SMALL BUSINESS FINANCE FINAL

Broadly defined, how many types of customers are there? A. 2 B. 4 C. 3 D. 5

B. 4

Why should you fund projects internally with cash from profits, as opposed to debt or equity financing, when possible? A. You can maintain decision-making and ownership of your company. B. All of the above C. You can avoid costs of debt such as interest and risk of default. D. You can retain all of your assets.

B. All of the above

Which of the following statements about business valuation is not true? A. Deal structure is a vital component of the valuation process. B. Commonly available businesses are priced with a higher multiple. C. A company's adjusted net income considers owner's salary and cash benefits. D. Multiples reflect market behavior including demand and perceived risk.

B. Commonly available businesses are priced with a higher multiple.

Which of these forecasting techniques has the advantages of being easy to calculate and reacts quickly to changes in demand caused by trends or seasonality? A. Moving Average Forecast B. Exponential Smoothing C. Weighted Moving Average D. Expected Value Analysis

B. Exponential Smoothing

After stock has been issued it cannot be repurchased. A. TRUE B. FALSE

B. FALSE

Which of the following statements about factoring is true? A. Factoring is for only large corporations. B. Factoring is common in industries with low receivables turnover. C. Factoring is a loan. D. Factors are most concerned about creditworthiness of the business owner.

B. Factoring is common in industries with low receivables turnover.

If your business is currently experiencing cash flow issues, which of the following actions would you avoid? A. Delaying current accounts payable B. Increasing inventory C. Reducing operating expenses D. Reducing collection times for receivables

B. Increasing inventory

Your company's current ratio is 0.72. which of the following is NOT TRUE about your firm? A.cash and other liquid assets combined are less than your debts B.current liabilities are greater than its current assets C.if necessary, could not pay its current liabilities with it current assets D.your current assets exceed your current liabilities by 28%

D. your current assets exceed your current liabilities by 28%

Opportunity cost is ________ A. the cost an individual, investor or business is charged for doing business B. a component of variable costs C. the benefits an individual, investor or business misses out on when choosing one alternative over another D. all answers are correct

C. the benefits an individual, investor or business misses out on when choosing one alternative over another

The Proforma shows projected results but it is only as good as A. market awareness B. production capacity C. the forecast D. research & development

C. the forecast

The Dupont framework is composed of the following performance indicators except: A.profitability B. leverage C. solvency D. efficiency

C.solvency

You have purchased inventory from a supplier on credit. Their terms are 2% 10 net 30. If you wanted to delay your accounts payable payments, which terms below would be the best to negotiate with your supplier? A. 2% 10 net 40 B. 3% 10 net 20 C. 3% 10 net 30 D. 2% 10 net 45

D. 2% 10 net 45

What should a business do to decrease the foreign exchange risk? A. Be sure that the exchange rate at the date the contract is signed is favorable for the company B. Do not get involved in business with foreign companies C. Diversify the currencies you are using to do business D. Accept only US dollars

D. Accept only US dollars

Which of the firm's below will have the highest ROE? A. None of the above, leverage does not affect the ROE B. Firm C with leverage of 2.0 C. Firm B with leverage of 2.5 D. Firm A with leverage of 2.9

D. Firm A with leverage of 2.9

Which of the following can be considered a category of concern for off-balance sheet items? A. Personal assets of the owner B. Economic independence C. Policy risk D. Interest rate risk

D. Interest rate risk

Which of the following factors can create economic dependence for a business? A. Expansion on multiple markets B. Multiple sources of revenue C. A rapid increase in new customers D. One customer represents the majority of the company's revenue

D. One customer represents the majority of the company's revenue

Which company departments need to be involved in developing a sales forecast? A. The Sales Department B. The Marketing Department C. Sales and Marketing Departments D. Sales, Marketing, Finance, Operations

D. Sales, Marketing, Finance, Operations

Which of the following is the least effective effort in collecting overdue receivables? A. Send paper statements to customers. B. Contact the customer via phone or email. C. Meet with customer to discuss overdue accounts. D. Send overdue accounts to collections and cancel customer credit immediately.

D. Send overdue accounts to collections and cancel customer credit immediately.

The leverage component of the Dupont framework can be calculated by dividing a firm's ______ by it's______. A. net income; sales B.debt ; equity C. assets; liability D.assets ; equity

D. assets ; equity

Your company has purchased a brand new production facility. Which of the following financial statements would disclose the source of the financing for your company's new facility? A. P& L statement B. cash flow statement C.income statement D. balance sheet

D. balance sheet

Since many small- to medium-sized businesses are not actively publicly traded, it is challenging to utilize the ________ to value those businesses and their shares. A. discounted cash flow approach B. income approach C. cost approach D. market approach

D. market approach

Common size financial statements and ration analysis can show___. A.positive or negative trends within the company over time B.how a company is performing with respect to a specific competitor C.performance compared to industry standards D.performance overtime, relative to competitors, and with respect to the industry

D. performance over time, relative to competitors, and with respect to the industry

Scoring is based on A. total sales B. contribution margin C. increase in stock price D. year over year improvement in all areas

D. year over year improvement in all areas

Debt financing means _____ while equity financing involves _______. A. you are borrowing money non-traditionally; you borrowing money traditionally B. you must give up part of your ownership in the company; you giving your controlling interest in the company C. you lose shares of your company; you gaining back shares of your company D. you are borrowing money that must be repaid with interest; you selling shares of your business in exchange for money

