Small Business Finance Chapter 6&7

Which of the following is not a current asset?

Equipment

Under accounting rules, the assets on a balance sheet are carried at current market value.

False

A business without inventory is likely a retail business.

False Service businesses are likely not to carry much, if any inventory.

Which of the following business types would likely have little or no accounts receivable?

Retailer Retailers are likely to have little or no accounts receivable, as customers generally pay before leaving the store.

Which of the following is not an asset?

Retained earnings

Which of the following statements is true?

Retained earnings are the cumulative profits of a business since its inception, which have not been paid to the ownerís of the business.

Which of the following statement provides a ìsnapshotî of the company as of a particular point in time?

The balance sheet

A manufacturing business would be likely to have a significant investment in plant, property, and equipment.

True Manufacturing businesses generally have large investments in plant, property, and equipment.

Ownersí equity would likely be found on the balance sheet of a _____________.

all of the above Ownersí equity is typically found on the balance sheet of all types of companies.

retail business

A business that sells products directly to consumers via physical retail stores or via the internet.

manufacturing business

A business that uses labor to make raw and unfinished materials into finished products for sale, typically to retailers or to other manufacturers.

If you see accounts payable on a balance sheet, which of the following is true?

Accounts payable is typically found on the balance sheet of all business types.

Which of the following is not a current liability?

Accumulated depreciation

The balance sheet for Alpha, Inc. indicates the business has bank loan debt. Which type of business is Alpha, Inc. likely to be?

All business types may use debt in their operations.

Which of the following business types is likely to have the largest investment in fixed assets?

Auto parts manufacturer Manufacturing businesses, such as an auto parts manufacturer, are likely to have a significant investment in fixed assets.

plant, property, and equipment

the buildings and equipment used in the business's production and operating processes.

retained earnings

the cumulative profits since the inception of the business that have been kept in the business (retained) and not paid to the owners of the business.

Assets and liabilities on a balance sheet are always presented at current market value.

False

Most service businesses have a significant investment in plant, property, and equipment.

False

Which of the following would you not likely find on the balance sheet of a consulting business?

Inventory

Which of the following would you not likely find on the balance sheet of a retailer?

Net sales net sales would appear on a profit and loss statement, not a balance sheet.

Which type of business is least likely to have accounts receivable?

Store in the mall Retailers often do not have accounts receivable.

accounts receivable

The money that customers owe the business is called accounts receivable.

When a business purchases an asset and uses section 179 depreciation, which of the following is true?

They are depreciating the value of the asset immediately.

raw materials

This includes materials purchased by the business to be used in the production process but that haven't yet been turned into products.

inventory

This includes merchandise received from manufacturers and suppliers that hasn't yet been sold to customers.

work in process

This reflects the value of goods currently in the production process.

Assets that are already in cash or that a business expects to turn into cash within the next year are known as ________________.

current assets

The liabilities section of the balance sheet includes ________________.

current liabilities and long-term liabilities

current assets

include cash or other items such as accounts receivable, and inventory that can be expected to be turned into cash within the next year.

The debts of a business are known as ________.

liabilities

. Another name for fixed assets is ______________.

other assets long-term assets plant, property, and equipment assets

The value of the business after all liabilities have been paid is known as _____________.

ownersí equity

service business

sell the time and skills of their employees to meet the needs of customers. The skills sold may be physical (landscaping construction) or they may be knowledge based (medical, legal, educational, financial).

balance sheet

shows a business's assets, liabilities, and owners' equity.

accounts payable

the money the business owes to its suppliers.

assets

the things a business owns, such as cash, inventory, money owed from customers, and buildings and equipment.

owners' equity

the value of the business after all its liabilities have been paid.

A balance sheet shows _________________.

what a business owns and what it owes

Which of the following is a current asset?

Prepaid expenses

Accumulated depreciation for an asset reflects the total of all depreciation recorded on that asset since the purchase of the asset.

True

he things a business owns are known as

assets

The main sections of a balance sheet are _________________.

assets, liabilities, and ownersí equity

Work in process inventory would likely be found on the balance sheet of a __________.

manufacturer Work in process is commonly found on the balance sheets of manufacturers.

long-term liabilities

the debt that must be paid in more than one year.

current liabilities

the debts the business must pay within the next year.

If a company has $90,000 of liabilities and $40,000 of ownersí equity, what are the companyís total assets?

$130,000

If a piece of equipment was purchased for $5,000 three years ago and has since recorded depreciation totaling $3,000 on its profit and loss statement, what is the current value of this piece of equipment on the balance sheet?

$5,000 - $3,000 = $2,000.

Which of the following is the fundamental rule of the balance sheet?Beginning Cash + Net Cash Flow = Ending Cash Revenue ñ Expenses = Profit Profits + Cash = Total Assets Assets = Liabilities + Ownersí Equity

Assets = Liabilities + Ownersí Equity