ENT- Chapter 7- Financing and Accounting

Which of the following is NOT true with regard to managing the flow of data?

- *Data measurement methods must be complex.* - Data are obtained in a timely manner. - The data management philosophy is the same for new business and large, established firms. - Data are tied to the strategic needs of the business.

Which of the following are true regarding the accounts payable?

- All invoices received should be recorded. - The record should include date paid, amount, and check number or tracking number. - A record of payment toward each invoice should be included.

Which of the following are potential outcomes of a poorly managed credit card?

- An increase in the interest rate - Possible bankruptcy of a firm

Which funding tool involves the leasing of equipment from manufacturers or a third-party reseller?

- Asset lease

What type of lending involves the bank estimating the residual value of the equipment if the bank had to repossess the equipment and then lend the business a percentage of the difference between that number and the sale price?

- Asset-based lending

Which form of equity investors refers to high-net-worth individuals that invest widely in business?

- Business angels

Which of the following large firms have been active equity investors in new start-up firms in the technology sector?

- Cisco - Intel - Microsoft

What form of debt financing allows for a unique positive cash flow situation by allowing up to a 25-day delay in payment?

- Credit cards

Which form of debt is almost always tied personally to the founders, thus exposing them to personal bankruptcy?

- Credit cards

Which of the following are considered sources of debt for starting a new business?

- Credit cards - Suppliers - Banks

______ involves entrepreneurs making a pitch on an internet site and letting potential investors know what they will receive for their funding, which might be equity but is more often a product, service, or gift.

- Crowdfunding

Which of the following are considered alternative sourcing tools for funding a business?

- Crowdfunding - Crowdsourcing

In the event of a business failure, which of the following sources of funding must be paid back first?

- Debt

What is the generic term is used to describe any type of nonequity funding tied to the business?

- Debt

Which of the following are typically the targets of grants?

- Economic areas - Particular industries - Disadvantaged groups

Which of the following are potential business angels?

- Entrepreneurs who have cashed out - High-income executives of large organizations - Professionals such as doctors or lawyers - Individuals with significant inheritances

Which funding option traditionally involves selling a percentage of the business to an outside party?

- Equity Investment

Which of the following are key reports a business should generate?

- Expense account - Accounts payable - Payroll - Petty cash

True or false: Credit cards are a form of equity investment.

- False

True or false: Funding for almost any new business begins with the founder and his or her personal resources.

- False!

True or false: To calculate the maximum amount to obtain in outside financing, it is advisable for an entrepreneur to calculate the entire cash flow projection by adding in all equity investments.

- False!

True or false: The founder should avoid personally lending money to the new business because it is an unsecured investment.

- False! (The debt is actually secured)

Which of the following are sources of nonequity capital to start a business?

- Grants - Debt

Why do companies invest in a new venture with the data of ultimately purchasing the venture?

- It is one of the least expensive means for the companies to try out new ideas. - It helps the companies maintain access to the latest thinking in the field.

What method of inventory control seeks to minimize excess capital investment in inventory by having is present only shortly before it is used?

- Just-in-time inventory

Which of the following items should be included on the payroll record?

- Number of hours worked - Benefit deductions - Taxes - Base pay and overtime par rate

Which account operates much like a bank savings account using a register to track the amount in the box?

- Petty cash register

Which of the following typically issue grants?

- Private foundations - Government

Identify the typical advantage of having suppliers invest in a new business.

- Suppliers refrain from trying to run the business. - Suppliers do not aim to take the business over if it does particularly well.

Which of the following is a disadvantage of factoring for a new business?

- The business will not receive the full amount of the debt that is due to it.

What are the key financial issues involved with starting a business?

- The flow of information in the new business - The establishment of an accounting system - The funding and the funding level of the firm

Identify a disadvantage of asset leasing for a new business.

- The new business may spend more money for the equipment over time than if it had bought the unit outright.

Identify the issues a new business uses to determine the quality of accounts receivable.

- The size of the transaction - The debtor's credit rating

Identify the characteristics of loans as a source of funding for new businesses.

- They are often repaid monthly from cash flow - They are secured by assets or a personal guarantee.

True or false: Both a check register and a petty cash register are required by an entrepreneur to form an annual record of all expenses.

- True!

True or false: Prior to allowing any nonfounder to invest in a new business, the entrepreneur should have a fair and valid estimation of the value of his or her company.

- True!

When are credit cards a good method of managing cash flow?

- When used on a short-term basis - When used as a tracking system for individual expenses within the company - When paid off each month

Which of the following are examples of groups typically targeted for grants?

- Women-owned businesses - Veterans

An inventory record will include:

- a description of the item - an item number - the quantity of the item - a unit and total cost *ALL OF THE ABOVE*

Funding received by a business by soliciting a large number of very small investors usually via the internet is called ______.

- crowdfunding

Banks have traditionally been a major source of funds for:

- established firms.

Besides banks, finance companies, and the founders, another source of nonequity loans comes from:

- friends and family.

The accounting system and the data flow management provide information on how the ______ will be used by the business.

- funding

In the long run, the cost of capital for nonequity funding is generally ______ that of equity investment.

- less than

It is important to record and balance the company account on at least a ______ basis.

- monthly

A key aspect of how the funding will be used is found in the information provided by the business, and that comes from:

- the accounting system. - the data flow management.

Besides banks, finance companies, and friends and family, another source of nonequity loans comes from:

- the founders.

Grant funding typically comes from:

- the government. - a nonprofit agency.

Which of the following is NOT a common form of debt for a new business?

-Venture capital

A chart of accounts is simply a listing of each type of activity and each type of asset within the company. Rank the categories from first to last associated with a chart of accounts.

1.) Income category 2.) Expense category 3.) Asset category

It recognizes expenses as they are paid and recognizes revenue as it is generated.

A cash-based accounting system

It is the more typical form of accounting used, with expenses and revenues recorded when they actually occur, regardless of when the cash is received.

An accrual-based accounting system

______ credit is a form on nonequity funding for physical assets as well as the actual suppliers purchased.

Supplier

The ______ system of a firm is a powerful asset that should be used as a fine-grained tool to provide data about when and how inventory is needed.

accounting

Banks will lend money for the establishment and maintenance of inventory by arranging a revolving line of ______.

credit

A(n) ______ investment is funds received by a business in exchange for a percentage ownership of the business.

equity

If a firm needs to generate cash in the short run, accounts receivable can be sold at a discount via a technique known as ______.

factoring

A(n) ______ involves a contractual agreement whereby the business receives some amount of money that must be repaid over a specified over a specific period of time at a specific interest rate.

loan

Accepting ______ ______ can limit a firm's ability to shop around for a cheaper source.

supplier credit

A(n) ______ fund is a fund that usually is organized as a limited partnership and is organized to make significant equity investments in high-growth new ventures.

venture capital