New Venture Finance -Exam I
enables trending
Why should a small business owner care about the income statement?
variance analysis
Which methodology compromising estimating the changes in revenues and expreses from current operating results that will occur if each alternative is taken?
franchise
A right or license granted to an individual, group, or business to market a company's good and services in a particular territory?
balance sheet
A snapshot of assets, liabilities, and owners' equity at a point in time.
negatives of getting funds at one time
A. Forecasts may be wrong as a result of incoming cash flows occurring earlier than year 4, requiring less up-front capital. B. Receiving too much capital at one time spoils the inexperienced entrepreneur and could lead to unnecessary waste of the capital C. Invested capital comes in at a lower valuation.
reasons to get out business
- technological obsolescence - specific industry decline - potential laws changing the business landscape
A/R Parameters
-cash discount -credit period -collection effort
security for surplus money markets
-preferred stock -tax exempt municipal bonds -convertible bonds
income statement purpose
-tax purposes -estimate sales -estimate future cash flows
cash flow statement
Which financial report is most important to managing a small business?
financial flexibility
A business' ability to manage cash flows in such a manner that the company can respond appropriately to unexpected opportunities & needs
liquidity
A measure of how quickly a company can raise money through internal sources by converting assets to cash
cost-volume-profit analysis
Diane is looking to help her company determine how many units it should sell in order to maximize profits. What kind of analysis should she use?
EBITDA
Earnings before interest, taxes, depreciation, and amortization.
GAAP
When submitting accounting reports to the government one must follow these standardized rules for account?
educated estimates and roadmaps
How are budgets related to business plans?
cost- good b/c add value, expenses= bad, sunken & no return
How are costs and expenses different?
asset= liabilities + shareholders equity
How does the accounting equation relate to the balance sheet?
owners equity
How much is the business worth to an owner?
net income
How much profit did the company make?
sales revenue
How much revenue did the business produce?
rarely
How often does the statement sequence change?
when cash is received
In cash accounting when are revenues recognized?
managerial accounting
Jerry, a manager for a small restaurant, is trying to plan future budgets which type of accounting should he use?
current ratio
Measures whether current bills can be paid
stockholders equity
Monies paid in from owners through purchases of stock and retained earnings.
franchise fee
One time, upfront fee paid to a franchiser
royalty fee
Ongoing obligation to pay a franchiser a percentage of gross sales; may or may not include advertising fee.
lifestyle entrepreneur
People who start a business to provide themselves with a decent standard of living are referred to as?
income statement
Rachel owns a small business and wants to know how much profit she made last year. To find this out she would view her?
cash gap
Refers to the period between payment of cash and receipt of cash
computerized systems
Robert owns a small business and wants to simplify the account process, he can do so by using what?
operating ratio
Shows focus on the use of assets and the performance of management
business entity concept
The concept that a business has an existence separate from that of its owners
varience
The difference between an actual and budgeted revenue or cost.
reasons to do accounting
To produce information that is useful to you to manage your business, and to meet legal or contractual requirements
ease of use,produce formatted financial statements, facilitiate budgets
What are 3 most important characteristics of a small business computer system?
liquidity, budgeting, credit facilitating
What are the 3 most important functions of a computer system?
managerial, financial, tax
What are the 3 types of accounting?
cash flow positive and growth
What are the break-even points?
compound annual and simple
What are the two main methods of measuring company growth?
minimize taxes
What do privately own companies want to do?
cash income and use
What does the cash flow statement explicitly show?
bankruptcy
What does the financial state if having more debt than assets mean?
budget
What is a collection of estimates?
balance sheet
What is another name for the statement of financial positions?
cash
What is king?
quicker start up time
What is one advantage of owning a franchise?
objectively appraise a company
What is ratio analysis typically used to do?
6-8 months
What is the fixed time horizon of the two types of financing?
total assets
What is the value of everything your company owns?
current assets exceed current liabilities
What makes a business be consider liquid?
cost-volume-profit analysis
What managerial accounting technique looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize profit?
assets
What should not be included on the income statement?
cash flow statement
What statement measures the business fron one point to another point?
managerial
What type of accounting is most important to small business?
cash flow
You must Prepare a 3-5 year monthly annual cash flow projection when forecasting what?
operating expenses
how much does the business need for its continuing operation?
COGS
the costs of raw materials, land, direct labor required to produce the product or service that generated the revenue.
total current assets
what can you turn into cash in one year?
interest expense
what costs did the business have for financing?
long term debts
what debts will take longer than a year to pay off?
COGS
what did it cost to make your product?
profit lost statement
what is another name for the income statement?