starting a business final exam study guide
Which statement is true regarding a trademark?
A trademark can sometimes also function as a service mark.
Which statement is not true of financing with leases?
The two types of leases differ primarily in how the property is acquired in the beginning.
Lenders use operating income as:
a measure of how much debt a business can support.
For a business to factor receivables, the _________blank must have good credit ratings.
customers
Which ratio is better when it is a lower number?
debt to assets ratio
The first step in preparing a master budget is to prepare a _________blank budget.
sales
_________blank is an estimation of what a price should be based on information a consumer gathered, such as advice, advertisements, or comparison shopping.
An external reference price
Which answer option is an example of a direct mail approach?
A new dentist in town sends out a letter to all town residents introducing himself and announcing the opening of his practice.
Which statement is true of partnerships?
A partnership does not allow one partner to obtain bonding protection against the acts of the other partner(s).
_________blank is the series of steps and activities required to complete a process.
A procedure
_________blank ratios measure how productive a particular asset is in producing sales movement.
Activity
An organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area is referred to as:
a community development organization.
Which answer option is not an advantage for providing credit to customers?
lenders are more likely to provide financing
Which statement is true of pricing strategy?
An entrepreneur's first goal in pricing is to set the price as high as they think they can.
Which answer option is a formal dispute resolution method that operates using the court system, typically with a lawyer representing each party?
litigation
An accounting method that is specifically intended to be used for planning, directing, and controlling a business is called:
managerial accounting.
Out of the courts, small-claims court, arbitration, and mediation, which one utilizes attorneys or specialists rather than judges?
mediation
Small businesses use the periodic inventory method because it is relatively inexpensive and it:
meets the requirements of local and federal taxing agencies.
The purchase of inventory—typical with Internet-based businesses—only after a sale is made is called a:
micro-inventory.
Which answer option are SBA-approved partners who offer guaranteed loans under $50,000 to eligible small businesses?
microlender
Neil places an advertisement for his pastry shop, Neil's Pastries, in the local newspaper. He includes his phone number, website, email address, and postal address in the advertisement so that prospective customers have the option to contact him in the way they feel most comfortable. Neil is a:
multichannel marketer.
Services at a _________blank often have too much specialized equipment to be readily transported and a need for at least some client involvement.
mutually accessible location
Which variety of paid media costs the most for each 1,000 impressions?
newspaper ads
Training and flexible hours are a part of the _________blank strategy used to control money that is expected to leave the firm.
noncash incentive
Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business, are called:
noncore projects.
Private businesses that are authorized to make SBA-insured loans to start-ups and small businesses are called:
small business investment companies.
Except for _________blank, business forms are types of separate, legal entities.
sole proprietorships
Paying for a local organization's needs in exchange for recognition is referred to as:
sponsorship.
If a risk-averse small business owner can't reduce the level of risk to where they are comfortable, they can either ensure against future losses or:
spread the risk among other people or businesses.
Which answer option is the most common noncash incentive given to an employee?
stock options
A jewelry store promises to deliver custom-made wedding rings to a buyer within 2 weeks. However, it charges ten percent of the sales price in advance. In this example, which technique is the store using to increase cash inflows?
taking deposits and progress payments
Direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria are referred to as:
tax credits.
Insurable value is defined as:
the amount of an asset for which a company will write an insurance policy.
Some hotels offer beds made by specific manufacturers, such as Sleep Number beds or Tempur-Pedic beds. The bed manufacturers benefit because it has the potential to move a prospective customer (anyone who recently comparison shopped for a new mattress) to which step of the customer development funnel?
the consideration step
A 20-year patent covering a process, machine, article of manufacture, composition of matter, or any new or useful improvement of an existing one is known as a:
utility patent.
The difference between an actual and budgeted revenue or cost is called:
variance.
Which answer option is not a form of owned media?
viral marketing
Which answer option is not an example of a direct sales method?
word of mouth
When documenting the operations of your business, which answer option contains the most detail?
work instructions
Which answer option is a disadvantage of providing credit to customers?
you must replace the "missing" cash
_________blank is the cost incurred to substitute one asset with an identical asset.
Replacement value
Which statement is true of sharing business risk with the government?
