Entrepreneurship-Financing a Business

5 most important financial documents that must be included in a business plan:

personal financial statement, startup cost estimate, income statement, balance sheet, cash flow statement

the amount of money that you borrow to start a business

principal

___________ is the amount of money that you borrow to start a business If you borrow money to start a business, you will have to repay the loan amount plus ___________

principal, interest

You want to measure how many days it takes to turn over inventory

stock turnover ratio

Austin is a jewelry designer/store owner who operates a sole proprietorship. His net sales are the amount left after gross sales (total sales) have been adjusted for returns and allowances

true

Five important documents to include in a business plan are: the personal financial statement, start-up cost estimate, income statement, balance sheet, and cash flow statement

true

The income statement is also called a "profit-and-loss statment"

true

Ex of variable expenses:

utilities

___________ expenses include a business;s operating expenses, such as advertising costs and utility expenses

variable

Chase has assets of $25,000, $14,500, $8,000, $2,725. His debts are $12,480 and $2,700. His net worth is _____________?

$35,045

Start-up costs for both small and large businesses are the same because these costs are basically fixed

false

net income from operations-other expenses (interest)

net profit (loss) before taxes

Total gross sales-returns and allowances

net sales

You want to determine the rate of profit as a percentage

profit margin on sales

_______________ ratios measure how well the company has operated during the past year

profitability

List 4/8 factors of the amount of start-up money:

proposed business, size, operating expenses, continuing costs

acid test ratio is aka:

quick ratio

You want to determine how well you are doing compared to other companies

rate of return on assets

projections of how much money a new business owner needs for the business's first year of operation

start-up costs

How would an entrepreneur know if he has a net profit after federal, state, and local taxes are subtracted?

the net profit after taxes shows a profit

Why do entrepreneurs have to include their personal financial statements when discussing business plan and financial statements for their new business?

they will need to invest their own money into the business

What is the primary goal for a new entrepreneur to prepare financial statements?

to determine the amount of money needed to borrow to startup and operate the new business

A company's payroll taxes are part of its fixed expenses

true

Gross sales are the total of all sales for a given period of time

true

If a lender wished to rate how quickly a business could turn its assets into cash, which type of system would it use?

activity ratio

anything of monetary value that you own

asset

A ___________ is anything of monetary value that you own A ___________ is a debt that you owe

asset, liability

Banks look at the _________ of a potential borrower because they can be sold if necessary to pay off a loan

assets

Formula to get net worth:

assets-liabilities

this summarizes a business's assets, liabilities, and owner's equity

balance sheet

Your income goal for your first year of operation should be to reach a ____________ point. This is reached when enough money is received to pay all operating expenses, including your salary, and to pay debt obligations.

break-even

What monthly plan helps a business owner track when cash is expected to come in and when it would be paid out?

cash flow statement

a monthly plan that tracks when cash is expected to come into the business and when it is expected to be paid out

cash flow statement

the total amount spent to produce or buy merchandise to be sold

cost of goods sold

Besides considering a borrower's assets, or collateral, and prospects for a successful business, lenders also examine a borrower's _______________ history

credit

___________ assets are cash or anything of value that can be converted into cash within a year ___________ assets are used over a period of years to operate your business

current, fixed

_____________ liabilities are the debts a business must pay during the upcoming business year _____________ liabilities are debts that are due after 12 months (mortgages or long-term loans)

current, long-term

Net worth or ____________ is calculated on a balance sheet

equity

net worth is also known as _________?

equity

Employers are not obligated to pay social security or medicare taxes on their employee's earnings because employees pay for those costs

false

Fixed expenses change every month based upon the needs of the business

false

The principal is the money paid for the use of money borrowed or invested

false

An asset that a business uses over a period of years, such as a desk or a building is referred to as a(n) ____________ asset

fixed

net costs-cost of goods sold

gross profit

_______________ are the total of all sales for a given period of time

gross sales

A summary of income and expenses during a specific period such as a month or year

income statement

Which would not be part of the start-up cost?

income statement

Ex of fixed expenses:

insurance

if you borrow money to start a business, you will also have to repay the loan amount plus __________?

interest

a debt that you owe

liability

Lenders use different types of ____________ ratios to determine a business's ability to meet its current debts

liquidity

the amount left after total expenses are subtracted from gross profit

net income

gross profit-operating expenses

net income from operations

_____________ is the amount left after total expenses are subtracted from gross profit ______________ is the total amount spent to produce or buy merchandise to be sold

net income, cost of goods sold

the amount that an employee receives after deductions for taxes, insurance, and voluntary deductions

net pay

this is the amount of money left over after federal, state, and local taxes are subtracted

net profit (loss)

Net profit (loss) before taxes-taxes

net profit (loss) after taxes

List 4/7 parts of the income statement:

net sales, gross profit, operating expenses, total expenses

Which shoes how to find gross profit?

net sales-cost of goods sold

the different between assets and liabilities

net worth

these are divided into variable and fixed expenses

operating expenses

What document summarizes a loan applicant's assets and liabilities?

personal financial statement

a summary of your current personal financial condition

personal financial statement

Current liabilities are cash and anything of value that can be converted into cash in a year

false

Carson has assets of $145,000 and debts of $90,000. What is his net worth?

$55,000

Sammy earns $18 per hour, and he received time-and a-half for each hour that he worked beyond 40 hours in a week. Last week, Sammy worked 48 hours. His deductions totaled $196.50. His net pay for the week was ____________?

$739.50

If a company had a gross profit of $126,532 and net income from operations of $45,945, what was the total amount of its operating expenses?

$80,587

You want to determine how quickly a business' assets can be turned into cash

accounts receivable turnover

You want to determine a business' ability to meet its short-term cash needs

acid test ratio

______________ ratios determine how quickly assets can be turned into cash

activity