ent chapter 7
loan
a contractual agreement whereby the firm receives some amount of money that must be repaid over a specific period of time at a specific interest rate
profit and loss statement
a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period of time
asset lease
a form of lease tied to a particular asset used by a business to conserve cash and maintain the latest versions of whatever equipment is available
venture capital fund
a fund that is organized to make significant equity investments in high-growth new ventures
debt
a generic term used to describe any type of non-equity funding tied to the business
private equity fund
a series of funds intended to provide capital to invest in existing businesses that the investors believe can leverage their resources to improve the entrepreneurial venture
A __________ is like a master system for tracking the activity of the business
chart of accounts
what report creates a listing of all checks that have been written and all that have cleared through the bank?
check register
suppliers will generally provide _______ on both physical assets and the actual supplies purchased
credit
which of the following is a form of debt that is almost always tied personally to the founders, thus exposing them to personal bankruptcy?
credit cards
Any form of capital infusion that must be paid back with interest is called _____.
debt
_______ is a major source of non-equity financing and can come from banks, credit cards, or suppliers
debt
what is the generic term used to describe any type of non-equity funding tied to the business
debt
which of the following are sources of non-equity capital to start a business
debt and grants
when someone provides funding in return for some ownership in the new business, it is referred to as a(n) _________.
equity investment
when someone provides funding in return for some ownership in the new business, it is referred to as a(n) __________.
equity investment
besides banks, finance companies, and the founders, another source of non-equity loans come from:
friends and family
Equity Investment
funds received by a business in exchange for a percentage ownership of the business
a cash based accounting system
it recognized expenses as they are paid and recognizes revenue as it is generated
what method of inventory control seeks to minimize excess capital investment in inventory by having it present only shortly before it is used?
just-in-time inventory
in the long run, the cost of capital for non-equity funding is generally _______ that of equity investment
less than
a separate accounts _______ record should be maintained for each creditor
payable
______ credit is a form of non-equity funding for physical assets as well as the actual supplies purchased
supplier
shrinkage
the difference between what is sold and what was bought into the business
Besides banks, finance companies, and friends and family, another source of nonequity loans comes from:
the founders
inventory should be taken at scheduled times during the year and an exact match should be completed between:
- starting inventory - units sold - ending inventory
true or false: the founder should avoid personally lending money to the new business because it is an unsecured investment
false
true or false: there is no need to treat a loan from family as a contractual agreement
false
which account operates much like a bank savings account using a register to track the amount the time in the box?
petty cash register
identify the characteristics of credit cards as a form of non-equity investment
- they typically have a set upper limit - they are generally tied to a much larger interest rate than that of a bank loan
which account should be used when there is an expense too small to write a check for or when a check is simply inappropriate
petty cash register
grant funding typically comes from:
- a nonprofit agency - the government
which of the following are common forms of debt for a new business?
- credit cards - supplier credit - loans
supplier credit
another form of non-equity funding that is available. suppliers often will provide credit on both physical assets and the actually supplies provided
banks have traditionally been a major source of funds for:
established firms
a separate accounts _____ record should be maintained for each creditor
payable
grants
special funds, neither equity or debt, designed to aid businesses in specific areas
true or false: when considering funding, a firm needs to evaluate not only the amount provided but also the sources of that funding
true
which of the following is NOT a common form of debt for a new business?
venture capital
an inventory record will include:
- a unit and total cost - an item number - a description of the item - the quantity of the item
which form of funding is used by a business to conserve cash and maintain the latest versions of whatever equipment is available?
asset lease
crowdfunding
funds received by a business by soliciting a large number of very small investors usually via the internet
the new business should employ all _________ funding mechanisms available before seeking __________ funding.
non-equity; equity
which of the following are true regarding the accounts payable?
- all invoices received should be recorded - a record of payment toward each invoice should be included - the record should include date paid, amount paid, and check number or tracking number
A chart of accounts is simply a listing of each type of activity and each type of asset within the company.
1. income category 2. expense category 3. asset category
business angels
High-net-worth individuals who invest in businesses not as a business, but as an individual.
which accounting record tracks time for hourly workers and attendance for salaried employees
payroll
which of the following typically issue grants?
the government and private foundations
an accrual based accounting system
it is the more typical form of accounting used, which expenses and revenues recorded when they actually occur, regardless of when the cash is received
credit card
credit entitling the owner to use of revolving credit that is not tired to any particular asset, does not have a set repayment schedule, and is usually tied to a much high relative interest rate
asset-based lending
the loan provided for the purchase of a necessary asset for the business
which of the following are true with regard to managing the flow of data in the context of businesses?
- data are obtained in a timely manner - data are tied to the strategic needs of the business
identify the true statements about equity investment.
- in the case of dissolution, each investor is entitled to the percentage of the break-up value equal to their investment percentage - equity investment involves selling a percentage of the business to an outside party
which of the following items should be included on the payroll record?
- number of hours worked - base pay and overtime pay rate - benefit deductions - taxes
which of the following are true about loans as a source of funding for new businesses?
- they are secured by assets or a personal guarantee - they are often repaid monthly from cash flow
which of the following funding options traditionally involves selling a percentage of the business to an outside party?
equity investment
A(n) __________ investment is funds received by a business in exchange for a percentage ownership of the business.
equity or stock
what are special funds that are neither equity or debt funds that are designed to aid businesses in specific areas
grants
which type of funding involves a contractual agreement whereby the business receive some amount of money that must be repaid over a specified period of time at a specified interest rate?
loan
factoring
the practice of selling accounts receivable at a discount to another company in order to receive immediate cash
Why are banks often quite restrictive in their lending to start up firms?
the risk is perceived to be too high