Risk for a government is very different from risk for private business.
Which statement is true of service locations?
Services at a remote location can be located anywhere in the world.
There are two basic where questions to be considered when starting a small business (as opposed to the: who, what, when, why, and how questions). The first one is, "Where are my customers?" and the second question is:
"Where should I be?"
_________blank refers to the process of deciding among various investment opportunities to create a specific spending plan.
Capital budgeting
Aaron, a businessman, has a method of keeping track of accounts receivable by sorting them into groups of those that are 30, 60, 90, and over 90 days past due. Aaron decides to sell long delinquent accounts to a collection agency. Which action will the collection agency which buys the delinquent accounts from Aaron take?
Collect the entire amount owed and keep all the money it obtains.
_________blank refers to the practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold.
Consignment
__________blank data gives you the particulars on your customers, while __________blank data gives you information on the date and type of contact.
Contact; performance
Which statement is true of copyrights?
Copyright involves the expression of ideas, not the ideas themselves.
_________blank refers to the percentage expense of obtaining future funds.
Cost of capital
_________blank make up most of the noncurrency cash which is available immediately.
Demand deposits
Which statement is true of distribution?
Direct sales is part of direct marketing.
Which statement concerning business risks related to the property of the business is true?
Each type of property involves specific forms of risk.
_________blank refers to amounts that are owed to a business for merchandise that was sold on credit.
Receivables
Which statement is true of documenting the operations of your business?
Every business process does not have to be extensively documented.
_________blank is a process of communicating within or to an organization about how the outputs worked or were received.
Feedback
_________blank refers to the filing made with a state(s) in which the business operates disclosing the trade name or assumed name of the business along with the owners of the business.
Fictitious name filing
_________blank refers to a set of rules and procedures that work to limit the opportunity for employee theft or malfeasance.
Internal control
Which scenario is true of managerial accounting?
It is forward-looking in nature.
Which scenario is true of the accounting equation?
It is used to place records into understandable categories that are useful for managing a business.
Which scenario is true regarding credit insurance?
It requires the merchant to provide co-insurance in the amount of 10 to 20 percent of the credit loss.
The term for measures or metrics that identify the outcomes that are most important to the success of a business are known as:
KPIs.
_________blank is the most common kind of coverage on key persons of a business.
Life insurance
_________blank is a measure of how quickly a company can raise money through internal sources by converting assets to cash.
Liquidity
_________blank is the set of methods and procedures used to account for entities designed and organized differently, such as NGOs
Nonprofit accounting
Which statement concerning financial management is correct?
Obtaining money for your start-up is only the beginning of financing a small business.
Which scenario is a drawback to financing with debt?
Payment is expected even if you have no money to make the payment.
_________blank is the ratio measure of how well a firm does in using its inputs to create outputs.
Productivity
Walter Bradham, the owner of Bradham Corporation muddled his personal finances with his business accounts. Following a suit into the financial irregularities at Bradham Corporation, a court subjected the Corporation to the decision of piercing the veil. Which course of action is the court most likely to take in this case?
The court will dissolve the corporation into a sole partnership under Bradham.
Aaron, a businessman, has a method of keeping track of accounts receivable by sorting them into groups of those that are 30, 60, 90, and over 90 days past due. Aaron's key in controlling receivables is to have them _________blank, by sorting them into groups.
aged
While closing a sales call, when a sales person says "I'll just need your credit card for payment," he is using the sales closing technique of:
an assumptive close.
Which answer option has low overhead and unlimited shelf space and thereby can afford to take on an unknown firm or product?
an e-tailer
A long-term rental in which ownership of the asset never passes to the person paying for the lease is called:
an operating lease.
A just-in-time (JIT) inventory system attempts to reduce inventory levels to the absolute minimum by:
assembling the product in the absolute minimum time possible.
