Entrepreneurship 8-11

Which of the following ways does borrowing help increase potential profits? a-by increasing the cost of capital of the business b-By increasing the weighted average cost (WAC) of the business c-By providing capital funds for additional business opportunities d-By allowing less debt to be included in the capital mix e-None of the above

By providing capital funds for additional business opportunities

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

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

False

Nonsufficient funds is a financial crisis that is caused by a business growing faster than it can be financed

False

Which of the following statements concerning financial management is correct? a-Obtaining money for your start-up is only the beginning of financing a small business b-The details of financial management are standard across businesses in different industries 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

Obtaining money for your start-up is only the beginning of financing a small business

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-Crux pays a higher premium than Synapse. c-Synapse pays a higher premium than Crux. d-Both the companies pay the same premium. e-None of the above

Synapse pays a higher premium than Crux.

Which of the following is true of financing small businesses? a-The most popular source of financing for start-ups is from commercial banks. b-A business has fixed financial goals in all stages of its development. c-There are several resources available for financing start-ups. d-Funding is only important when a business is just starting. e-None of the above

There are several resources available for financing start-ups.

Which of the following describes angel investors? a-They are individuals who act as brokers to help connect owners to organizations that provide funding. b-They are government organizations that help small-scale companies grow. c-They are wealthy individuals who invest in companies in relatively early stages of development. d-They are state-run organizations that buy stakes in companies in the early stages of development. e-None of the above

They are wealthy individuals who invest in companies in relatively early stages of development.

Financial accounting is primarily intended for a-avoiding penalties for noncompliance b- bankers, investors, and regulators c- calculating and reporting taxes d- predicting the results of management decisions e- all

bankers, investors, and regulators

A(n) _____ is an amount of loss that is specifically excluded by the insurance contract a-premium b-deductible c-insurance value d-coverage e-None of the above

deductible

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

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.

false

The time required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale is referred as the ___ cycle of a business a-seasonal b-chargeback c-operating d-credit e-none

operating

The difference between assets and liabilities of a business is called a-net income b- current ratio c- cost of capital d- owners equity e- none

owners equity

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-charge backs b-receivables c-payables d-deposits e None of the above

receivables

Commercial paper is transferable to other investors.

true

Money contributed to businesses in return for part ownership of the business is called a(n) _____. a-loan b-debt c-gift d-equity capital e-none

equity capital

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

false

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

false

Small businesses rarely experience cash flow problems

false

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

false

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

true

The cost of goods sold budget shows the predicted cost of product actually sold during the accounting period

true

The first step in budgeting is to make a forecast of your future sales

true

currency is the most common form of cash

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

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

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? a-vents related to customers and others. b-Events related to personnel. c-Events related to the competitors of the business. d-Events related to the property of the business. e-None of the above

Events related to the competitors of the business

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

False

Which of the following should be undertaken in order to reduce a business's exposure to the risk of violating tax regulations? a-Reconcile the cash register tape to the cash register contents every day b-Understate revenues and overstate deductible expenses c-Take cash from the businesses before it is recorded as revenue d-Borrow from tax money in order to make payments to creditors e-None of the above

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

Checking and savings accounts are the most common forms of _____. a-demand deposits b-debt investments c-marketable securities d-commercial papers e-None of the above

demand deposits

A company's goodwill is its best collateral.

false

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

false

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 have a limited contact-independent help function c-it should limit the production of custom reports that meet management needs d- it should show the financial position of the business only after elaborate processing e-all f-none

it should facilitate the development of a cash budget

______ represents either ownership or debt of publicly held firms and government issued debt, in the form of bonds, notes, and bills a-marketable securities b- demand deposits c-set-asides d-travelers checks e-none

marketable securities

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

true

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

true

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

true