individual assets but that cannot be sold separately from the business. A. Goodwill B. Collateral C. Inventory D. Debt

A. Goodwill

Which of the following is true of typical accounting functions used in businesses? A. Inventory accounting facilitates maintenance of appropriate levels of inventory and aids in calculation of appropriate stocking and reorder levels. B. Fixed assets record the improvements to leased property or equipment made by the business. C. Payroll records automatically calculate and accumulate depreciation. D. Accounts receivable records track what one owes and helps to make timely payments.

A. Inventory accounting facilitates maintenance of appropriate levels of inventory and aids in calculation of appropriate stocking and reorder levels.

Which of the following is the most common noncash incentive given to an employee? A. Stock options B. Autonomy C. Benefits packages D. Telecommuting

A. Stock options

The amount that revenues exceed expenses is referred to as _____. A. profit B. cash flow C. operating margin D. debt

A. profit

Ownership of corporations is established by _____. A. stock certificates B. share agreements C. member share certificates D. partnership share agreements

A. stock certificates

A

Amanda recently tried out a new skin cream. However, using the cream caused severe rashes on her body. She can make a _____ to compensate for the damage that the cream caused. A) product liability claim B) errors and omissions claim C) malpractice claim D) catastrophe claim

Revenue

An increase in owners' equity caused by selling your product or service

A business that collects, collates, and reports information concerning an entity's use of debt is referred to as a(n) _____. A. accelerator B. credit reporting agency C. debt reporting organization D. community development organization

B

A financial plan for the future based on a single level of operations is called a(n): A. balance sheet. B. budget. C. income statement. D. statement of cash flows.

B

A long-term rental in which ownership of the asset never passes to the person paying for the lease is called a(n) _____ lease. A. leveraged B. operating C. finance D. capital

B

A(n) _____ is a one-page document on letterhead that introduces the business plan and owner to the recipient and indicates why the recipient is being asked to read the plan. A. executive summary B. cover letter C. appendix D. title page

B

From an entrepreneur's perspective, marketing is all about connecting your customer to your product or service. The first step in this process is: A. connecting the two through price. B. connecting the two through the value proposition. C. connecting the two through promotion. D. connecting the two through product placement.

B

Hugh starts his own animation company by borrowing funds from his parents. His parents tell him that he can repay them when the business is generating profits. This is an example of _____. A. accelerated cash-out B. deferral C. free work D. free use

B

If the owner plans to _____ a business, he or she should be removing all surplus cash and tightening the cash-to-cash cycle to the shortest time possible. A. transfer B. sell C. terminate D. start

B

Jacob often manipulates charges on his travel expenses to indicate higher amounts when he travels for the company he works for. Trent, the accounts manager, accepts fake bills and assists Jacob in deceiving the company. They split the profits made this way. This is an example of theft by: A. adverse possession. B. employee collusion. C. employee nonfeasance. D. vendor fraud.

B

Kevin has taken an apartment on lease for five years with a monthly rental of $3,500. At the end of five years, Kevin will be the legal owner of the apartment after an additional payment of $80,000. This type of lease is an example of a(n) _____ lease. A. leveraged B. capital C. direct D. operating

B

Martin, an employee at a boutique store, is required to handle store displays and also ensure that all the sales records tally at the end of each business day. However, he committed fraud by recording fake sales and then keeping the products to himself. Which of the following managerial concepts would have helped the store avoid this deception? A. Adverse possession B. Separation of duties C. Accession D. Rule against perpetuities

B

Money contributed to businesses in return for part ownership of the business is called a(n) _____. A. debt B. equity capital C. gift D. loan

B

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? A. Building owner's wealth B. Conserving what little money the business has C. Obtaining increasing amounts of cash inflows D. Minimizing debt and increasing asset value

B

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? A. Building owner's wealth B. Conserving what little money the business has C. Obtaining increasing amounts of cash inflows D. Minimizing debt and increasing asset value

B

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major. Within a few months, the sales increase exponentially which results in a shortage of cash needed to expand their business. This crisis is termed _____. A. nonsufficient funds B. growth trap C. charge back D. reconciling

B

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who manages the budgets and expenses of the business. Within a few months, David notices problems in cash flow. Although not the primary strategy of her business, Tammy takes up craft projects for kindergarten schools in an effort to increase cash inflow. This kindergarten project is an example of a(n) _____. A. consignment B. noncore project C. charge back D. arraignment

B

The first step of the strategic planning process for a small business is: A. performing a SWOT analysis. B. reviewing and confirming the goals that define the firm. C. mapping the prospective customers. D. studying the dynamics and trends of the industry.

B

The most common form of institutional gift financing is in the form of _____. A. state loans B. reduced taxes C. state grants D. donated capital

B

There are three elements to most aspects of business law - finding the right information, negotiating the specific outcome you want, and: A. choosing the right attorney. B. taking care of the paperwork associated with it. C. checking the law. D. come to an agreement about a particular outcome.

B

When finally setting the actual price of your product or service, there are several contextual factors including your company objectives, your marketing strategy, competition, channels of distribution, and legal and regulatory issues to consider. Which of the following statements is not true when considering these factors? A. The customer's end price is usually higher than your price due to price escalation. B. Pricing off a competitor's price is as easy as picking a percent, say 80%, and charging that price for your product or service. C. Some forms of price discrimination are illegal. D. Firms that compete on price may experience negative growth.

B

Which of the following businesses should be most concerned with property, plant, and equipment? A. A wholesaler B. A rancher C. A retailer D. A hairstylist

B

Which of the following is a characteristic feature of sales packets? A. They are usually large enough to read by passing traffic. B. They provide potential customers an education in a firm's product or service. C. They generally consist of pens or small calendars which are printed with the name and slogan of the company. D. They are generally hand-written.

B

Which of the following is a form of personal gift? A. Tax credits B. Free use C. Grants D. Tax abatements

B

Which of the following is a type of informational plan that solicits information on customer interests? A. Invention plan B. Proof-of-concept website C. Private placement memorandum D. Operational plan

B

Which of the following is true of a private placement memo? A. It provides information to potential licensees. B. It is a complex legal document and should be drafted by a lawyer. C. It is a special form of informational plan posted on the Internet. D. It is designed to be used internally for management purposes.

B

Which of the following is true of financial statements? A. The customization of financial reports is illegal in all states. B. The overall content and form of financial statements have been made standard by long usage. C. Bankers and investors are typically new and unacquainted with standard financial statements. D. The differences unique to each industry cannot be represented accurately in financial statements.

B

Which of the following ratios is determined by dividing total liabilities by total owners' equity? A. The acid test B. Debt to equity ratio C. The quick ratio D. Return on equity

B

Which of the following should be undertaken in order to reduce a business's exposure to the risk of violating tax regulations? A. Understate revenues and overstate deductible expenses B. Reconcile the cash register tape to the cash register contents every day C. Take cash from the businesses before it is recorded as revenue D. Borrow from tax money in order to make payments to creditors

B

Which of the following statements best describes the process of idea screening in new product development? A. It involves specifying the details of each idea's technological feasibility, its cost, how it can be marketed, and its market potential. B. It is the process of selecting the most promising ideas to be further evaluated for feasibility. C. It involves creating the first versions of products called prototypes which are used in further consumer testing. D. It is the process of mass producing a new product so that consumers can avail it.

B

Which of the following statements concerning financial management is correct? A. The details of financial management are standard across businesses in different industries. B. Obtaining money for your start-up is only the beginning of financing a small business. C. Financial management needs remain the same through the life of the company. D. Once a financial management system is in place it only requires periodic review.

B

_____ refers to amounts that are owed to a business for merchandise that was sold on credit

B. Receivables

_____ is a schedule of the amounts and timings of the cash coming into a business. A. Cash disbursements budget B. Cash receipts budget C. Comprehensive budget D. Capital budget

B. Cash receipts budget

_____ refers to the practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold. A. Barter B. Consignment C. Noncash incentive D. Benchmarking

B. Consignment

_____ refers to the percentage expense of obtaining future funds. A. Risk B. Cost of capital C. Rate on investment D. Return on investment

B. Cost of capital

Which of the following is a form of personal gift? A. Tax credits B. Free use C. Grants D. Tax abatements

B. Free use

A jewelry store promises to deliver custom-made wedding rings to a buyer within 2 weeks. However, it charges ten percent of the sales price in advance. In this example, which of the following techniques is the store using to increase cash inflows? A. It is offering discounts to customers for prompt payment. B. It is taking deposits and progress payments. C. It is factoring all receivables. D. It is taking on noncore paying projects.

B. It is taking deposits and progress payments.

Which of the following is a disadvantage of a computerized accounting system? A. It makes the accounting process complicated and extensive. B. It produces financial reports that meet legal requirements. C. It reduces the accuracy of the accounting information. D. It makes the process of error checking complicated.

B. It produces financial reports that meet legal requirements.

Which of the following is true of financial management for a business exit? A. Its main emphasis is on conserving what little cash the business has. B. Its main emphasis is on maximizing the value of the business for successors. C. Its main emphasis is to obtain increasing amounts of cash inflows to pay for added inventory. D. Its main emphasis is on increasing amounts of cash inflows to pay for added inventory, productive assets, and employees.

B. Its main emphasis is on maximizing the value of the business for successors.

Risk Averse

Avoid risk Most prefer to avoid risk to the extent possible Consider what they could lose

One technique to increase cash inflow is to offer discounts for delayed payments.

False

Financial Statements

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

False

In the U.S., government programs are the number one source for financing small busi-nesses.

TRUE

IndieGoGo gives the option of collecting funds from a failed campaign for a high-er commission

Adverse possession occurs when an owner of real property does not enforce property rights and allows a non-owner to use the property as if it were his or her own

True

Employees whose experience and skills are critical to the success of a business are called key employees

True

Insuring Against Risk

Use of insurance can minimize the damage that such risks can cause Can minimize the damage that such risks can cause The key is using the RIGHT amount of insurance at an affordable rate

Buyout Insurance

What is the most common type of disability insurance? Provides funds to the business to purchase the ownership position of a disabled partner

False

When a business enters a phase of rapid growth, one of the challenges it faces is that very few sources of money are available to support its growth.

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who would manage the budgets and expenses of the business. Tammy buys her craft materials on credit from her supplier but clears all her debts at the end of every month. The amount that Tammy owes her supplier is referred to as _____.

payables

Today the biggest risk to most businesses comes from _____.

using computers

The process of determining the effect of price and quantity changes on revenues and expenses refers to:

variance analysis.

Age discrimination in employment act

1967 An act congress makes it illegal to discriminate against people who are older than 40

Rehabilitation Act o

1973 An act congress that provides training for workers who are injured on the job

The rule of thumb is that perks should take no more than _____ of the annual personnel budget. A. 3 percent B. 15 percent C. 50 percent D. 75 percent

A

There are two general sources of gift financing: A. institutional and personal. B. friends and family. C. consumer and commercial banks. D. angel and venture investors.

A

There are two general sources of gift financing: A. institutional and personal. B. friends and family. C. consumer and commercial banks. D. angel and venture investors.