In _________blank, products are sold to foreign buyers or distributors without any intermediaries.
direct exporting
When comparing the strategies for market growth, if you are looking at people who have not been customers and try to sell them newly developed products, you are following this strategy.
diversification strategy
A(n) _________blank is a valuable process that can greatly help an employer with the issues of keeping risks at acceptable levels. It is strictly a management tool that is not provided to outsiders; it can be structured and conducted in any systematic manner the owner finds acceptable.
internal audit
A(n) _________blank budget combines a purchases budget with a cost of goods sold budget.
inventory
When preparing pro forma statements for your business plan, once sales have been projected, the next step is to plan for:
inventory purchases.
Most states allow firms to use the same trade name, as long as the firms are in different parts of the state, or in different lines of business, and as long as:
none of firms have a trademark or service mark in the name.
There are several ways to export, but for most businesses the simplest way is to use this method.
online retailers such as Amazon or eBay
Ty ran a shop that sold and traded sports cards and sports memorabilia. He bought space on a billboard overlooking one of the main highways into the city and included the shop's phone number (555-CARDS). The shop soon received a flood of phone calls inquiring about his location, stock, and business hours. The number of customers entering the store increased by tenfold and his sales doubled. Every person who called the shop because they saw the billboard are:
sales leads.
Which answer option provides potential customers an education in a firm's product or service, including stories of customers' whose problems were solved, an FAQ list, as well as a page on the products or services, and a page on the business owner and his or her firm?
sales packets
Working proactively to ensure that your physical place of business is (1) free of potential hazards and (2) _________blank will prevent on-premises injuries and violations of EEOC or OSHA rules.
secure from intruders
Breakeven equals fixed cost divided by:
the contribution margin.
The steps in the "Get Customers" portion of the customer development funnel for physical products are awareness, interest, consideration, and purchase. Here, consideration refers to:
the process of getting into the prospective customer's final list of brands of products or services they may purchase.
Mr. Hill, who runs a key-chain manufacturing unit, buys raw materials from his supplier during the first week of every month. The supplier's policy states that all payments need to be cleared within 50 days of buying the materials. This schedule ensures that Mr. Hill gets an extended period to make payments thus controlling when the payment is made. Which strategy is Mr. Hill using to control cash outflow?
timing the purchase
_________blank is a dispute resolution process held instead of court cases in which both sides present their case to a legal professional.
Arbitration
_________blank is the practice of trading goods and services without the use of money.
Barter
_________blank is a formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators.
Financial accounting
_________blank are used to pay losses that are not covered by other liability insurance.
General liability insurance
_________blank uses creative and relatively inexpensive ways such as door-knob hangers, T-shirts, balloons, flyers under windshield wipers to reach customers.
Guerilla marketing
_________blank businesses have diverse operations and three critical site selection considerations: traffic, customer ease, and competition.
High customer contact
Which of the following statements is true of sales forecasting?
In many cases, the best sales forecast you can come up with is an educated guess.
_________blank ratios measure management effectiveness in creating wealth from sales and from invested funds.
Profitability
_________blank advertisements provide both geographic and demographic segmentation with a highly distracted audience.
Radio
Which statement is true of using internal audits to manage risk?
The owner should provide sufficient authority to the auditor to ensure that he or she can accomplish the goals of the audit.
Financial management requires that you have some method to measure and compare your financial position and financial results. Your financial position is reflected on your _________blank, and your financial results on your _________blank.
balance sheet; income statement
While teaching strategy at Farrell University, Jessica developed an interactive strategy-simulation game to inculcate the concept of strategy to her students. She found that they were able to grasp the concept much better from the game rather than from reading books. For two years Jessica used the game to teach students. Eventually she removed possible glitches and perfected the game. She wanted students at other universities to benefit from the simulation. The result was the launch of Simulate Strategy, Inc. Some of Jessica's students suggested that she create a website for Simulate Strategy, Inc. Her company is fairly new and opening a website immediately would expose her company to customers from around the world. In this scenario, Simulate Strategy is an example of a:
born international.
