Entrepreneurship A - Unit 4
False
A quarterly report is a monthly report issued to shareholders.
False; A storage facility is physical, so it is an example of a tangible asset.
A storage facility is an example of an intangible asset.
True
Company executives mainly concern themselves with "the bottom line," which is the final line in a profit and loss statement.
Short-term debts; long-term debts
_____ are liabilities owed by an organization that are due within one year; _____ are liabilities that last longer than one year.
Accounts receivable
_____ are the money a company is owed after advancing a good or service to another organization or individual ahead of time.
Financial projections
______ are a key component of accounting because they help companies better predict the potential financial success or pitfalls of new business endeavors.
Assets
______ − liabilities = shareholders' equity.
creditor
a person or institution that gives money to someone else with the intention of getting paid back, usually with interest
certified public accountant
an accounting professional who has passed a standardized accounting exam within the United States
net worth
an organization's overall value calculated by removing liabilities from assets
non-current assets
assets that are expected to be useful and productive for an organization for longer than one year
intangible assets
assets that are non-physical in form
tangible assets
assets that have a physical form
tangible assets accounts payable intangible assets
assets that have a physical form recorded entries specifically representing an organization's obligation to pay short-term debts to its creditors assets that are non-physical in form
liabilities
financial debts or obligations owed by an organization because of business operations
accounts receivable
invoices, or bills, whose sum must be paid to an organization in exchange for a good or service
short-term debt
liabilities owed by an organization that are due within one year
True
A good way to gauge the overall health of an organization is through a balance sheet, which provides a "snapshot" of the company's assets, liabilities, and shareholders' equity.
False; A music video is non-physical, so it is an example of an intangible asset.
A music video is an example of a tangible asset.
False
A piece of heavy machinery is an example of an intangible asset.
balance sheet
A(n) ______ is a financial statement portraying a company's assets, liabilities, and shareholders' equity.
True
Accounting controls are methods created by a business to ensure the accuracy and validity of its own financial statements.
accounting controls
Accounting fraud usually occurs because of a lack of _____, which are meant to ensure the accuracy and validity of a business's financial statements.
True
Accounting is the recording and organization of business financial information for government and tax agencies.
True
Accounts receivable are the money a company is owed after advancing a good or service to another organization or individual.
specialization of labor division of labor division of labor specialization of labor specialization of labor division of labor
In basketball, a center is skilled at close-range scoring while a point guard is skilled at long-range scoring. To increase efficiency at her furniture manufacturing firm, Samantha creates a team for purchasing raw materials and a separate team to continue manufacturing. A marketing team handles the branding of an organization, while a sales team handles selling. In a construction company, there are architects skilled at planning architecture and construction workers who know how to use these plans to actually build the architecture. Upper management is good at delegating responsibility, while lower management is good at execution. In companies that produce several product lines, a different team is often assigned to each individual line.
growth pace expense projection reports growth challenges growth challenges fundraising opportunities expense projection reports growth pace fundraising opportunities
How quickly a company can expand is directly tied to projected revenues and expenses. Calculate the total amount of revenue and itemized expenses for an organization over an extended period of time in order to predict net revenue. Pro forma statements can denote areas that could be problematic in the future. Specific line items of expenses might reveal overspending in certain areas, preventing a more profitable bottom line. If they have access to accurate and thorough financial projections, potential investors are more likely to see the value in the future of an organization. These are usually projected per quarter. Pro forma statements are utilized to determine a reasonable pace, or rate, of future growth for an organization. For companies, especially startups created by entrepreneurs, finding reliable funding is often necessary.
True
Intellectual property is a form of intangible asset which includes patents, branding, logos, copyrights, and trade secrets.
False; Inventory is neither a long-term piece of property nor an asset used for long-lasting production, so it is not a fixed asset.
Inventory is an example of a fixed asset.
False; Investors heavily rely on the financial projections in pro forma statements when making investment decisions.
Investors rarely find pro forma statements relevant for investment opportunities.
True
The law of diminishing marginal returns states that with the addition of more workers, individual productivity, not overall production, is what decreases.