A

Uncertainty of returns in a business is referred to as _____. A. financial risk B. accelerated cash-out C. overpayment D. collateral

A

Uncertainty of returns in a business is referred to as _____. A. financial risk B. accelerated cash-out C. overpayment D. collateral

A

When considering the service life cycle, which of the following statements is not true? A. It can be more difficult to extend the life cycle of a service over that of a product. B. Services go through the same four stages of the life cycle. C. New services will take a little time to attract customers. D. Initial advertising efforts will be to educate your clients about the service.

A

When debt increases as a percentage of total investment, returns on equity: A. increase at a decreasing rate. B. decrease at an accelerated rate. C. increase at an accelerated rate. D. decrease at a decreasing rate.

A

When determining the cost of a capital asset, the _______ is the sum of everything that you spend to acquire and prepare the asset for its first productive use. A. acquisition cost B. costs of owning C. costs of disposition D. costs of operating

A

When writing your elevator pitch, remember that elevator pitches have four success factors. Which of the following is not one of those success factors? A. The length. B. The purpose. C. The delivery. D. The hook.

A

Which of the following is a tactical action? A. New distribution channels B. Mergers C. New product introductions D. Entering new markets

A

Which of the following is one of the disadvantages of the return on investment (ROI) analysis? A. The profits received are not the same as cash. B. The calculations involved in the method are complex. C. It does not consider annual profits in its calculations. D. It does not rely on accounting information with which investors are comfortable.

A

Which of the following represents the problem with legal protection methods for intellectual property? A. There is no governmental agency that will assist small business owners in maintaining their legal rights. B. The cost of legal protection for intellectual property is so high that it is practically useless for a small business owner. C. Legal protection methods for intellectual property are primarily "reserved" for large businesses. D. Legal protection methods can only be offered for tangible property and not intellectual property. E. Holding legal rights to intellectual property provides the owner solely with grounds to pursue lawsuits against infringement.

A

Which of the following should be included in an employee contract for a key employee? A. Offer rewards for providing adequate termination notice B. Specify that the employee must work at the organization for a minimum of two years C. Detail the consequences of insubordination within the workplace D. Encourage employees to poach clients from competitors

A

_____ is a strategy whose goal is growth, based on selling more of the firm's product or service to the existing customer base. A. Market penetration B. Product expansion C. Market expansion D. Diversification

A

An entity that processes checks and electronic fund transfers for banks and other financial organizations is called a _____.

A. clearinghouse

Which of the following concepts assume that information flows from the income statement through the statement of retained earnings, the statement of owners' equity to the balance sheet? A. Articulate concept B. Going concern concept C. Opportunity cost concept D. Leveraging concept

A. Articulate concept

_____ is the name given to the bank's accounting system for all recognized transactions that affect the account, including deposits, electronic transfers, service fees, and checks presented to the bank for payment. A. Bank ledger balance B. Company book balance C. Overdraft balance D. Bank available balance

A. Bank ledger balance

_____ is the practice of trading goods and services without the use of money. A. Barter B. Consignment C. Noncash incentive D. Float

A. Barter

Identify the managerial accounting technique which looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize gains. A. Cost-volume-profit analysis B. Marginal revenue costs analysis C. Break even analysis D. Cash flow analysis

A. Cost-volume-profit analysis

Breakeven point is the point at which: A. total costs equal gross revenue. B. fixed costs equal variable costs. C. total costs equal profit. D. variable costs equal gross revenue.

A. total costs equal gross revenue.

Credit Insurance

Abnormal losses from credit customer not paying their bills requires the merchant to provide insurance in the amount of 10 to 20 percent of credit loss Customers who cease business because of bankruptcy or business interruptions caused by fire, storm, wind, flood and earthquakes

For an owner, the main financial management emphasis while transferring a business to family members must be to: A. increase the cash-to-cash cycle to the highest time possible. B. increase asset value. C. optimize capital structure for profits. D. maximize debt.

B

Which of the following statements is true of an elevator pitch? A. It is shorter than a vision statement or tagline. B. Its goal is to sell the idea of a business to another. C. It does not sound like a sales pitch. D. It is a summary of the business, its business models, and immediate goals.

B

Money that is immediately available to be spent is called _____.

B. cash

A business that collects, collates, and reports information concerning an entity's use of debt is referred to as a(n) _____. A. accelerator B. credit reporting agency C. debt reporting organization D. community development organization

B. credit reporting agency

The value of current assets divided by current liabilities is called: A. inventory turnover ratio. B. current ratio. C. total assets to total liabilities ratio. D. current equity ratio.

B. current ratio.

Eddie, the owner of a fast-food joint, finds that he spends far lesser when he bakes breads in dozens than when he bakes two or three loafs at a time. This idea of Eddie's is similar to the concept of: A. break-even point. B. economy of scale. C. economy of scope. D. monopoly.

B. economy of scale.

An accounting method that is specifically intended to be used for planning, directing, and controlling a business is called: A. tax accounting. B. managerial accounting. C. benchmarking. D. forensic accounting.

B. managerial accounting.

The time required for a business to acquire resources, convert them into a product, sell the product, and receive cash from the sale is referred as the _____ cycle of a business. A. seasonal B. operating C. credit D. chargeback

B. operating

The difference between assets and liabilities of a business is called its: A. net income. B. owners' equity. C. cost of capital. D. current ratio.

B. owners' equity.

The most common form of institutional gift financing is in the form of _____. A. state loans B. reduced taxes C. state grants D. donated capital

B. reduced taxes

Maintaining an inventory helps a business to have an optimal level of cash flow by: A. increasing the cost of carrying inventory. B. reducing the cost of processing orders. C. reducing cash inflow due to being out of stock. D. increasing cash outflow due to waste resources.

B. reducing the cost of processing orders.

The sum of all profits and losses, less all dividends paid since the beginning of the business is called: A. liabilities. B. retained earnings. C. net income. D. tax liability.

B. retained earnings.

If the owner plans to _____ a business, he or she should be removing all surplus cash and tightening the cash-to-cash cycle to the shortest time possible. A. transfer B. sell C. terminate D. start

B. sell

The information that the bank knows about an account, but is not known by the account holder, includes: A. the checks written and mailed by an account holder but have not been received by the bank. B. the amount of any direct payments made in the account by the account holder's customers. C. deposits that the account holder has mailed or made after bank closing. D. the sum of cash inflows and cash outflows recorded in the holder's accounting records.

B. the amount of any direct payments made in the account by the account holder's customers.

In the Small Business Administration guaranteed loan payment programs, the owners must be _____ before they qualify. A. backed by personal equity for half the loan sum B. turned down by a bank C. partnered with a successful entrepreneur D. the heads of an already successful business

B. turned down by a bank

The most common strategy employed by small businesses for handling money shortages is _____. A. adjusting scheduled payments B. using personal money C. selling investments D. laying off employees

B. using personal money

Making ______ work requires giving employees permission to act, the knowledge to act, and the skill to act. A. nepotism B. training C. empowerment D. teamwork

C

Which among the following is an example of an on-the-job training method? A. Lectures B. Case studies C. Coaching D. Role playing

C

The "business entity" concept of accounting indicates that: A. a successful business will stay in business. B. assets = liabilities + owners' equity. C. a business has an existence that is separate from its owner. D. accounting information must be useful to the owners and managers of businesses.

C. a business has an existence that is separate from its owner.

Cash that can be obtained by selling the products and services of a business and collecting cash from customers is called: A. cash flow from subsidy. B. cash from financing. C. cash flow from operations. D. cash flow from investing.

C. cash flow from operations.

Something of value given or pledged as security for payment of a loan is called _____. A. chargeback B. capital equity C. collateral D. personal equity

C. collateral

Delays in the movement of money among depositors and banks is referred to as a(n) _____. A. overdraft B. ledger balance C. float D. charge back

C. float

FALSE

Crowdfunding is always the best source of income to fund a startup

Arbitration differs from mediation in that arbitration: A. works outside the court system. B. is less costly than mediation. C. requires that both parties represent themselves. D. has limited appeal possibilities.

D

Axion Inc. is a small business started by Robert. As the business grew, he decided to implement new company policies that would ensure that his employees are not encouraged to set up competition against Axion. Which of the following techniques should he adopt to achieve this? A. Lay off employees who seem most likely to go into competition with Axion B. Groom other candidates to replace the employees currently working at Axion C. Cross train the employees to neutralize job specialization D. Negotiate contracts with key employees that limit their freedom to go into competition

D

During the start-up phase of a business, the emphasis is on: A. finishing all outstanding projects, collecting all money due, disposing of all business assets, and finally paying off any outstanding debt. B. removing all surplus cash and tightening the cash-to-cash cycle to the shortest time possible. C. piggybacking with other successful firms. D. conserving what little cash the business has.

D

Mr. Hill, who runs a key-chain manufacturing unit, buys raw materials from his supplier during the first week of every month. The supplier's policy states that all payments need to be cleared within 50 days of buying the materials. This schedule ensures that Mr. Hill gets an extended period to make payments thus controlling when the payment is made. Which of the following strategies is Mr. Hill using to control cash outflow? A. Taking a consignment B. Offering trade discount C. Gaming the payment process D. Timing the purchase

D

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major. Jane purchases a picture frame from Tammy using a credit card. She notices a crack in the frame and returns it to Tammy. Jane contacts the credit card service provider for a refund. The credit card company removes the sale amount from Tammy's account which is referred to as a(n) _____. A. incentive B. liquidity C. overdraft D. charge back

D

Ted, a 46-year-old IT professional, recently attended a job interview at Acton Org. He was not offered the job. Ted tried to find the reasons for his disqualification and the company could not provide a satisfactory explanation. He later learned that he was refused the job due to his age as the job position was offered to a 23-year-old who had just graduated from college. Which of the following laws protect Ted from such discriminations? A. ADA B. OSHA laws C. Sarbanes-Oxley Act D. ADEA

D

The sales plan of a marketing strategy focuses on: A. the longer-term partnerships to be sought. B. the new markets to be pursued. C. the ways to leverage a firm's assets. D. the day-to-day specifics of how sales are achieved.

D

Which of the following is true of the debt-to-equity ratio? A. It measures the relative risk that a business setback could cause bankruptcy. B. It is calculated using the formula: Total Liabilities/Total Assets. C. If the ratio is lower, it indicates lesser solvency. D. If the ratio is greater, it indicates increased business risk. A greater debt to equity ratio means increased business risk.

D

The Family and Medical Leave Act applies to all employers.

F

The OSHA is a commission established to enforce the provisions of the Equal Employment Opportunity Act.

F

What statements is true of joint ventures?

It does not require its partners to lose more than what each partner has invested in it.

The going concern expectation

Larry owns a successful business called Super Car-Hire. He plans to sell it to Bob. Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well. Which of the following basic accounting concepts is reflected in Bob's assumption?

True

Limited liability companies' primary advantage is that owners may easily choose whether to be taxed as an entity or have tax items pass through.

Financial risk Nonpayment of debts Changes in technology Injury and illnesses suffered by employees Injury from accidents incurred by customers Natural events (storms, floods, fire, earthquakes) Theft of business property Misbehavior by employees

Most commonly identified sources of risk

A niche market is a narrowly defined segment of the population that is likely to share interests or concerns.

T

Access for employees and reasonable cost are critical for businesses with low customer contact.

