Entrepreneurship ch 11
True
A budget is one of the most powerful tools that an entrepreneur can use in planning business operations.
False
Accounts receivable turnover measures the rate at which accounts receivable are being collected on a monthly basis.
False
An entrepreneur must graph at least two numbers: total sales and total expenses, when using the graphic approach for break-even analysis.
True
The cash-flow budget provides an overview of cash inflows and outflows for the budget period.
True
The first step in creating an operating budget is to prepare the sales forecast.
True
The first type of expense to be estimated when preparing an operating budget is cost of goods sold.
False
The traditional accounting equation is: assets + liabilities = owner's equity.
True
After the operating budget has been prepared, an entrepreneur can proceed to the next phase of the budget process, the cash-flow budget.
False
The first step in the preparation of the cash-flow budget is the identification and timing of cash outflows.
True
The handling questionable costs approach of break-even analysis was specifically designed for firms that have expenses that are difficult to assign.
True
The principal objective of capital budgeting is to maximize the value of the firm.
True
The pro forma income statement is prepared before the pro forma balance sheet.
False
The set of assumptions on which financial projections are based have little meaning.
True
Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price.
False
Capital budgeting is used to help the entrepreneur plan for capital depreciation.
True
Capital investments or capital expenditures are expected to last beyond one year
False
Contribution margin is the difference between the selling price and the fixed cost per unit.
True
Financial information pulls together all the information presented in the other segments of the business.
True
Gross margin measures profitability at the gross profit level: the number of dollars of gross margin produced for every $1 of sales.
True
Horizontal analysis looks at financial statements and ratios over time.
False
It is typical for a firm to prepare an operating budget but not a cash budget.
False
Pro forma statements show the firm's present financial position.
False
Vertical analysis is the application of ratio analysis to the many sets of financial statements.
True
When using regression analysis, the entrepreneur may draw conclusions about the relationship between product sales and advertising expenditures.
True
The typical business will have cash inflows from three sources: cash sales, cash payments received on account, and loan proceeds.
