New Venture Finance -Exam I

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enables trending

Why should a small business owner care about the income statement?

variance analysis

Which methodology compromising estimating the changes in revenues and expreses from current operating results that will occur if each alternative is taken?

franchise

A right or license granted to an individual, group, or business to market a company's good and services in a particular territory?

balance sheet

A snapshot of assets, liabilities, and owners' equity at a point in time.

negatives of getting funds at one time

A. Forecasts may be wrong as a result of incoming cash flows occurring earlier than year 4, requiring less up-front capital. B. Receiving too much capital at one time spoils the inexperienced entrepreneur and could lead to unnecessary waste of the capital C. Invested capital comes in at a lower valuation.

reasons to get out business

- technological obsolescence - specific industry decline - potential laws changing the business landscape

A/R Parameters

-cash discount -credit period -collection effort

security for surplus money markets

-preferred stock -tax exempt municipal bonds -convertible bonds

income statement purpose

-tax purposes -estimate sales -estimate future cash flows

cash flow statement

Which financial report is most important to managing a small business?

financial flexibility

A business' ability to manage cash flows in such a manner that the company can respond appropriately to unexpected opportunities & needs

liquidity

A measure of how quickly a company can raise money through internal sources by converting assets to cash

cost-volume-profit analysis

Diane is looking to help her company determine how many units it should sell in order to maximize profits. What kind of analysis should she use?

EBITDA

Earnings before interest, taxes, depreciation, and amortization.

GAAP

When submitting accounting reports to the government one must follow these standardized rules for account?

educated estimates and roadmaps

How are budgets related to business plans?

cost- good b/c add value, expenses= bad, sunken & no return

How are costs and expenses different?

asset= liabilities + shareholders equity

How does the accounting equation relate to the balance sheet?

owners equity

How much is the business worth to an owner?

net income

How much profit did the company make?

sales revenue

How much revenue did the business produce?

rarely

How often does the statement sequence change?

when cash is received

In cash accounting when are revenues recognized?

managerial accounting

Jerry, a manager for a small restaurant, is trying to plan future budgets which type of accounting should he use?

current ratio

Measures whether current bills can be paid

stockholders equity

Monies paid in from owners through purchases of stock and retained earnings.

franchise fee

One time, upfront fee paid to a franchiser

royalty fee

Ongoing obligation to pay a franchiser a percentage of gross sales; may or may not include advertising fee.

lifestyle entrepreneur

People who start a business to provide themselves with a decent standard of living are referred to as?

income statement

Rachel owns a small business and wants to know how much profit she made last year. To find this out she would view her?

cash gap

Refers to the period between payment of cash and receipt of cash

computerized systems

Robert owns a small business and wants to simplify the account process, he can do so by using what?

operating ratio

Shows focus on the use of assets and the performance of management

business entity concept

The concept that a business has an existence separate from that of its owners

varience

The difference between an actual and budgeted revenue or cost.

reasons to do accounting

To produce information that is useful to you to manage your business, and to meet legal or contractual requirements

ease of use,produce formatted financial statements, facilitiate budgets

What are 3 most important characteristics of a small business computer system?

liquidity, budgeting, credit facilitating

What are the 3 most important functions of a computer system?

managerial, financial, tax

What are the 3 types of accounting?

cash flow positive and growth

What are the break-even points?

compound annual and simple

What are the two main methods of measuring company growth?

minimize taxes

What do privately own companies want to do?

cash income and use

What does the cash flow statement explicitly show?

bankruptcy

What does the financial state if having more debt than assets mean?

budget

What is a collection of estimates?

balance sheet

What is another name for the statement of financial positions?

cash

What is king?

quicker start up time

What is one advantage of owning a franchise?

objectively appraise a company

What is ratio analysis typically used to do?

6-8 months

What is the fixed time horizon of the two types of financing?

total assets

What is the value of everything your company owns?

current assets exceed current liabilities

What makes a business be consider liquid?

cost-volume-profit analysis

What managerial accounting technique looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize profit?

assets

What should not be included on the income statement?

cash flow statement

What statement measures the business fron one point to another point?

managerial

What type of accounting is most important to small business?

cash flow

You must Prepare a 3-5 year monthly annual cash flow projection when forecasting what?

operating expenses

how much does the business need for its continuing operation?

COGS

the costs of raw materials, land, direct labor required to produce the product or service that generated the revenue.

total current assets

what can you turn into cash in one year?

interest expense

what costs did the business have for financing?

long term debts

what debts will take longer than a year to pay off?

COGS

what did it cost to make your product?

profit lost statement

what is another name for the income statement?


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