T

true

The best part of crowdfunding project is that they generate revenue rather than involving debt or giving up equity?

Balance sheet

Which of the following is a statement of what a business owns, what it owes to others, and how much value the owners have invested in it?

A(n) _____ is an amount of loss that is specifically excluded by the insurance contract.

deductible

Product Liability

: payments for injury or damage that occurs during the use of the business's products Payment for injury or damage that occurs during the use of the business's products is referred to as product liability. The magnitude of losses resulting from product liability claims has increased greatly in recent years with an increase in class action lawsuits.

A customer role that describes a person in an organization who is responsible for choosing which product or service will be obtained is the __________. A. decision maker B. purchaser C. end user D. influencer

A

A(n) _____ is the amount of inventory that results in the minimum cost, considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory. A. optimum stocking level B. periodic inventory C. economic order quantity D. micro inventory

A

According to the Panel Study of Entrepreneurial Dynamics (PSED), when an entrepreneur comes up with the idea from others, the single greatest idea source is from: A. discussions with friends and family. B. discussions with potential or existing customers. C. discussions with existing suppliers or distributors. D. discussions with potential or existing investors or lenders.

A

According to the poll conducted by the National Federation of Independent Business (NFIB), small business faced cash flow problems because of: A. delayed payments from customers. B. lack of seasonal fluctuation in sales. C. delayed payments from vendors. D. unexpected increases in taxes.

A

After being in business for 24 months, Paul's auto spare parts company Chromson Inc. grows to a relatively stable size. Which of the following would be Paul's primary financial management need at this stage? A. Building owner's wealth B. Clearing all debts C. Implementing bootstrapping techniques D. Establishing internal control over assets

A

After being in business for 24 months, Paul's auto spare parts company Chromson Inc. grows to a relatively stable size. Which of the following would be Paul's primary financial management need at this stage? A. Building owner's wealth B. Clearing all debts C. Implementing bootstrapping techniques D. Establishing internal control over assets

A

An organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area is referred to as a(n) _____. A. community development organization B. accelerator C. economic cooperation organization D. limited partnership

A

Identify the managerial accounting technique which looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize gains. A. Cost-volume-profit analysis B. Marginal revenue costs analysis C. Break even analysis D. Cash flow analysis

A

In Connie's business plan, which of the following components is most likely to be of interest to Mr. Johnson? A. Cash flow and cash cycle B. Growth rate C. Competitive advantage D. Amounts and schedules for returns

A

Jacob has started a graphic design company called Interon Graphics. As Interon Graphics moves into the growth phase, which of the following would be Jacob's dominant financial management need? A. Obtaining increasing amounts of cash inflows B. Establishing internal control over assets C. Conserving the money that the business has D. Clearing all debts

A

Jacob has started a graphic design company called Interon Graphics. As Interon Graphics moves into the growth phase, which of the following would be Jacob's dominant financial management need? A. Obtaining increasing amounts of cash inflows B. Establishing internal control over assets C. Conserving the money that the business has D. Clearing all debts

A

Josh, the owner of a software company, is facing cash flow problems. To control the cash outflow, he avoids paying the bills to his vendors. After much delay, he sends a check in payment but intentionally forgets to sign the check. To prevent the cash from going out of his business, Josh is applying the strategy of _____. A. gaming the payment process B. timing the purchases C. noncash incentives D. trade discount payments

A

Many businesses have either relatively few large sales events or highly seasonal sales that complicate forecasting cash inflows. Which of the following is not an example of such a company? A. A restaurant B. Retailing C. Real estate brokers D. Water parks

A

Operations management is primarily concerned with: A. directing and controlling. B. planning and organizing. C. staffing and planning. D. controlling and organizing.

A

Small business owners' unique selling points (also known as benefits) that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition is known as: A. value proposition. B. long-term value. C. tangibility. D. total product.

A

Susan, who is a florist, purchases her flowers on credit. Lucy, a customer, takes eight bouquets and promises to pay Susan within two weeks. The amount that Lucy owes Susan is termed _____. A. receivables B. deposits C. charge backs D. payables

A

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who would manage the budgets and expenses of the business. Tammy buys her craft materials on credit from her supplier but clears all her debts at the end of every month. The amount that Tammy owes her supplier is referred to as _____. A. payables B. charge backs C. deposits D. receivables

A

Ted's business, situated near the Missouri River, was partially destroyed when the river overflowed after a deluge. Which of the following measures would've helped Ted minimize the effect of the flood from interrupting the operations of his business? A. Creating provisions for subcontracting work B. Developing an informal code of ethics for all employees to follow C. Ensuring that all employees have easy access to all assets D. Securing valuable assets from low-level employees

A

The number one source of financing for small businesses is from _____. A. the owners themselves B. angel investors C. government programs D. banks

A

The practice of acquiring inventory only in response to a completed sale is called a(n) _____. A. pull-through system B. economic order quantity C. optimum stocking level D. point-of-sale system

A

The steps in Blank and Dorf's "Get Customers" funnel are awareness, interest, consideration, and purchase. Here, consideration refers to: A. the process of getting into the prospective customer's final list of brands of products or services they may purchase. B. the process of prospective customers taking some action to learn more about the product or service you offer. C. the process of getting your message out as much as you can to your target market. D. the end of the initial promotional funnel.

A

Which of the following is an advantage to renting capital assets? A. Renting usually protects you from unexpected costs of repairs. B. You have an ownership position. C. You can exercise control over cash outflows. D. The dollars paid in rent will not exceed the dollars you would spend to own the asset.

A

Which of the following is an example of debt financing? A. Incubators B. Crowdfunding C. Tax abatement D. Angels

A

Which of the following is not generally considered to be very useful for any purpose other than accounting and income taxes? A. Book value B. Salvage value C. Replacement value D. Disposal value

A

Which of the following is not one of the primary criteria for a small business's record keeping system? A. The ability to outsource the task. B. The timeliness of reports. C. The security of data. D. Understandability to the manager of the business.

A

Which of the following is true of financing small businesses? A. There are several resources available for financing start-ups. B. Funding is only important when a business is just starting. C. A business has fixed financial goals in all stages of its development. D. The most popular source of financing for start-ups is from commercial banks.

A

Which of the following is true of government agencies that issue grants? A. They publish RFPs that specify the conditions of a grant. B. They require each business to create a proposal using formats that best fits the business. C. They only provide funding after a long evaluation of applications which generally takes over a year to process. D. They are unstructured and prefer informal approaches from companies.

A

Which of the following is true of the ADA Technical Assistance Program? A. It provides specific advice to a business concerning how to comply with the pertinent requirements. B. It provides inspection of the workplace to determine compliance. C. It provides affirmation services to all businesses. D. It provides its services only to large businesses that have more than 500 employees.

A

Which of the following is true of theories based on the bounded rationality models? A. It assumes that people are inefficient processors of information. B. It assumes that people use complete information and incomplete analyses to make decisions. C. It assumes that people have unlimited abilities to obtain and process information. D. It assumes that the human mind is fundamentally irrational.

A

Which of the following statements is true of documenting the operations of your business? A. Every business process does not have to be extensively documented. B. You will not have to give up any personal control of your business, even if you have employees. C. Businesses with no employees use a different process than do those businesses with employees. D. A typical start to the task of documenting the processes of an operating business is to start from the bottom up.

A

Which of the following statements is true of nondirect distribution? A. A product's final price is more than the manufacturing cost if intermediaries are involved. B. An agent sells products to consumers or end-users, typically in small quantities. C. Distributors and wholesalers tend to take on start-up products due to zero setup charges. D. A retailer represents a manufacturer's product to other business-to-business middleman firms.

A

_____ is a type of CRM report that segments by customer or customer group on purchases or dates of purchase. A. Customer vector B. Sales report C. Customer service D. Interim report

A

_____ is the name given to the bank's accounting system for all recognized transactions that affect the account, including deposits, electronic transfers, service fees, and checks presented to the bank for payment. A. Bank ledger balance B. Company book balance C. Overdraft balance D. Bank available balance

A

_____ ratios measure the business's ability to pay debts and expenses that are due in the current accounting period. A. Liquidity B. Profitability C. Activity D. Leverage

A

_____ refers to family or friends letting you add your purchases with theirs in order to get lower prices. A. Piggybacking B. Accelerated cash-outs C. Free use D. Overpayment

A

_____ refers to the value of a business that exceeds the sum of the value of all individual assets but that cannot be sold separately from the business. A. Goodwill B. Collateral C. Inventory D. Debt

A

_____ refers to the value of a business that exceeds the sum of the value of all individual assets but that cannot be sold separately from the business. A. Goodwill B. Collateral C. Inventory D. Debt

A

the _____ stage of a business, the emphasis of financial management is to build owner wealth, to conserve assets, to match cash inflows to outflows, and to maximize the return on capital assets by making optimal investing decisions. A. operations B. exit C. growth D. start-up

A

Master Budget

A budget, also referred to as a comprehensive budget, consists of sets of budgets that detail all project receipts and spending for the budgeted period

Financial Flexibility

A business's ability to manage cash flows in such a manner that the company can respond appropriately to unexpected opportunities and needs

EEOC

A commission established to enforce the provisions of the Equal Employment Opportunity Act Their rule making authority has grown from the agency start in 1964 5 protected classes: Race Color religion sex or national original Since then this has grown: Age discrimination Rehabilitation ADA Civil Rights Act

False

A company's goodwill is its best collateral.

Expense

A decrease in owners' equity caused by consuming your product or service

Budget

A financial plan for the future, based on a single level of operations; a quantitative expression of the use of resources necessary to achieve a business's strategic goals

Which of the following is not something a manager needs in order to make good decisions?

A good support system.

Liquidity

A measure of how quickly a company can rise money through internal sources by converting assets to cash

False

A measure of the amount of debt relative to total investment is called cost of capital.

FALSE

A privately owned company will always have greater value than a publicly owned company.

false

A publicly owned company will always have a greater value than a private one.

Cost of Goods Sold Budget

A schedule that shows the predicted cost of product actually sold during the accounting period

Civil Rights Act of 1991

A series of acts by congress that prohibit discrimination on the bases of race color religion sex national origin

Internal Control

A set of rules and procedures that work to limit the opportunity of remployees theft or malfeasance Primary method to ensure honest in employees Matter of establishing policies and procedures that work to make dishonesty difficult and honesty easy Most basic technique is to separate the duties of maintaining the security of assets from the duties of maintain record of those assets Ex: Adverser Possession- Owner of real property does not enforce property rights and allows for non owner to use the property as if it were his or her own Separation of Duties

Cash Flow Statement

A statement of the sources and uses of cash in a business for a specific period of time

Separation of Duties

A type of internal control that separates the physical control of an asset from the persona accounting for that asset

_____ is a measure of how much money can be made available to pay obligations within the fiscal year. A. Current ratio B. Return on investment C. Return on equity D. Profitability ratio

A. Current ratio

Which of the following is true of accounting equation? A. It is used to place records into understandable categories that are useful for managing a business. B. It assumes that a successful business will stay in business and this enables long-range planning and strategy. C. It underlies the legal forms of establishing businesses, such as corporations, limited partnerships, and limited liability companies. D. It ensures that accounting information is useful to the firm's stakeholders.