Q1, Q2, Q3, and Q4
The quarters of a financial calendar are often expressed as _____.
inventory turnover
a ratio showing how many times a company's inventory is completely sold over a period of time; usually measured in months or years
current assets non-current assets non-current assets non-current assets current assets non-current assets current assets
accounts receivable patents intangible assets machinery inventory tangible assets money orders
current assets
assets that are expected to be consumed within one year of purchase
current assets liabilities accounts payable intangible assets short-term debt tangible assets
assets that are expected to be consumed within one year of purchase financial debts or obligations owed by an organization because of business operations recorded entries specifically representing an organization's obligation to pay short-term debts to its creditors assets that are non-physical in form liabilities owed by an organization that are due within one year assets that have a physical form
liabilities assets shareholders' equity liabilities shareholders' equity assets
bank loan cash common stock accounts payable retained earnings inventory
long-term debt
liabilities that last longer than one year
fixed assets
long-term pieces of property an organization owns and uses for production over an extended period of time
accounts payable
recorded entries specifically representing an organization's obligation to pay short-term debts to its creditors
non-operating revenue operating expenses non-operating expenses operating revenue non-operating revenue non-operating expenses operating revenue operating expenses
selling off an industrial plant once used for manufacturing paying your employees non-recurring legal fees the sale of flowers at Marianna's Floral Shop, Inc. selling an investment of stocks and earning a profit paying out employee benefits, such as health insurance Fuller and Sons' Automotive earning revenue from a car repair buying raw materials
common stock
shares of a company that can be owned by the general public
debit
A withdrawal from an account a(n) _____.
True
An undocumented purchase is an example of accounting fraud.
True
Approval authority describes the system in which specific managers in an organization are required to authorize certain kinds of transactions.
incentive
In business, a(n) ______ is anything that motivates an individual or organization toward action.
organization
In business, an incentive is anything that motivates an individual or _____ to action.
False
The final line of a profit and loss statement is commonly referred to as the absolute line.
diminishing marginal return
The larger teams get, the more _____ tends to occur.
retained earnings
net earnings retained by a company that can be reinvested in the business
audits careful documentation separation of duties approval authority audits careful documentation approval authority separation of duties
taking inventory of raw materials generating invoices, purchase orders, receipts, and expense reports making the CFO responsible for bookkeeping and the CEO responsible for reporting requiring five signatures from superiors before making any purchase over $100,000 hand-counting cash making sure record-keeping documents are standardized across departments Redford, Inc., only requires two signatures for purchases of $500 to $4,500. At TeleDoc, Inc., the CEO is not allowed access to the balance sheet.
accounting
the recording and organization of business financial information for government and tax agencies
forecasted inventory
the total amount of inventory available, including new inventory coming from a supplier
creditor
A ____ is a person or institution that gives money to someone else with the intention of getting paid back, usually with interest.
quarter
A _____ is a three-month period within a company's financial calendar that acts as a basis for reporting earnings and losses.
credit
A deposit to an account is a(n) _____.
True
Expenses are any costs a company must pay when seeking to earn income.
profit and loss statement
Also called an income statement, which of these is a financial statement that reports a company's financial performance over a specific accounting period?
False
An annual report is a financial statement that reports a company's inventory remaining, typically over a period of one year.
False
An audit is an opinion-based assessment of a firm's financial statements done to ensure accurate and fair reporting.
False
Assets represent the overall net value of a company owned by shareholders.
An annual report is a more extensive set of financial statements, compared to a quarterly report, released by a company reporting performance over the course of one calendar year.
Explain in your own words what an annual report entails.
A debit is a withdrawal from an account, while a credit is a deposit.
Explain the difference between a debit and credit to an account.
True
Budgets make predictions about future potential income and expenses.
current assets
Cash, money orders, accounts receivable, and inventory are all examples of _____.
True
Certified public accountants are essentially trusted financial advisors who help individuals and businesses accomplish their financial goals.
operating revenue operating expenses non-operating revenue non-operating expenses non-operating expenses operating revenue non-operating revenue operating expenses
Clarksdale Furniture sells 150 dining room tables in one year. purchasing raw materials Retail chain TedMart wins a lawsuit against one of its suppliers and is awarded $300,000 because of losses. paying off interest on a loan hiring an attorney to make sure legal documents and user agreements are worded correctly selling one's primary good or service Preston's Bottling Company downsizes and sells one of its older manufacturing plants. purchasing inventory
False
Credit turnover is a ratio showing the number of times a company's inventory is completely sold over a period of time.
