Business Management Ch. 9 Quiz

Before you can approach a lender or investor about financing your business, you must prepare all of the following except

A personal cash flow statement

An income statement helps you do all of the following except

Anticipate when negative cash flows will occur so that you can plan for how to handle them

Items of value that you own are called

Assets

Depreciation is included on a balance sheet to show that some

Assets have lost value over time

The assets, liabilities, and owner's equity of a business are shown on a

Balance sheet

Posting generally done

Every one to two days

Which of the following is not one of the journals that businesses typically use to record their transaction

Expense journal

A bank usually will loan a business up to 50 percent of the total value of its accounts receivable if it feels that the business's customers are good credit risks.

False

A best-case-scenario cash flow statement should project the lowest cash receipts and highest cash disbursements that your business is likely to have

False

A business that collects sales tax must pay the tax quarterly

False

A business that has more assets than liabilities has negative net worth

False

A cash flow statement shows a business's revenues and expenses incurred over a period of time and the resulting profit or loss

False

An aging table is record keeping took for tracking accounts payable

False

An income statement shows revenues that you have received and expenses that you have paid

False

Banks require collateral for most unsecured loans

False

Debt capital is money invested in a business in return for a share in the profits of the business.

False

If you receive supplies today but pay for them later, you should record this transaction in the cash payments journal

False

Inventory is a type of fixed asset because it is used up in normal business operations

False

The cash flow statement is prepared using the accrual method of accounting

False

To calculate your net worth, you should prepare a pro forma financial statement.

False

On a balance sheet, buildings and furniture would be included as

Fixed assets

Under the cash method of accounting, revenue is recorded prior to receipt

Flase

The journal used to record any kind of transaction is the

General journal

The difference between revenue and cost of goods sold is called

Gross profit

An aging table shows a business

How long it is taking customers to pay their bills

An income statement indicates

How much money a business earns or loses over a period of time

A high debt-to-equity ratio

Indicates that a business is primarily financed through equity

A line of credit

Is a type of debt capital

In the accounting equation, assets must always equal

Liabilities plus owner's equity

A mortgage is a type of

Long-term liability

If a business wants to make improvements to increase profits, it will usually get a

Long-term loan

Venture capitalists are individuals or companies that

Make a living by investing in startup companies

A business must pay income taxes

Quarterly

A sales journal is used to record any kind of transaction is the

Sales of merchandise on account

A payroll register includes all of the following information except

Sales taxes deducted from an employee's earnings

Although similar to borrowing from the SBA, the restrictions are tighter for borrowing from

The Economic Development Association

An income statement is sometimes called a profit/loss statement

True

Deductions from the employee's earnings include federal, state, and local taxed and contributions for Social Security and Medicare

True

Equity capital does not include money invested by the owner of the business.

True

Interest earned from bank accounts is considered revenue

True

Loans and accounts payable are examples of liabilities

True

Net worth is the difference between items of value that you own and amounts you owe to others.

True

Payroll records show employee earnings and any deductions from those earnings

True

Subsidiary ledgers are commonly used for accounts payable and accounts receivable

True

The Small Business Administration (SBA) does not make direct loans

True

The cost of the inventory that a business sells during a particular period is called costs of goods sold

True

Typically, only very small businesses use the cash method of accounting

True

Venture capitalists are usually interested in companies that have the potential of earning hundreds of millions of dollars within a few years.

True

Your company's dept-to-equity ratio measures how much money a company can safely borrow over time.

True

Unsecured loans are

Usually short-term loans that have to be repaid within a year

If cash receipts total more than cash disbursements, your business has

a positive cash flow

A booklet in which you record the dates and amounts of the checks you have written is called an

check register

A bank may turn down a loan application of a new business because the entrepreneur

is investing too little of his or her own money in a business

The accrual method of accounting

is used by most companies because it offers a better picture of long-term profitability