A. It is used to place records into understandable categories that are useful for managing a business.

Which of the following is a feature that a chosen accounting system should have? A. It should facilitate the development of a cash budget. B. It should limit the production of custom reports that meet management needs. C. It should show the financial position of the business only after elaborate processing. D. It should have a limited context-independent help function.

A. It should facilitate the development of a cash budget.

Which of the following steps helps to protect cash from being stolen by employees? A. Running periodic credit checks on employees who have access to a business's finances B. Having internal and external audits and ignoring any variances in the budget C. Assigning only one person to authorize bill payments and to write the checks for payments D. Hiring an employee to examine every aspect of cash inflows of a business

A. Running periodic credit checks on employees who have access to a business's finances

Which of the following is more indicative of a business's financial strength? A. Short-term investments B. Prepaid expenses C. Accounts payable D. Inventories

A. Short-term investments

_____ is an accounting approach based on specific accounting requirements set by governmental taxing agencies. A. Tax accounting B. Managerial accounting C. Benchmarking D. Forensic accounting

A. Tax accounting

Juan has an accounting philosophy according to which he keeps the loans borrowed from the business separate from the loans he takes from banks for his own purposes. Which of the following basic accounting concepts is reflected in Juan's accounting philosophy? A. The business entity idea B. The going concern expectation C. The accounting equation D. The revenue and expense premise

A. The business entity idea

Which of the following is true of financing small businesses? A. There are several resources available for financing start-ups. B. Funding is only important when a business is just starting. C. A business has fixed financial goals in all stages of its development. D. The most popular source of financing for start-ups is from commercial banks.

A. There are several resources available for financing start-ups.

Which of the following is true of government agencies that issue grants? A. They publish RFPs that specify the conditions of a grant. B. They require each business to create a proposal using formats that best fits the business. C. They only provide funding after a long evaluation of applications which generally takes over a year to process. D. They are unstructured and prefer informal approaches from companies.

A. They publish RFPs that specify the conditions of a grant.

Financial accounting is primarily intended for: A. bankers, investors, and regulators. B. calculating and reporting taxes. C. predicting the results of management decisions. D. avoiding penalties for noncompliance.

A. bankers, investors, and regulators.

A(n) _____ refers to the sum of cash inflows and cash outflows recorded in a firm's accounting records. A. company book balance B. bank ledger balance C. overdraft balance D. bank available balance

A. company book balance

According to the poll conducted by the National Federation of Independent Business (NFIB), small business faced cash flow problems because of: A. delayed payments from customers. B. lack of seasonal fluctuation in sales. C. delayed payments from vendors. D. unexpected increases in taxes.

A. delayed payments from customers.

Uncertainty of returns in a business is referred to as _____. A. financial risk B. accelerated cash-out C. overpayment D. collateral

A. financial risk

Josh, the owner of a software company, is facing cash flow problems. To control the cash outflow, he avoids paying the bills to his vendors. After much delay, he sends a check in payment but intentionally forgets to sign the check. To prevent the cash from going out of his business, Josh is applying the strategy of _____. A. gaming the payment process B. timing the purchases C. noncash incentives D. trade discount payments

A. gaming the payment process

In general, all forms of business organization can be categorized based on the owners' responsibilities for the organization's liabilities, and _____. A. how the business is taxed B. how the business is financed C. the business's target market D. whether it is a manufacturing or service organization

A. how the business is taxed

When debt increases as a percentage of total investment, the value of the firm: A. increases at a decreasing rate. B. decreases at an accelerated rate. C. increases at an accelerated rate. D. decreases at a decreasing rate.

A. increases at a decreasing rate.

There are two general sources of gift financing: A. institutional and personal. B. friends and family. C. consumer and commercial banks. D. angel and venture investors.

A. institutional and personal.

A charge for the use of money, usually figured as a percentage of the principal is called _____. A. interest B. dividend C. tax D. chargeback

A. interest

A comprehensive budget is also referred to as the: A. master budget. B. sales budget. C. purchases budget. D. universal budget.

A. master budget.

Training and flexible hours are a part of the _____ strategy used to control money that is expected to leave the firm. A. noncash incentive B. trade discount C. barter system D. gaming payment

A. noncash incentive

Activities involved in producing and selling goods and services are called _____ activities. A. operating B. investing C. financing D. marketing

A. operating

At the _____ stage of a business, the emphasis of financial management is to build owner wealth, to conserve assets, to match cash inflows to outflows, and to maximize the return on capital assets by making optimal investing decisions. A. operations B. exit C. growth D. start-up

A. operations

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who would manage the budgets and expenses of the business. Tammy buys her craft materials on credit from her supplier but clears all her debts at the end of every month. The amount that Tammy owes her supplier is referred to as _____. A. payables B. charge backs C. deposits D. receivables

A. payables

Financial statements containing estimated or hypothetical information are called: A. pro forma statements. B. assumed income statements. C. tentative balance sheets. D. annual report statements.

A. pro forma statements.

A delay in delivering checks from the writer of a check to the recipient's bank is called _____. A. processing float B. overdraft C. availability float D. charge back

A. processing float

Susan, who is a florist, purchases her flowers on credit. Lucy, a customer, takes eight bouquets and promises to pay Susan within two weeks. The amount that Lucy owes Susan is termed _____. A. receivables B. deposits C. charge backs D. payables

A. receivables

Borrowing money is a better alternative to investing additional personal funds because obtaining equity investment from others: A. reduces the potential loss for any single investor. B. allows lesser debt to be included in the capital mix. C. increases the cost of capital for the business. D. increases the weighted average cost (WAC) of the business.

A. reduces the potential loss for any single investor.

The number one source of financing for small businesses is from _____. A. the owners themselves B. angel investors C. government programs D. banks

A. the owners themselves

Ted, a 46-year-old IT professional, recently attended a job interview at Acton Org. He was not offered the job. Ted tried to find the reasons for his disqualification and the company could not provide a satisfactory explanation. He later learned that he was refused the job due to his age as the job position was offered to a 23-year-old who had just graduated from college. Which of the following laws protect Ted from such discriminations?

ADEA

B 40%

According to the Wells Report submitted by The Association of Certified Fraud Examiners, the most likely method to discover fraud is through a(n) _____. A) internal audit B) tip C) external audit D) confession by the culprit

Present and Projected Cash Flow

According to the book, historically, what factor is largely the driving force in valuing a company?

The company's culture

According to the book, which is not a key factor influencing valuation?

Managerial Accounting

Accounting methods that are specifically intended to be used by managers for planning, directing, and controlling the business

Operating Activities

Activities involved in producing and selling goods and services

Financing Activities

Activities through which cash is obtained from and paid to lenders, owners, and investors

_____ is an accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service.

Activity-based cost estimates

MACRS Rate

An Internal Revenue Service acronym for the Modified Accelerated Cost Recovery System. The MACRS approach lets taxpayers depreciate more of the cost earlier in the life of a capital expense

Tax Accounting

An accounting approach based on specific accounting requirements set by governmental taxing agencies

managerial accounting.

An accounting method that is specifically intended to be used for planning, directing, and controlling a business is called:

Activity-Based Cost Estimates

An accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service

American with Disabilities

An action of congress that requires business make provisions for access by disabled people

Surety Bonds

An agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual agreements

Deductible

An amount of loss that is specifically excluded by the insurance contract not paid by an insurance company The HIGHER the deductible the LOWER the policy premium payments will be

Personnel Insurance

Available to protect both you and your employees forms pacific risks Key person insurance, life, disability and medical coverage : available to protect both you and your employees from specific risks Life Disability Medical coverage

A _____ is a type of intellectual property, not created by the government but is information known to certain people in a company that makes that company more competitive. A. copyright B. trade secret C. patent D. trademark

B

A business plan that provides information to potential licensees is referred to as a(n) _____ plan. A. screening B. invention C. operational D. concept

B

A jewelry store promises to deliver custom-made wedding rings to a buyer within 2 weeks. However, it charges ten percent of the sales price in advance. In this example, which of the following techniques is the store using to increase cash inflows? A. It is offering discounts to customers for prompt payment. B. It is taking deposits and progress payments. C. It is factoring all receivables. D. It is taking on noncore paying projects.

B

A(n) _____ refers to a part of a contract in which a party to the contract states that he or she will not be responsible for certain actions. A. noncompete clause B. exculpatory clause C. hold harmless clause D. power of sale clause

B

After determining an organization's compensation philosophy, the next step in developing a compensation plan is to: A. develop a job description. B. find comparison factors for salary. C. provide stock options or stock grants to employees. D. offer employer-sponsored health insurance.

B

Crux Inc. and Synapse Inc. are two competing businesses in the same city. They use the services of the same insurance company and have taken the same policy. Crux has a higher deductible than Synapse for the policy. Which of the following statements would be true in this case? A. Both companies are not paying any premium. B. Synapse pays a higher premium than Crux. C. Both the companies pay the same premium. D. Crux pays a higher premium than Synapse.

B

Documenting the operations of your business, you must understand how three items relate to each other. Which of the items below is not one of those three related items? A. procedure B. property C. work instructions D. process

B

Economic order quantity (EOQ) helps a business to think in terms of: A. factoring receivables. B. ordering costs and carrying costs. C. pledging receivables. D. ordering costs and operating lease.

B

Eddie, the owner of a fast-food joint, finds that he spends far lesser when he bakes breads in dozens than when he bakes two or three loafs at a time. This idea of Eddie's is similar to the concept of: A. break-even point. B. economy of scale. C. economy of scope. D. monopoly.

B

Financial management requires that you have some method to measure and compare your financial position and financial results. Your financial position is reflected on your _______, your financial results on your _______. A. master budget; return on investment B. balance sheet; income statement C. return on investment; master budget D. income statement; balance sheet

B

Marcie works at a public library and she is responsible for purchasing all audiobooks for the library. Marcie reads reviews of the titles from the available monthly circulars, choosing the titles she would like to add to the collection. Marcie then sends the order to the technical services department where Linda places the order. In this case Linda is playing the customer role of _________. A. decision maker B. purchaser C. influencer D. end user

B

Market scope is important because: A. it helps business owners in determining the size of the target market. B. it helps business owners to decide where to focus their sales and advertising efforts. C. it helps business owners in designing a product. D. it helps business owners in calculating their magic number.

B

Most small businesses are more _____ than _____. A. cost-directed, profit-directed b. imitative, innovative c. profit-directed, cost-directed d. innovative, imitative

B

Orion Inc. was started as a small organization with five employees. After the first year's profits were made, the owners decided to invest the profits in expanding the business. This is an example of financing the business using _____. A. benchmarking B. bootstrapping C. piggybacking D. outside equity

B

The process of determining the effect of price and quantity changes on revenues and expenses refers to: A. accounting analysis. B. variance analysis. C. pro forma budgeting. D. financial flexibility.

B

To treat family and nonfamily employees as similarly as possible in a business, it is important to: A. have separate personnel policies for family and nonfamily members. B. create career ladders for nonfamily members. C. provide favorable treatment to nonfamily members. D. guarantee the possibility of employee ownership.

