EBD CHP 11
A budget is one of the most powerful tools that an entrepreneur can use in planning business operations.
TRUE
Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price.
TRUE
Financial information pulls together all the information presented in the other segments of the business.
TRUE
The cash-flow budget provides an overview of cash inflows and outflows for the budget period.
TRUE
The principal objective of capital budgeting is to maximize the value of the firm.
TRUE
A fixed cost
does not change in response to changes in activity for a given period of time
Break-even analysis is a technique commonly used to assess the
expected product profitability
A key concept in developing an expense budget is that of
fixed costs
Capital budgeting is designed to show
how many projects, in total, should be selected.
When using the internal rate of return method, the future cash flows are discounted at a rate that makes the net present value equal to
zero.
The traditional accounting equation is: assets + liabilities = owner's equity.
FALSE
The set of assumptions on which financial projections are based have little meaning.
FALSE
Contribution margin is the difference between the selling price and the fixed cost per unit.
FALSE
Pro forma statements show the firm's present financial position.
FALSE
The first step in the preparation of the cash flow budget is the identification and timing of cash outflows.
FALSE
The concept of the net present value method works on the premise that
a dollar today is worth more than a dollar in the future.
The traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet is
assets = liabilities + owner's equity
Which of the following is a form of the pro forma statement?
balance sheet
The cash flow budget describes
cash inflows/cash outflows.
A variable cost
changes in the same direction and in direct proportion to changes in operation activity.
Financial information is important to entrepreneurs because it pulls together all the information presented in other segments of the business and:
it quantifies all the assumptions concerning business operations.
The principle objective of capital budgeting is to
maximize the value of the firm
A budget that is a statement of estimated income and expenses over a specified period of time is referred to as an
operating budget.
Comparing financial numbers in order to make decisions is referred to as:
ratio analysis.
Contribution margin is the difference between
selling price and variable cost per unit.
