midterm intro business

True or False: An advantage of starting a business from scratch is that the entrepreneur has the freedom to use his or her own ideas and concepts.

True

In the context of stock indices, which of the following is a difference between the Dow Jones Industrial Average (DJIA)and the Standard & Poor's 500 (S&P 500)?

Unlike the DJIA, the S&P 500 is a much broader index.

true or false: A budgeted income statement is a detailed forecast of future cash flows that helps financial managers identify when their firm is likely to experience temporary shortages or surpluses of cash.

false

Leverage ratios measure the extent to which a firm uses _____.

financial leverage

In the context of a public offering, a(n) _____ is a complex document that must include a firm's key financial statements plus additional information about the company's management, its properties, its competition, and the intended uses for the funds it plans to obtain from the offering.

registration statement

tRue or fAlse: Common stock represents the basic ownership interest in a corporation.

tRue

Financial capital refers to the:

the funds a firm uses to acquire its assets and finance its operations

In the context of small business opportunities, which of the following statements is true of market niches?

they tend to be quite attractive to small firms.

trUE or faLSE: Par value is the value of a bond at its maturity; what the issuer promises to pay the bondholder when the bond matures.

trUE

trUe or faLse: The deduction of a firm's expenses from its revenue is shown in the income statement of the firm.

trUe

trUe or falsE: When entrepreneurs develop new products that we didn't even know we needed until we had them, they are showing the entrepreneurial characteristic of vision.

trUe

Albert is the owner of a car service center. As a sole proprietor, any profit that he earns is:

treated as albert's income

truE or falSe: The earnings of not-for-profit corporations are exempt from federal and state income taxes.

truE

true or false: A disadvantage of an S corporation is that it can have no more than 50 stockholders.

true

Which of the following is a difference between managerial accounting and financial accounting?

?Financial accounting is governed by a set of generally accepted accounting principles, whereas managerial accounting uses procedures developed internally that are not required to follow generally accepted accounting principles.

Which of the following is a similarity between angel investors and venture capitalists?

Both invest in risky opportunities that offer the possibility of high rates of return.

TRUE or FALSE: External locus of control is adeep-seated sense that the individual is personally responsible for what happens in his or her life.

FALSE

TrUE or FaLSE: The Securities Act of 1933 created the Federal Reserve System to serve as the central bank in the United States.

FaLSE

Which of the following is a criterion that needs to be fulfilled by an individual to be recognized as a certified public accountant?

He or she must complete the equivalent of 150 semester hours of college education with a heavy emphasis in accounting and other business-related courses.

Which of the following explains the preemptive right of common stockholders?

If a corporation issues new stock, existing stockholders can purchase new shares in proportion to their existing holdings before the stock is offered to the other investors.

Which of the following statements is true of trade credit?

It is granted by suppliers after evaluating the creditworthiness of a firm.

In the context of the capital structure of a firm, which of the following statements is true of equity financing?

It is less risky than debt financing.

Which of the following statements is true of the Dodd-Frank Act?

It required large firms in the financial sector to hold more equity and less debt in their capital structures.

TRUE or FALSE: An effective business plan is usually 25 to 50 pages long.

TRUE

Identify a true statement about angel investors.

They invest in promising start-up companies because they want to make money for themselves.

TrUE or FaLSE: There is no limit on the number of partners who can participate in a general partnership.

TrUE

A Franchise Disclosure Document (FDD) is:

a document provided by a franchisor to the franchisee.

From a financial manager's perspective, the time value of money reflects the fact that:

a dollar received today is worth more than a dollar received in the future.

Institutional investors:

amass huge pools of financial capital from various sources.

In the context of opportunities and threats, overhead costs for small businesses:

are often lower than big companies

A _____ is the most common depository institution.

commercial bank

Through the establishment of a set of generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (FASB) aims to ensure that financial statements are:

comparable.

____is the process of funding ventures by raising money from a large number of investors via the Internet.

crowdfunding

In financial management, risk is referred to as the:

degree of uncertainty about the actual outcome of a decision.

In the context of managerial accounting, _____ are costs that are incurred as the result of some specific cost object.

direct costs

A _____ is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.

distributorship

tRUE or fALSE: In top-down budgeting, top management prepares the budget with the involvement of the middle and supervisory managers.

fAlse

tRue or fAlse: For research purposes, the U.S. Small Business Administration (SBA)defines small business as companies with up to 1000 employees.

fAlse

trUE or faLSE: One of the advantages of a C corporation is ease of formation.

faLSE

truE or falSe: The U.S. Small Business Administration (SBA) gives free money to start-up businesses.

falSe

Harold, a financial accountant in a company, is asked to identify the changes in the company's account values between 2014 and 2016. To get the required information, he uses comparative financial statements, which state the figures for the two years side by side. These comparative financial statements make it easier for Harold to identify the changes that may have taken place during that period. In this scenario, Harold is most likely using _____ to get the required information.

horizontal analysis

In the context of budgeting, a flexible budget:

is designed to show the appropriate budgeted level of costs for each different level of sales.

An advantage of debt financing is that:

it does not require firms to sell stock to new investors to gain additional funds.

Firms buy commercial paper as part of their portfolio of cash equivalents because:

it is a safe way to earn some interest.

Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must:

let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements.

In the accounting equation, assets are equal to:

liabilities plus owners' equity.

A _____ is an order to a broker to buy a specific stock only if its price is below a certain level, or to sell a specific stock only if its price is above a certain level.

limit order

FoodieGo, a catering company, is owned by foreign investors and local businessmen. Its earnings are equally divided among its members. It does not face the problem of double taxation as taxes are only levied on the personal income of the members. The owners of FoodieGo do not have personal liability for any debts incurred by the company. In the given scenario, FoodieGo is an example of a _____.

limited liability company

The stocks of firms that do not meet the listing requirements of stock exchanges are traded on the _____.

over-the-counter market

A corporation is a separate entity from its owners where the:

owners are not personally responsible for the obligations of the company.