B

Walter Bradham, the owner of Bradham Corporation muddled his personal finances with his business accounts. Following a suit into the financial irregularities at Bradham Corporation, a court subjected the Corporation to the decision of piercing the veil. Which of the following course is the court most likely to take in this case? A. It will convert Bradham Corporation into a separate legal entity. B. It will dissolve the corporation into a sole partnership under Bradham. C. It will change Bradham's liability in the business to one that of a limited partner. D. It will hold that Bradham has no personal liability for Bradham Corporation's debt.

B

When an entrepreneur gets funding for his business from an account that his family had initially set up for his future education or a first home, it is referred to as _____. A. piggybacking B. accelerated cash-out C. free use D. overpayment

B

Which of the following is true of leasing issues? A. Landlords do not have the right to move a business elsewhere at their discretion. B. It costs more to limit the landlord's ability to lease to competing businesses. C. It is irrelevant to look for stores in a landlord's property that match your business hours. D. There are no penalties or problems for rent default.

B

Which of the following statements is not true of the product life cycle? A. There are four stages to the product life cycle. B. Stages in the product life cycle are not similar to those of the firm's life cycle. C. Not all products survive the introduction phase of the product life cycle. D. Most small businesses can only afford to launch a product on a small scale.

B

Which of the following statements is true of business plans? A. Firms without a business plan are less likely to close down than firms with plans. B. External legitimacy for a firm is best established by creating business plans. C. Typically, the higher-performing firms in any industry tend to be those who do not have any business plan. D. Having a business plan guarantees higher profits.

B

Which of the following statements is true of the company section of a business plan? A. The overall description of the business financials forms the core part of this section. B. The product or service subsection mentions any protection through a proprietary technology. C. The company background subsection includes information about the pilot sales efforts and the floor plans. D. The tagline and elevator pitch of the business form the subsections of company description.

B

Which of the following statements is true of the target market? A. Your Total Available Market (TAM) represents the customers that you think would be interested in your particular product or service. B. Your target market is the same as your Serviceable Obtainable Market (SOM). C. Your Penetrated Market (PM) is your target market divided by your actual number of customers. D. Your Serviceable Available Market (SAM) is never the same as your Total Available Market (TAM).

B

Which of the following terms refers to a concept in public importance which alludes to the degree to which the issue is immediate in its impact? A. Proximity B. Currency C. Power D. Cultural resonance

B

Which of the following would implicate employee empowerment? A. Providing learning opportunities at every level of the organization through training B. Letting employees make on-the-spot decisions for the companies' best interest C. Providing meaningful work for employees and keeping them occupied D. Showing appreciation for a job well done or giving credit to an employee who introduced a great idea

B

_____ is a strategy whose goal is growth, based on selling in areas or to groups previously not served by the business. A. Market penetration B. Market expansion C. Product expansion D. Diversification

B

_____ is the particular way a firm implements customer benefits that keeps the firm ahead of other firms in the market. A. Industry analysis B. Competitive advantage C. Resource distribution D. Market relinquishment

B

_____ refers to the percentage expense of obtaining future funds. A. Risk B. Cost of capital C. Rate on investment D. Return on investment

B

_____ refers to the practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold. A. Barter B. Consignment C. Noncash incentive D. Benchmarking

B

________ is setting a price at the highest level the market will bear, usually because there is no competition at the time. A. Premium pricing B. Skimming C. Odd-even pricing D. Partitioned pricing

B

________ is the series of steps and activities required to complete a process. A. Work instructions B. A procedure C. Operations D. GAAP

B

Which of the following is a correct representation of typical accounting functions? A. Credit card sales function helps to ensure that payroll and employment taxes are kept current. B. Accurate and timely accounts receivable records are essential for making decisions concerning the extension of credit. C. Leasehold records help to ease the problems of keeping necessary insurance coverage current and in force. D. Insurance register helps to track the amount of discount and charge backs taken by your credit card provider.

B. Accurate and timely accounts receivable records are essential for making decisions concerning the extension of credit.

Which of the following does the accounting equation state? A. Revenue = Expense B. Assets = Liabilities + Owners' Equity C. Liabilities = Owners' Equity D. Net income = Long-term Liabilities

B. Assets = Liabilities + Owners' Equity

Which of the following is a statement of what a business owns, what it owes to others, and how much value the owners have invested in it? A. Income statement B. Balance sheet C. Cash flow statement D. Statement of retained earnings

B. Balance sheet

Every month, David, an assistant at a shoe store, steals money from his employer, after it has been received and recorded in the books, by altering the accounting records in the company book. David's act falls under which of the following categories of theft? A. Shoplifting B. Embezzlement C. Skimming D. Phony disbursement

B. Embezzlement

_____ is an indicator of the business's ability to manage cash flows so that the company has the fiscal ability to respond appropriately if an unexpected opportunity or problem arises. A. Liquidity B. Financial flexibility C. Absorbability D. Equitability

B. Financial flexibility

_____ is a measure of the amount of debt relative to total investment. A. Cost of capital B. Financial leverage C. Optimum capital structure D. Financial risk

B. Financial leverage

_____ represent either ownership or debt of publicly held firms and government issued debt, in the form of bonds, notes, and bills. A. Demand deposits B. Marketable securities C. Set-asides D. Traveler's checks

B. Marketable securities

Larry owns a successful business called Super Car-Hire. He plans to sell it to Bob. Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well. Which of the following basic accounting concepts is reflected in Bob's assumption? A. The business entity idea B. The going concern expectation C. The accounting equation D. The revenue and expense premise

B. The going concern expectation

Aaron, a businessman, has a method of keeping track of accounts receivable by sorting them into groups of those that are 30, 60, 90, and over 90 days past due. Aaron's key in controlling receivables is to have them _____, by sorting them into groups. A. collected B. aged C. merged D. written-off

B. aged

A(n) _____ is a delay in transferring money among banks due to internal procedures. A. overdraft B. availability float C. charge back D. processing float

B. availability float

Currency is a form of cash represented by: A. stocks and bonds. B. bills and coins. C. commercial paper. D. demand deposits.

B. bills and coins.

Orion Inc. was started as a small organization with five employees. After the first year's profits were made, the owners decided to invest the profits in expanding the business. This is an example of financing the business using _____. A. benchmarking B. bootstrapping C. piggybacking D. outside equity

B. bootstrapping

Money contributed to businesses in return for part ownership of the business is called a(n) _____. A. debt B. equity capital C. gift D. loan

B. equity capital

The percentage amount that the payout of an investment differs from original cost is known as: A. dividend on capital. B. gain on investment. C. risk on investment. D. interest on the principle.

B. gain on investment.

Reconciliation of bank and book balances helps to: A. estimate the bank ledger balance for managing the cash flow of a business. B. identify any mistakes made by either a bank or by a business. C. provide an approximate value of cash held by a business. D. exclude items on a bank statement that are not included in a business's accounting records.

B. identify any mistakes made by either a bank or by a business.

To perform _____ analyses, only cash flows are considered. A. benchmarking B. net present value C. cost-benefit D. SWOT

B. net present value

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who manages the budgets and expenses of the business. Within a few months, David notices problems in cash flow. Although not the primary strategy of her business, Tammy takes up craft projects for kindergarten schools in an effort to increase cash inflow. This kindergarten project is an example of a(n) _____. A. consignment B. noncore project C. charge back D. arraignment

B. noncore project

The process of determining the effect of price and quantity changes on revenues and expenses refers to: A. accounting analysis. B. variance analysis. C. pro forma budgeting. D. financial flexibility.

B. variance analysis.

True

Borrowing money for capital investment enhances the potential for higher rates of return for the owners.

B

Business risk is: A) the probability that a business will understate its revenues and overstate its deductible expenses. B) the probability that the future state of the business will be less successful than planned. C) the probability chance that a business will grow two-fold in a year. D) the probability level of two different businesses having to share the same resources.

Aaron, a businessman, has a method of keeping track of accounts receivable by sorting them into groups of those that are 30, 60, 90, and over 90 days past due. Which of the following actions will the collection agency which buys the delinquent account from Aaron do? A. Collect the entire amount owed and return it to Aaron. B. Sell it back to Aaron after collecting the entire amount owed. C. Collect the entire amount owed and keep all the money it obtains. D. Take mild actions and collect a token amount.

C

After successfully operating for five years, Tina plans to sell her computer service center. Which of the following would be Tina's main financial management need as she exits the business through sale? A. Obtaining increasing amounts of cash inflows B. Building her wealth and conserving assets C. Optimizing capital structure for profits D. Conserving the money that the business has

C

An ideal situation is where a business receives new inventory just as the last unit of the previous order is sold. However, this rarely occurs because the: A. inventory level is not affected by demand. B. delivery times never fluctuate. C. sales volumes are not constant. D. estimate never exceeds demand.

C

In a business, accepting payments by credit card causes significant differences between the bank and book balances because the credit card service provider: A. records the gross amount of each credit card sale. B. deposits the amount of the sale in the business's account on the date of the sale itself. C. deposits the sale amount in the business's account after deducting a service fee. D. retains the sale amount in the business's account in the event of customer challenge.

C

In evaluating potential employees, a small business owner: A. should hire a moderately qualified person in case filling the position is an urgent requirement. B. should ensure that only a single interviewer meets with a candidate in order to avoid conflicting evaluations. C. should design interview questions such that "yes" or "no" answers are not applicable. D. should accept the candidate's word that he or she possesses a certain skill or knowledge base.

C

Lenders use operating income as: A. a measure of how well management achieved sales. B. an indication of future sales. C. a measure of how much debt a business can support. D. an indication of a business's ability to control costs.

C

Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business, are called _____. A. discount projects B. charge backs C. noncore projects D. consignments

C

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who manages the budgets and expenses of the business. David prepares the quarterly budget and maintains a company book for recording all transactions. The company book balance that David regularly updates is the sum of: A. the actual amount of cash that is available to the firm at any specific time. B. the deposits and withdrawals recorded in a bank's accounting records. C. the cash inflows and cash outflows recorded in the firm's accounting records. D. the negative balance in a depositor's bank account.

C

The capital budgeting equation used to measure the relationship between initial investment and the profits that are expected to be received from making the investment is called _____. A. rate of investment B. return on equity C. return on investment D. net present value

C

The emphasis of financial management during the _____ phase is to obtain increasing amounts of cash inflows to pay for added inventory, productive assets, and employees. A. start-up B. exit C. growth D. operations

C

The fourth step of a small business' strategic planning process involves: A. considering the customers and the benefits to offer them. B. refining the firm's capabilities in order to maintain a competitive advantage. C. determining the best strategic direction and strategy for the firm. D. studying the dynamics and trends of the industry.

C

The level of probability that an investment will not produce expected gain is called _____. A. interest B. dividend C. risk D. diversification

C

The makers of baby wipes began advertising their products for adult use, for everyone's use. This is an example of a product during which stage of the product life cycle? A. The decline stage B. The introduction stage C. The maturity stage D. The growth stage

C

The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer is termed as _____. A. perpetual inventory B. point-of-sale system C. just-in-time inventory D. optimum stocking level

C

The ratio of debt to equity that provides the maximum level of profits is called _____. A. cost of capital B. declining financial leverage position C. optimum capital structure D. weighted average cost

C

There are two points in the presentation where your listeners will be giving you value. Which of the following are those two points? A. In the contacts you make and the experience you gain. B. In the questions they ask and the contacts you make. C. In the questions they ask and the feedback they give. D. In the feedback they give and the experience you gain.

