Chapter 12 "Financial Management" Review

If owners have total equity of $1,000,000 in the business and the business has net income (profit) of $10,000, the return on equity is _____.

1 percent

_____ records identify the amount assets have decreased in value due to their age and use.

Depreciation

An employee using direct deposit will receive a paycheck printed electronically to take to the bank. True or False

False

Current liabilities are amounts owed by the business that will be paid off within two years. True or False

False

FICA refers to _____.

Social Security and Medicare taxes

A business with a debt-to-equity ratio of 3:1 may have trouble borrowing additional funds from a bank. True or False

True

A current ratio of 1:2 represents an unhealthy business situation. True or False

True

A current ratio of 2:1 means that the value of current assets is twice as much as the value of as current liabilities. True or False

True

The right side of the balance sheet lists _____.

both liabilities and owner's equity

Examples of long-term assets are _____.

buildings and equipment

The _____ tells you if the business will be able to pay its debts when they are due.

current ratio

The differences between actual and budgeted performance, called _____, allow managers to spot problems before they become serious.

discrepancies

Actual revenue and expenses for a specific period are reported on the _____.

income statement

When the company is operating at a loss, the total expenses listed on the income statement will be _____.

more than the total revenue

The _____ shows how much profit is being made by each dollar of sales for the period being analyzed.

net income ratio

Sources of information to help build a budget for a new business include all except _____.

past financial records

Revenue minus expenses equals _____.

profit or loss

Financing requirements for a major business expansion are based on the _____ budget.

start-up

What is the formula for calculating owner's equity?

total assets minus total liabilities

If you are an employee of a company, your net pay is _____.

your gross pay minus deductions minus tax withholding