General partnerships are similar to limited partnerships in that:
both dissolve when their respective partnership mix changes.
Putting two or more of the same or different products or services together and selling for a price somewhat under the products' individual prices is:
bundling.
Setting the price for an item relatively low and then charging much higher prices for the expendables it uses is called:
captive pricing.
Regardless of your business's size, the one essential element of an accounting system is _________blank that is accurate, easy to use, and tracks all checks written and all deposits made.
cash accounting
Debt investments that mature in less than three months are an example of:
cash equivalents.
Liability insurance protects a business against:
claims from harm caused by inadvertent consequences of actions of the business or its employees.
With which type of legal fee does the attorney take a percentage of recovery as his or her fee?
contingency fee
Joshua suffered a serious knee injury at work after a machine he was using malfunctioned. Joshua plans to sue for compensation from Milch Enterprises, the company that built that machine. Joshua's attorney wants a percentage of the compensation if it is proven that Milch Enterprises' negligence caused the accident. Which type of legal fee would Joshua be paying to his attorney?
contingency fees
The number of prospects or leads you need to approach in order to make one sale if your:
conversion rate.
Exclusive rights given to the creator of a literary or artistic work to make use of that work is called a:
copyright.
Which answer option is not one of the Four Cs of borrowing?
cost of capital
The direct cost incurred in using an asset for the purpose for which it was intended is the:
cost of operating.
Which ratio is used to estimate the liquidity of a business?
current ratio
Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who manages the budgets and expenses of the business. Tammy receives a bulk order from a customer to make 100 paper roses for Valentine's Day. She charges 20 percent of the total sales price in advance and promises to deliver the order within 30 days. The advance payment that Tammy receives for the order before delivering the product is called:
deposit and progress payment.
While teaching strategy at Farrell University, Jessica developed an interactive strategy-simulation game to inculcate the concept of strategy to her students. She found that they were able to grasp the concept much better from the game rather than from reading books. For two years Jessica used the game to teach students. Eventually she removed possible glitches and perfected the game. She wanted students at other universities to benefit from the simulation. The result was the launch of Simulate Strategy, Inc. Jessica places an advertisement about her product with her email and contact information in the "Chronicle of Higher Education," a leading publication for University professors. Which marketing strategy exemplifies this scenario?
direct response advertising
Which scenario is true of follow-up?
electronic approaches dramatically lower marketing costs
Which answer option is an example of a special type of liability insurance that covers losses from harm caused during the performance of a profession?
errors and omissions insurance
There are three general types of events that cause business risk. Which answer option is not one of those three general types of events?
events related to the competitors of the business
The price at which goods and services are bought and sold between willing sellers and buyers in an arms-length transaction is called a:
fair market value.
When a business needs cash for marketing or cash for building inventory levels, their financial management needs are:
financing for growth.
When the financial management needs of a business are to reinvest for maintenance or to build owner wealth, the business needs:
financing for operations.
Which accounting functions focus the most on automatically calculating and accumulating depreciation?
fixed asset accounting
Josh, the owner of a software company, is facing cash flow problems. To control the cash outflow, he avoids paying the bills to his vendors. After much delay, he sends a check in payment but intentionally forgets to sign the check. To prevent the cash from going out of his business, Josh is applying the strategy of:
gaming the payment process.
Using methods to appear to be paying bills on time, when in fact the cash outflow is being delayed or avoided is called:
gaming the payment process.
Customer relationship management is only comprised of two steps, which are:
gather the data and analyze the data
Which answer option is not one of the most commonly identified sources of U.S. business risk small businesses face?
government instability
Gifts of money made to a business for a specific purpose are referred to as
grants.
A crisis in which there is a shortage of cash for expanding a business after an exponential increase in sales is termed:
growth trap.
Which scenario is a primary advantage of replacement value?
high accuracy of the value
For an owner, the main financial management emphasis while transferring a business to family members must be to:
increase asset value.