C

We use many electronic forms of money: debit cards, online bill payments, electronic bank drafts, and wire transfers. These forms of money make an important point - the essence of money is that it is a form of ______. A. cash B. currency C. information D. growth trap

C

What is the goal of appendixes? A. To inform customers and partners about a firm and its products B. To establish marketing strategies and identify major competitors C. To provide supporting information that helps detail the key selling points of a plan D. To explain the growth plan and competitive strategies

C

Which of the following concepts is based on the perception that promises have been made in exchange for certain employee obligations such as giving of their energy, time, and technical skills? A. Open-book policy B. Work facilitation C. Psychological contract D. Autonomy

C

Which of the following forms of direct response advertising allows very specific targeting and is appropriate for business-to-business selling? A. Television B. Radio C. Magazine D. Billboard

C

Which of the following is a difficulty that arises in understanding and interpreting the income statements? A. There is difficulty deciding whether to report the revenues. B. There is difficulty deciding what should be considered as expenses. C. There are disputes over when to recognize revenues. D. There are disputes over the preferred tax rate to incorporate.

C

Which of the following is a drawback to financing with debt? A. You will be required to make periodic reports detailing how the money is being used. B. You will be selling a portion of your business. C. Payment is expected even if you have no money to make the payment. D. Your business must be organized as one of three legal forms of business.

C

Which of the following is an advantage of personal selling? A. It helps in easily establishing and promoting a favorable opinion by the media. B. It helps business owners in generating finance for their business. C. It allows business owners to find out the buyers' main concerns and address them. D. It increases business owners' publicity.

C

Which of the following is most likely to be the key information that joint venture partners seek in a business plan? A. Asset or collateral base B. Cash flow and cash cycle C. Intellectual property protection D. Stability of firm

C

Which of the following is not a benefit of correctly documenting your business processes? A. There should be less waste and scrap in your processes. B. There should be fewer employee mistakes. C. The process is self-sufficient and does not require much time to review or update. D. Extensive documentation will make selling your business much easier.

C

Which of the following is true about trade name? A. There can be only one business using the same name within a state. B. Assumed name is completely different from trade name. C. Most states allow several firms to use the same trade name, as long as the firms are in different lines of business. D. Most states allow several firms to use the same trade name even if they are in the same town and have received a service mark.

C

Which of the following is true of customer retention? A. It focuses on increasing customers' cognitive dissonance. B. It focuses on satisfying prospective customers to make a sale successful. C. It handles problems that crop up after a sale. D. The CRM aspect of customer retention is based on short-term monitoring of customers.

C

Which of the following is true of follow-up? A. It increases cognitive dissonance in customers. B. It is typically done only once after a sale. C. Electronic approaches to follow-up dramatically lower the cost of marketing efforts. D. It refers to business owners doing what they said they would do.

C

Which of the following is true of insuring the property of a business? A. All the value of a property has insurable value. B. The value of land is the most commonly insured property. C. The value of the historical significance of a building often cannot be insured. D. The lower the deductible, the lower the policy premium payments will be.

C

Which of the following layouts is more typically found in upscale department stores? A. Grid layout B. Production line layout C. Free-form layout D. Process layout

C

Which of the following ratios is better when it is a lower number? A. Gross margin ratio B. Asset turnover ratio C. Debt to assets ratio D. Current ratio

C

Which of the following reconciles the net increase or decrease with the beginning cash balance and the ending cash balance? A. Net effect of foreign exchange rates B. Noncash investing and financing C. Net change in cash balance D. Noncash operating activities

C

Which of the following statements is not true of a product in the decline stage of the product life cycle? A. One reason for the decline of a product may come from the introduction of new technology. B. Some products' decline is permanent. C. Characteristics of the decline stage differ for each product. D. One reason for the decline of a product may be caused by a shift in consumer preferences.

C

Which of the following statements is not true of creating a customer profile? A. The process for a start-up should begin with face-to-face interviews with potential customers. B. It should be typically applied at the decline stage of the product life cycle Analyze the results of interviews by first looking at the problems your interviewees were trying to solve. C. The goal of these interviews is to get as many responses as possible. D. The hardest part of preparing the interview is figuring out what the problem context is.

C

Which of the following statements is true of a business plan presentation? A. Typically, a business plan presentation does not follow the content of a business plan. B. The content of a business plan presentation remains the same for different audiences. C. Handouts are mailed or distributed when the business plan changes frequently. D. Listeners check presentations for the content and not for the professionalism and passion of the presenter.

C

Which of the following statements is true of a vision statement? A. An overview of a business and its immediate goals form a vision statement. B. A vision statement describes a firm's goal and its competitive advantages. C. A tagline or a slogan is a good way to present vision statements. D. A vision statement gives more detail about a business than an executive summary.

C

Which of the following statements is true of an executive summary? A. It is written in an informal style for investors and lawyers. B. It gives fewer details about the business than an elevator pitch. C. It is the single most widely distributed written description of a business. D. It is typically put at the end of a business plan.

C

Which of the following statements is true of joint ventures? A. It requires both partners involved to allocate revenues and expenses equally between them. B. It is not considered a separate entity from any of the partners that own it. C. It does not require its partners to lose more than what each partner has invested in it. D. It is never taxed as a partnership.

C

Which of the following statements is true of low customer contact businesses? A. Customer access is relatively important when compared to high customer contact businesses. B. Some examples of low customer contact businesses are restaurants and dry cleaners. C. Empowerment zones offer businesses low-cost space and tax advantages. D. Business incubators are expensive and offer limited small business support services.

C

Which of the following statements is true of marketing research? A. Marketing research can falls into one of three categories. B. Marketing research can verify the size of the potential market but does not tell you where potential customers are likely to shop. C. Marketing research can tell you what customers consider a reasonable price. D. Marketing research cannot verify the size of the potential market.

C

_____ measure a management's effectiveness in using the invested capital of the business to provide profits. A. Profitability ratios B. Gross margin ratios C. Return on investments D. Return on equity

C

The information that the account holder knows about his or her account, but the bank does not know, includes:

C. any deposits the holder has made after bank closing.

Which of the following ratios is used to estimate the liquidity of a business? A. Inventory turnover ratio B. Total assets to total liabilities ratio C. Current ratio D. Quick ratio

C. Current ratio

_____ refers to the ability of a business to survive adverse financial events. A. Liquidity B. Financial flexibility C. Financial strength D. Profitability

C. Financial strength

Which of the following statements lists revenues and expenses and shows the amount of profit a business makes for a specified period of time? A. Balance sheet B. Statement of retained earnings C. Income statement D. Cash flow statement

C. Income statement

Which of the following accounting functions aids in calculation of appropriate stocking and reorder levels? A. Insurance register B. Investment records C. Inventory accounting D. Payroll records

C. Inventory Accounting

_____ measure a management's effectiveness in using the invested capital of the business to provide profits. A. Profitability ratios B. Gross margin ratios C. Return on investments D. Return on equity

C. Return on investments

Which of the following is a difficulty that arises in understanding and interpreting the income statements? A. There is difficulty deciding whether to report the revenues. B. There is difficulty deciding what should be considered as expenses. C. There are disputes over when to recognize revenues. D. There are disputes over the preferred tax rate to incorporate.

C. There are disputes over when to recognize revenues.

A legal "artificial" entity that is formed by filing specific documents with a state government is called a _____. A. sole proprietorship B. partnership C. corporation D. general partnership

C. corporation

A(n) _____ is a legal obligation to pay money in the future. A. equity capital B. stake C. debt D. gift

C. debt

In a business, accepting payments by credit card causes significant differences between the bank and book balances because the credit card service provider: A. records the gross amount of each credit card sale. B. deposits the amount of the sale in the business's account on the date of the sale itself. C. deposits the sale amount in the business's account after deducting a service fee. D. retains the sale amount in the business's account in the event of customer challenge.

C. deposits the sale amount in the business's account after deducting a service fee.

Any valuable asset that is donated to a business without any obligation to repay or to give any ownership interest is called a(n) _____. A. debt B. equity capital C. gift D. investment

C. gift

False

Community development organizations are private businesses that are authorized to make SBA insured loans to start-ups and small businesses.

Co Insurance

Contract requirement that works to prevent property owners from deliberately underinsuring Owner carry insurance in an amount equal to a stated minimum percentage of the market value of property Most usually 80% If the owner allows insurance coverage to fall below this amount then the amount that the insurance company will pay in the event of loss is reduced by an amount proportional to the amount of underinsurance They want to increase the amount of premium that the insurance company collects relative to the risk that the insurance company is taking by insuring the property The higher the value of property, the greater the likely payout an insurance company will have to make in the event of the loss

FALSE

Crowdfunding usually requires making requests for tasks and generating infor-mation and feedback

TRUE

Crowdsourcing is the umbrella term, under which crowdfunding falls

TRUE

Crowdsourcing requires making requests for tasks and generating infor-mation and feedback.

An organization that supports start-up technology businesses by providing inexpensive office space, a variety of support services, and resources is called a(n) _____. A. LLC B. community development organization C. small business investment company D. incubator

D

Approximately 90 percent of small businesses that fail do so because of ________. A. not enough money flowing out of the business B. too much money flowing in to the business C. lack of profitability D. cash flow problems

D

The weighted average cost (WAC) refers to: A. a legal reduction in taxes by the government. B. the average equity capital costs incurred by a firm per year. C. the percentage cost of obtaining future funds. D. the expected average future cost of funds.

D

Which of the following is a drawback to financing with gift capital? A. It can be very difficult and expensive to turn into a source of capital. B. You will be selling ownership in your business. C. The amount of financing you can raise is limited by the amount of wealth you have personally, the amount of wealth your business owns, and your reputation. D. No foundations exist to specifically provide start-up or working capital funding.

D

Which of the following is a recommended fair personnel policy guideline across family and non-family members? A. Owners should compare the family member hired to the nonfamily member who was not hired for a given position. B. Owners should not hold expectations that their family should work longer and harder than anyone else, because it is the family's business. C. Owners should have clearly differentiated personnel policies for family and non-family members. D. Owners should let family and nonfamily members pick and choose from a set of privileges or benefits.

D

Which of the following is true of the entry wedge of second sourcing? A. It occurs when business firms leave a market. B. It occurs because many big businesses have policies that provide for set-asides for purchases from small businesses. C. It offers the advantage of being globally based. D. It provides a competitive pressure to ensure that suppliers keep providing the best service and prices.