True
Division of labor is the assignment of different parts of the production process to different people to raise overall efficiency.
True
Expenses are any costs a business incurs while trying to earn revenue.
profit
Net revenue is the same thing as _____ in that they are both revenue minus expenses.
False; A quarter is made up of three months, not four.
On a company's financial calendar, a quarter is made up of four months.
non-current assets
Patents, machinery, and tangible or intangible assets are examples of ______.
income
Profit and loss statements, which report financial performance over a specific accounting period, are often also referred to as _____ statements.
True
Projected financial statements are also known as pro forma statements.
an asset
Stocks are an example of _____.
diminishing marginal returns
The law of _____ is a law of economics suggesting that an increase in the number of employees in an organization causes the production of each individual employee to decline.
on-hand inventory
a physical quantity of inventory available for sale in a warehouse
careful documentation careful documentation audits separation of duties audits separation of duties approval authority careful documentation
Titan Automotive makes sure all its invoices are the same across all departments. Titan Automotive makes sure all its invoices are the same across all departments. At Tammy's Floral Shop, inventory is counted after every new major shipment. At the Fortune 500 computer company GenBox, Inc., one executive is responsible for the cash flow statement, while another is responsible for the budget. At TradeCo, Inc., whenever cash changes departments, it is carefully counted by hand. At Bronners Home Furnishings, the executive board is careful not to let the CEO issue her own bonuses. Purchases under $200 require only one signature at School Supplies Plus. At Home and More Paint Co., the managers make sure purchase orders are the same across all departments.
operating investing financing
What are the three main parts of a cash flow statement?
A cash flow statement is a financial document showing the change in the balance of cash and cash equivalents in an organization over a period of time. Cash flow is determined by calculating and recording three specific figures: operating, investing, and financing. The ultimate goal of the cash flow statement is to determine where money is coming from and where it is going. Because cash is the most liquid and fundamental of resources to a company, organizations do their best to record its movement.
What does a cash flow statement tell us about an organization?
accounting fraud
What typically results when an organization does not use accounting controls?
specialization
When labor is divided, _____ tends to occur, allowing for greater efficiency and productivity.
shareholders' equity
Which aspect of a balance sheet represents the total net value of an organization?
separating duties
Which of the following is NOT a part of the cash flow statement?
customer
Which of the following is NOT an example of a creditor?
raw materials labor
Which of the following is an example of a cost of goods sold?
warehouse
Which of the following is an example of a fixed asset?
warehouse
Which of the following is an example of a tangible asset?
liabilities
Which of these are financial debts or obligations owed by an organization because of business operations?
accounting controls
Which of these are methods a company uses to maintain accurate and valid financial statements?
a ratio showing the number of times a company's inventory is completely sold
Which of these describes inventory turnover?
long-term debt
Which of these includes liabilities owed by an organization that last longer than one year?
paying an electric bill
Which of these is NOT an example of a cost of goods sold?
stealing inventory
Which of these is NOT an example of accounting fraud?
cash flow statement
Which of these is a financial document showing the change in the balance of cash and cash equivalents in an organization over time?
budget
Which of these is a financial plan that lays out incomes and expenses to determine how much money can be earned over a specific period of time?
projected financial statements
Which of these is a series of documents that help management predict future financial trends of an organization?
quarterly report
Which of these is a set of financial statements, including an income statement, released by a company every three months?
assets
Which of these is the missing variable within the net worth equation?_____ - liabilities = shareholders' equity
audit
Which of these is the official term for an objective evaluation of a firm's financial statements to ensure accuracy and fairness in reporting?
accounting
Which of these is the recording and organization of business financial information for government and tax agencies?
both investors and creditors
Who is particularly interested in an organization's profit and loss statement for investing?
Current assets; non-current assets
_____ are assets that are expected to be consumed within one year of purchase, whereas _____ are assets expected to be useful and productive for an organization for longer than one year.