Which answer option is an example of debt financing?
incubators
Which answer option is not one of the steps to protecting trade secrets?
inform customers about their role in protecting the trade secret
A contract between two or more parties in which one party agrees, for a fee, to assume the risk of another is called:
insurance
Separation of duties is most important for:
intangible assets.
In the context of accounting functions, which scenario is true of accounts receivable?
it records provision of credit to customers
Which answer option is an advantage of providing credit to customers?
it reduces the cost of selling
Which scenario is a disadvantage of renting capital assets?
it requires the business to make regular, timely payments
Which scenario is true of financial management for a business exit?
its main emphasis is on maximizing the value of the business for successors
Partnerships through which two or more businesses combine to undertake a specific economic activity are called:
joint ventures.
A _________blank is a unit recognized as having rights and duties apart from the owners of the company.
legal entity
At the _________blank stage of a business, the emphasis of financial management is to build owner wealth, to conserve assets, to match cash inflows to outflows, and to maximize the return on capital assets by making optimal investing decisions.
operations
Which scenario is a disadvantage of sole proprietorships?
owner has unlimited liability for the firm's debt
The difference between assets and liabilities of a business is called its:
owner's equity.
Out of these answer options, which is the most available funding source for new businesses?
owners' equity investments
Tammy is talented at crafts but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who would manage the budgets and expenses of the business. Tammy buys her craft materials on credit from her supplier but clears all her debts at the end of every month. The amount that Tammy owes her supplier is referred to as:
payables.
The amount of time it takes a business to earn back the funds it paid out to obtain a capital asset is referred to as the:
payback period.
The accounts that are not revenue and expenses (such as cash, accounts receivable, notes payable, etc.) are called _________blank and are kept in balance at all times.
permanent accounts
Separation of duties requires you to do two things to protect yourself from theft: develop and enforce rules that prevent the employee responsible for an asset from being able to account for that asset, and:
physically protect your property.
Uri started a small business providing consulting services on ways to make a business environmentally friendly while saving money at the same time. Uri wanted to approach a large business in his area about using his services. Uri knew the larger business had been fined for environmental infractions in the past and began researching their business operations, trying to identify ways his consulting service could benefit the larger business. Uri was performing which step in structuring a negotiation platform to approach the larger company?
prepare
Payment for injury or damage that occurs during the use of a business's products is referred to as:
product liability.
Customers may __________blank themselves by asking for more information after finding your website or responding to a direct mail advertisement.
prospect
Which of these sets of numbers are the three you need to arrive at your sales forecast?
prospective customers, hit rate, and sale amount
Ty ran a shop that sold and traded sports cards and sports memorabilia. He bought space on a billboard overlooking one of the main highways into the city and included the shop's phone number (555-CARDS). The shop soon received a flood of phone calls inquiring about his location, stock, and business hours. The number of customers entering the store increased by tenfold and his sales doubled. Every person who traveled to Ty's shop to look at his inventory as a result of his billboard promotion are:
prospects.
This type of earned media includes publicity and other forms of communication so that the public and important stakeholders get a favourable opinion about your firm.
public relations
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:
receivables.
Maintaining an inventory helps a business to have an optimal level of cash flow by:
reducing the cost of processing orders.
Which answer option is not an example of performance data?
referrals from a customer
Identify the type of service location in which face-to-face meetings with clients are infrequent.
remote location
Sharon started a bakery and her store shared a parking lot with an accountant. The parking lot would hold twenty cars and there were signs posted directing customers where to park, but the signs were old and faded. The accountant had ten of the parking spaces but usually only had one client at a time in his office, except during tax season. Sharon had the other ten parking spots but often needed more parking spots for her customers, especially in the early morning hours. Sharon decided to approach the accountant and negotiate a way of using the parking spaces differently. Sharon was going to ask if her customers could use all twenty spaces in the lot in the early morning when the accountant was not at his office. She was prepared to pay for purchasing new signs for the lot and to have temporary signage made to put up during tax season when the accountant needed more parking spaces. Which technique was Sharon using to
seek to create value
Any debt that must be paid in less than one year from the date of the financial statement on which it is reported is considered:
short-term debt.