D

_____ is money from selling part of a business to people who are not and will not be involved in the management of the business. A. Dividend B. Bond C. Equity capital D. Outside equity

D

_______ is collected by the IRS and state agencies as a percentage of tax upon payroll. A. Liability insurance B. Workers' compensation insurance C. Malpractice insurance D. Unemployment insurance

D

_____ is an accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service. A. Differential revenues and expenses B. Net present value analysis C. Cost-volume-profit analysis D. Activity-based cost estimates

D. Activity-based cost estimates

_____ is a measure of how quickly a company can raise money through internal sources by converting assets to cash. A. Absorbability B. Equitability C. Nominal value D. Liquidity

D. Liquidity

According to the definition provided by the U.S. Dallas Federal Reserve Bank, which of the following is one of the primary purposes of money? A. Creating competition B. Maximizing the wealth of all citizens equally C. Creating cash flow statements D. Making exchanges

D. Making exchanges

Mr. Hill, who runs a key-chain manufacturing unit, buys raw materials from his supplier during the first week of every month. The supplier's policy states that all payments need to be cleared within 50 days of buying the materials. This schedule ensures that Mr. Hill gets an extended period to make payments thus controlling when the payment is made. Which of the following strategies is Mr. Hill using to control cash outflow? A. Taking a consignment B. Offering trade discount C. Gaming the payment process D. Timing the purchase

D. Timing the purchase

A(n)_____ identifies when, how, and why money is expected to come into the business, and when, how, and why it is expected to leave. A. bearer B. overdraft C. charge back D. cash budget

D. cash budget

Cash that can be obtained from stocks, bonds, land, buildings, or equipment that a business has is called: A. cash flow from operations. B. cash from financing. C. cash flow from subsidy. D. cash flow from investing.

D. cash flow from investing.

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major. Jane purchases a picture frame from Tammy using a credit card. She notices a crack in the frame and returns it to Tammy. Jane contacts the credit card service provider for a refund. The credit card company removes the sale amount from Tammy's account which is referred to as a(n) _____. A. incentive B. liquidity C. overdraft D. charge back

D. charge back

For a business to factor receivables, the _____ must have good credit ratings. A. suppliers B. business C. vendors D. customers

D. customers

Cash payments received before a product is completed or delivered are called _____. A. overdrafts B. discounted payments C. payables D. deposits and progress payments

D. deposits and progress payments

Investing in multiple investments of differing risk profiles for the purpose of reducing overall investment risk is called _____. A. digression B. deviation C. specialization D. diversification

D. diversification

Gifts of money made to a business for a specific purpose are referred to as _____. A. equities B. debts C. tax credits D. grants

D. grants

Which of the following statements is true regarding the balance sheet? A. It is rarely useful to the owners and managers of businesses. B. It contains an exhaustive list of a business's assets and liabilities. C. It always contains exact amounts. D. it's values are considered as historical values.

D. it's values are considered as historical values.

The _____ budget shows the number of units that are expected to be acquired during the budget period. A. cash receipts B. labor C. sales D. purchases

D. purchases

A _____ must be paid in less than one year from the date of the financial statement on which it is reported but can be sold to other investors at any time. A. commercial paper B. demand deposit C. marketable security D. short-term debt

D. short-term debt

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who manages the budgets and expenses of the business. David prepares the quarterly budget and maintains a company book for recording all transactions. The company book balance that David regularly updates is the sum of:

D. the cash inflows and cash outflows recorded in the firm's accounting records.

There are three general types of events that cause business risk. Which of the following is not one of those three general types of events?

Events related to the competitors of the business.

Business risk is the probability that the future state of the business will be better than planned.

F

For me-too products, the stages of new product development are always extensively long.

F

Guerilla marketing is a form of communication that encourages the customer to act immediately, such as coupons, sales, or contests.

F

If your business is wholesale or retail merchandising, the issues of property, plant, and equipment (PPE) constitute your greatest investments and your greatest costs.

F

In a negotiation process, proposing solutions that provide value and balance for all parties involved is considered the easiest step.

F

In a professional corporation, the shareholders are responsible for debts of the corporation.

F

In employee leasing, the leased employees actually work for the hiring company rather than the leasing company.

F

In the context of employee rewards, if entrepreneurs work based on an open-book policy and the company hits a downturn and promises cannot be met, employees are more likely to react badly since they have little or no understanding of the firm's situation.

F

Lines of communication means having a way for the person who has failed to meet a metric, or made a mistake, or is facing firing to have their side of the story heard.

F

Off-the-job techniques include apprenticeships, internships, and job rotation. F

F

On-the-job techniques include orientations, job instruction training, lectures, and case studies.

F

Services have separability of production and consumption.

F

Small businesses never experience any cash flow problems.

F

The Sarbanes-Oxley Act only covers small businesses that are not publicly traded.

F

The OSHA is a commission established to enforce the provisions of the Equal Employment Opportunity Act.

F (False)

Of the strategies employed by small businesses for handling money shortages, the three most common, in order of use, are (1) sell investments, (2) sell receivables, and (3) lay off employees.

False

cash flow

Historically, the value of a company has been largely driven by its present and projected __________.

Tangible assets

Most of the value in manufacturing companies come from:

What should be included in an employee contract for a key employee?

Offer rewards for providing adequate termination notice

Which of the following should be included in an employee contract for a key employee?

Offer rewards for providing adequate termination notice

FALSE

On websites like Indiegogo, do you only get your money if your campaign is suc-cessful?

Depreciation

Regular and systematic reduction in income that transfers asset value to expense over time

depreciation

Regular and systematic reduction in income that transfers asset value to expense over time is called _____.

Adding employees in a firm increases both the amount of work that can be done and the demands on the owner.

T

Meritocracy is the management philosophy of selecting and promoting people based solely on their being the most capable person for the job.

T

One of the policies for managing customer credit requires business owners to maintain constant "aging" of accounts to quickly identify customers who become delinquent.

T

One reason why accounting is important to a small business is that it shows how much your business is worth.

T

Promotion includes getting the message out to the target market so that they can make decisions about a product or service.

T

Radio advertisements provide both geographic and demographic segmentation of a product or service.

T

Reconciling the differences between the bank and book balances gives a corrected bank balance and a corrected book balance which are identical.

T

Sales leads who actually make some sort of effort to learn more about the product, service, or business in anticipation of a possible purchase are known as prospects.

T

The SBIR and the STTR programs require that every U.S. agency that makes research grants provide a minimum of 2 percent of its grant budget to small businesses, as defined by the SBA

T

The business-to-consumer (B2C) contract is an example of an Internet contract.

T

The majority of small business start-ups are funded by bootstrapping

T

The primary areas for conflict resolution in exporting include nonpayment and contract default issues.

T

The time value of money is the concept that a dollar received today is worth much more than is a dollar to be received at some time in the future.

T

The total liability issue in general partnerships is similar to that of sole proprietorships.

T

The value delivered to the customer is second in order of importance to the pricing decision.

T

F

The Age Discrimination in Employment Act makes it illegal to discriminate against people who are younger than 35 years of age. A) True B) False

Current ratio.

The value of current assets divided by current liabilities is called:

What statement represents the problem with legal protection methods for intellectual property?

There is no governmental agency that will assist small business owners in maintaining their legal rights.

1) Events related to the property of the business 2) Events related to personnel 3) Events related to customers and others

Three general types of events that cause business risk:

Jacob often manipulates charges on his travel expenses to indicate higher amounts when he travels for the company he works for. Trent, the accounts manager, accepts fake bills and assists Jacob in deceiving the company. They split the profits made this way. This is an example of theft by:

employee collusion

Premium

is the amount of money that an individual or business must pay for an insurance policy. Iis considered income by the insurance company once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy. Insurance companies examine the type of coverage, the likelihood of a claim being made, the area where the policyholder lives or operates a business, the behavior of the person or business being covered, and the amount of competition that the insurer faces.

C

The OSHA is: A) an act of Congress that provides training for workers who are injured on the job. B) a commission established to enforce the provisions of the Equal Employment Opportunity Act. C) a government agency created to enforce safety in the workplace. D) an act of Congress that makes it illegal to discriminate against people who are older than 40 years of age.

The first task to be completed before a comprehensive insurance program for a business can be developed is:

to identify risks

The rule of thumb for evaluating current ratio is that the minimum acceptable ratio is:

2.0.

_______ is a set of theories and techniques used to optimize the receipt and use of capital assets. A. Financial management B. Bootstrapping C. Profitability D. Cost of capital

A

________ provides a lender with the right to seize specific assets if the loan is not paid back as specified in the loan contract. A. Secured debt B. Collateral C. Debt capital D. Cost of capital

A

OSHA

A government agency created to enforce safety in the workplace. MOST INDUSTRIES do no apply to firms with fewer than 10 employees Should provide medical examinations for all her employees Low hazard industries are exempt from the record keeping requirements of the regulation overs all employees except those in mining, transportation, state and local governments, and self-employment. is a government agency created to enforce safety in the workplace. OSHA rules in most industries do not apply to firms with fewer than 10 employees.

False

A legal obligation to pay money in the future is called equity capital.

Which of the following helps manage risks to physical assets of a business?

A manager's signature must be required to confirm that an item has been returned to its proper storage.

Cost-volume-profit analysis

A managerial accounting technique which looks at the fixed and variable costs of a business to arrive at a number of unit sales (volume) to maximize profits

After being in business for 24 months, Paul's auto spare parts company Chromson Inc. grows to a relatively stable size. Which of the following would be Paul's primary financial management need at this stage? A. Building owner's wealth B. Clearing all debts C. Implementing bootstrapping techniques D. Establishing internal control over assets

A. Building owner's wealth

_____ are notes issued by credit-worthy corporations. A. Commercial papers B. Receivables C. Demand deposits D. Marketable securities

A. Commercial papers

_____ is a method of borrowing against receivables. A. Factoring B. Trading C. Discounting D. Reconciling

A. Factoring

C

Adverse possession occurs when: A) two different business entities share human resources between themselves. B) rules and procedures that work to limit the opportunity for employee theft or malfeasance are enforced. C) the owner of real property does not enforce property rights and allows a nonowner to use the property. D) the physical control of an asset is separated from the person accounting for that asset.

Internal (cost) factors

Aspects of or choices within the business which could cause the business's costs to change

External (cost) factors

Aspects of the world outside the business which could cause the business's costs to change

A(n) _____ is a type of contract by which a new party agrees to perform a duty that one of the original parties to a contract was already legally obligated to perform. A. exculpatory agreement B. subcontract C. unilateral contract D. option contract

B

_____ refers to a situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount of the check. A. Charge back B. Nonsufficient fund C. Reconciling D. Overdraft

B. Nonsufficient fund

Which of the following is true of financial statements? A. The customization of financial reports is illegal in all states. B. The overall content and form of financial statements have been made standard by long usage. C. Bankers and investors are typically new and unacquainted with standard financial statements. D. The differences unique to each industry cannot be represented accurately in financial statements.

B. The overall content and form of financial statements have been made standard by long usage.

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who manages the budgets and expenses of the business. Tammy receives a bulk order from a customer to make 100 paper roses for Valentine's Day. She charges 20 percent of the total sales price in advance and promises to deliver the order within 30 days. The advance payment that Tammy receives for the order before delivering the product is called _____. A. discount payment B. deposit and progress payment C. noncash incentive D. gaming the payment process

B. deposit and progress payment

Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major. Within a few months, the sales increase exponentially which results in a shortage of cash needed to expand their business. This crisis is termed _____. A. nonsufficient funds B. growth trap C. charge back D. reconciling

B. growth trap

For an owner, the main financial management emphasis while transferring a business to family members must be to: A. increase the cash-to-cash cycle to the highest time possible. B. increase asset value. C. optimize capital structure for profits. D. maximize debt.

B. increase asset value

Small businesses use the periodic inventory method because it: A. gives instant access to accurate inventory records. B. records the receipt and sale of each item as it occurs. C. meets the requirements of local and federal taxing agencies. D. uses bar codes that are unique to each item of inventory.

C

Aaron, a businessman, has a method of keeping track of accounts receivable by sorting them into groups of those that are 30, 60, 90, and over 90 days past due. Which of the following actions will the collection agency which buys the delinquent account from Aaron do?

Collect the entire amount owed and keep all the money it obtains.

Which of the following is an example of a cash equivalent?

Commercial paper

Which of the following maintains a record of the inflows and outflows in a cash account?

Company book balance

Identify the managerial accounting technique which looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize gains.

Cost-volume-profit analysis

FALSE

Crowd sourcing is a subset of crowdfunding

FALSE

Crowdfunding is a loan source, which means it accrues debt or equity.

A(n) _____ analysis is a simplification methodology used to reduce the magnitude and complexity of the information that must be considered in making an appropriate decision when choosing from among investment alternatives. A. SWOT B. time-series C. auditor's report D. net present value

D. net present value

The weighted average cost (WAC) refers to: A. a legal reduction in taxes by the government. B. the average equity capital costs incurred by a firm per year. C. the percentage cost of obtaining future funds. D. the expected average future cost of funds.

D. the expected average future cost of funds.

The decision rule for an NPV analysis is to accept: A. the smallest negative NPV. B. the largest negative NPV. C. the NPV closest to zero. D. the largest positive NPV.

D. the largest positive NPV.

Assigning a high value to inventory results in increased sales margin and reported profit, but at the price of paying increased income taxes.

F

By agreeing to an exculpatory clause in a contract, one party is agreeing not to hold the other responsible for his or her actions.

F

true

In most cases, crowdfunding does not involve or generate debt or equity

To ensure your accounting information is accurate, reliable, and useful, the accounting system you choose should easily and efficiently maintain an internal "audit trail".

T

Regulation of the Workplace

Laws and government rules that limit the freedom of business owners to manage their business as they please Resulting in employer violations that range from having an employee one time gorget to use required safety equipment to failing to provide required accommodation for handicapped employees and others to discrimination against a protected class

Liabilities

Legal obligation to give up things of value in the future

Disability Coverage

Less common Will pay specific fixed costs of business such as rent salaries and utilities in the event that the owner or other named key person becomes disabled Even Less common is one that will pay specific dollar amounts to the business to replace lost revenue caused by the disability of key person

Employee Theft

MISAPPROPRIATION of business property by employees of that business Involve direct stealing of money or other assets of the business Conduct of an illegala ct that is intended to provide personal benefit at a cost to the business Most common: pilfering of items of small value, such as office supplies and small hand tools Estimated that 95 % of small business face at least some sort of loss annually.

________ information and reports are used when planning, organizing, staffing, directing, and controlling.

Managerial accounting

Workers Compensation Insurance

Mandatory in SOME states Discretionary In all states, this law provide fixed monetary awards to employees who are injured or disabled on the job Enforeced through administrative procedures which preclude mployees during their employers Federal statutes are limited to workers whoa re employed in some interstate commerce will rise as claims against it rise but it is required insurance.

Which of the following reconciles the net increase or decrease with the beginning cash balance and the ending cash balance?

Net change in cash balance

crime insurance

Offers protection against losses from crimes committed against your business protection against losses from crimes committed against your business may include employee misconduct insurance to prevent incidents such as embezzlement. Other policies may require bonding employees who handle large amounts of money.

Injuries suffered while upon business property Injury or damage that is caused during the use of the business's products

Risk from customers primarily arises from:

Crux Inc. and Synapse Inc. are two competing businesses in the same city. They use the services of the same insurance company and have taken the same policy. Crux has a higher deductible than Synapse for the policy. Which of the following statements would be true in this case?

Synapse pays a higher premium than Crux.

After determining whether one is hiring someone for an hourly or salaried position, one of the first steps in developing a compensation plan is to determine the organization's salary philosophy.

T

Employees whose experience and skills are critical to the success of a business are called key employees.

T

Equifax is one of the four primary CRAs in the United States

T

Eventually, mature industries begin a decline stage. Some industries face death, while others find new life in a process called retrenchment.

T

Every business faces risks in the real world, so every business plan needs to spend some time addressing them.

T

Which of the following is not one of the primary criteria for a small business's record keeping system?

The ability to outsource the task.

B All the value of a property does not have insurable value. The amount of an asset for which a company will write an insurance policy is called an insurable value.

The amount of an asset for which a company will write an insurance policy is called a(n) _____. A) deductible B) insurable value C) co-insurance D) credit insurance

Variance

The difference between an actual and budgeted revenue or cost

variance.

The difference between an actual and budgeted revenue or cost is called:

Owner's equity

The difference between assets and liabilities of a business

owners' equity.

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

Break-even Point

The point at which total costs equal gross revenue

Publicly held companies are required to disclose all details regarding the financial statement. Therefore the investor has more reliable information.

Why have publicly held companies a higher valuation than privately held companies (same industry, revenue, profitability, etc.)

Lenders use operating income as:

a measure of how much debt a business can support.

Insurance

contract between two parties in which one party agrees, for a fee, to assume the risk of another Is a contract between two business in which one , the insurance company for a fee agrees to indemnify the other for specific losses that are liekly to occur in the future Insurance company contacts to pay money to your business if a specific COVERED event occurs that causes your business to suffer financial loss Provides a benefit by requiring a relatively small fee compared to the amount of loss that is possible Insurance company makes a profit by collecting PREMIUMS for coverage from many business for the SAME set of risks Insurance provides a benefit by requiring a relatively small fee compared to amount of loss The more likely an event is to occur, and the greater the potential amount the insurance company must pay, the higher the price you must pay for coverage

Eddie, the owner of a fast-food joint, finds that he spends far lesser when he bakes breads in dozens than when he bakes two or three loafs at a time. This idea of Eddie's is similar to the concept of:

economy of scale.

Business risk is the probability that the future state of the business will be better than planned.

false

Risk

is the very real likelihood that the business may not succeed The probability that future states of being will be worse than you expect

Term Insurnance-

provided by you, the employer Is a form of insurance that does not accumulate any value over the contract term Very expensive for healthy young people Premium increase with age and with specific risk factors such as obesity, health problems and history of driving while intoxicated

Business Interruption Insurance

provides funds to pay the ordinary operating expenses of your business should it be forced to close temporarily because of an insured event. Can be purchased at a stand alone policy, most usually acquired as a provision of commercial property insurance funds to pay the ordinary operating expenses of your business should it be forced to close temporarily

Events Related to Personnel

3 Main types: Employee Theft Violation of Governmental Regulation Key Employees

T

Business interruption insurance provides funds to pay the ordinary operating expenses of your business if it is forced to close temporarily because of an insured event.

_____ ratios measure the business's ability to pay debts and expenses that are due in the current accounting period. A. Liquidity B. Profitability C. Activity D. Leverage

A. Liquidity

Which of the following is true of partnerships? A. It does not get terminated upon the death of one or more partners. B. It does not allow one partner to obtain bonding protection against the acts of the other partner(s). C. It cannot obtain financial resources from more than one person. D. It does not incur unlimited liability on its partners for the firm's debt.

B

A reduction in the bank account of a merchant by a credit card company is termed _____

B. charge back

Any valuable asset that is donated to a business without any obligation to repay or to give any ownership interest is called a(n) _____. A. debt B. equity capital C. gift D. investment

C

As a new entrepreneur, Anthony's magic number for 2013 is $42,000. If the current tax rate for his business is 30 percent, calculate the amount that Anthony's firm would need to sell for him to get his magic number. A. $50,000 B. $50,495 C. $60,000 D. $60,854

C

Direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria are referred to as _____. A. tax abatements B. grants C. tax credits D. debts Direct reductions

C

Giveaways, samples, and tastings are examples of ________ techniques used in sales promotion. A. contest B. loyalty C. introductory D. discounting

C

Serial entrepreneurs Steve Blank and Bob Dorf came up with a more inclusive approach than the standard marketing funnel. Which of the following is not one of the major goals of their new approach? A. Grow customers B. Get customers C. Identify customers D. Keep customers

C

Something of value given or pledged as security for payment of a loan is called _____. A. chargeback B. capital equity C. collateral D. personal equity

C

Restrictions imposed by loan contracts on the operations of a business, such as requiring that a specific minimum net worth be maintained, a specific debt-to-equity ratio not be exceeded, no dividends be paid to stockholders and so on, are known as _____. A. loan amortizations B. loan yields C. loan covenants D. credit assurance

C. loan covenants

The amount that revenues exceed expenses is termed _____. A. interest B. credit C. profit D. overhead

C. profit

The difference between an actual and budgeted revenue or cost is called: A. liquidity. B. financial flexibility. C. variance. D. investing activities.

C. variance.

Commercial Property insurance

Covers losses to the business property form causes such as fire storm vandalism and theft Pay losses resulting from floods or earthquake Commercial property insurance covers losses to the business property from causes such as fire, storm, vandalism, and theft Insurance is determined: Property's insurable value Amount of deductible loss Amount of co-insurance required (co-pay) Loss limits of the policy

Ted's business, situated near the Missouri River, was partially destroyed when the river overflowed after a deluge. Which of the following measures would've helped Ted minimize the effect of the flood from interrupting the operations of his business?

Creating provisions for subcontracting work

Agreement between the associates of a firm on matters pertaining to the formation and operation of the partnership is known as _____. A. articles of organization B. contracts of partnership C. articles of association D. articles of partnership

D

Which of the following statements is true regarding the Fair Credit Reporting Act? A. It requires that consumers investigate and directly report any inaccuracies to the source of the inaccurate information. B. It provides CRAs with a period of one year to investigate cases of inaccurate information. C. It requires that CRAs independently confirm information. D. It requires that the CRA forward copies of all relevant information to the source of the inaccurate information.

D. It requires that the CRA forward copies of all relevant information to the source of the inaccurate information.

Copyrights, trademarks, and patents provide automatic full protection to small business owners.

F

Customers can never be a source of risk for businesses.

F

Expendables are necessarily fixed costs.

F

Exporting is usually expensive, difficult to start, and more risky than licensing, franchising, or joint ventures.

F

Face-to-face meetings with the client are infrequent if the services are provided at the client's location.

F

Financial flexibility of a business is a matter of judgment, whereas financial strength is an objective assessment.

F

The advantage of legal protection methods for intellectual property is that there are multiple government agencies in each area that will assist a small business owner in maintaining their legal rights.

False

Variable costs decrease if output increases.

False

Giveaways, samples, and tastings are all examples of introductory techniques used in sales promotion.

T

Identifying risks is the first task to be completed before a comprehensive insurance program can be developed for a business.

T

If the business is a corporation or an LLC, the owner can only lose what he or she has invested in the business.

T

In a C corporation and S corporation, the IRS expects the owner to pay himself or herself a salary that is roughly at market rates.

T

Marketing and new product experts believe that most of the small business failures could have been avoided by following the new product development (NPD) process.

T