D. you are borrowing money that must be repaid with interest; you selling shares of your business in exchange for money

If you borrowed $150,000 to invest in a new business storefront at an 8% interest rate and pay approximately 35% in federal/state taxes, what is your post-tax cost of the debt? A. $7,800 B. $12,000 C. $9,600 D. $4,200

A. $7,800

Based on the information presented in the Module, which forecasting frequency typically produces the most accurate results? A. Quarterly B. Daily C. Weekly D. Annually

A. Quarterly

Which kind of forecast can be used in a stable industry and stable market that is not impacted by seasonality? A. Rollover forecast B. Expected value analysis C. Moving average forecast D. Weighted moving average forecast

A. Rollover forecast

There is no limitation to the amount of funds that can be borrowed. A. TRUE B. FALSE

A. TRUE

What type of insurance covers costs or damages as a result of any directors or officers in your organization being involved in a lawsuit? A. directors and officers insurance B. workers' compensation C. business interruption insurance D. disability insurance

A. directors and officers insurance

If you are concerned with how efficiently your company is generating sales with the assets it has, which Dupont framework indicator would you be most interested in? A. efficiency B. profitability C.solvency D.leverage

A. efficiency

General liability insurance covers damages to a person or to property caused by A. normal business operations B. a third party C. a general decline in the economic conditions D.natural disasters

A. normal business operations

If you are analyzing the discounts you are offering customers and evaluating how those discounts are impacting your ability to collect the sales price for your products, you are focusing on your business' ___________ capability of value-based pricing. A. price management B. pricing economics C. superior customer insights D. pricing psychology

A. price management

One of the most important aspects to manage is A. projected ending cash position B. the number of shares outstanding C. the amount of long-term debt D. the amount of short-term debt

A. projected ending cash position

The establishment of quality and reliability factors is done in A. research & development B. marketing C. finance D. production

A. research & development

A company could utilize the economic order quantity model to determine __________. A. the optimal number of units per order B. annual demand C. holding costs D. set-up costs

A. the optimal number of units per order

If you are concerned about your company's ability to generate sales through its efficient use of assets, you should calculate the ______ ratio. A. asset turnover B. receivables turnover C.return on assets D. return on investments

A.asset turnover

Which of the following statements about off-balance sheet items is not true? A. Lenders will not provide funding to new or struggling companies without the owner(s) signing personal guarantees B. Interest Rate Risk is directly aligned with the top management compensation C. Operating leases need to be included in the monthly/annual budget and cash flow statements D. The director of the company can be held liable by other stakeholders for losses and negligent behavior

B. Interest Rate Risk is directly aligned with the top management compensation

You are considering taking on an equity partner in your company. Which of the following scenarios is most likely an advantage of an equity partnership? A. Your equity partner's expectations for ROI may fluctuate. B. Your equity partner has core competencies complimentary to your skill set. C. Your partner is a family member that you sometimes do not get along with. D. Your partner wants a majority ownership and controlling interest in the company.

B. Your equity partner has core competencies complimentary to your skill set.

Which of the following must be considered when using the discounted cash flow method to value a business? A. amount of cash flows B. amount, timing, and risk of cash flows C. timing of cash flows D. risk of cash flows

B. amount, timing, and risk of cash flows

One of the key performance indicators that can be managed is A. sales B. contribution margin C. ending inventory D. stock price

B. contribution margin

Based upon your analysis of a competing service provider's fees and a survey about potential customers' perception of pricing, you decide to offer a good-better-best three-tiered pricing structure in addition to offering repeat customers 10% off their second purchase and 15% off their third purchase. You have adopted all of the following pricing strategies except: A. competitive pricing B. cost-based pricing C. discount pricing D. psychological pricing

B. cost-based pricing

Your company is strapped for cash and is having difficulties making payroll. Which of the following actions would not alleviate your cash flow issues? A. selling or leasing assets B. delaying accounts receivable C. prioritizing or eliminating expenses D. extending accounts payable

B. delaying accounts receivable

Which of the following statements about the Dupont framework is FALSE? A. sales are greater than its assets, its efficiency indicator is >1 B. net income has increased relative to sales, then the profitability will decrease C.Equity is greater than assets, its leverage indicator will be <1 D.Assets are increasing and sales are decreasing over time, the efficiency is decreasing

B. if a firms net income has increased relative to sales, then the profitability component of Dupont will decrease

You have been asked t calculate your firm's return on assets. Which of the following financial statements do you need? A.balance sheet B. income statement and balance sheet C.income statement D.none of the above

B. income statement and balance sheet

The four areas in which decisions are made are: A. Operations, production, finance, marketing B. marketing, research & development, production, finance C. finance, operations, marketing, production D. marketing, research & development, production, forecasting

B. marketing, research & development, production, finance

If you are evaluating the effect that a change in price will have upon customer demand for your product, which of the following value-based pricing capabilities are you considering? A. superior customer insights B. pricing economics C. pricing psychology D. price management

B. pricing economics

All of the following are disadvantages of having too much inventory except: A. difficulty in storage and control B. reduced holding costs C. reduced availability of cash D. increased risk of product obsolescence

B. reduced holding costs

To fund the company's plans the financing area allows A. issuing stock B. short-term debt, long-term debt, and stock issuance C. only short-term debt D. only long-term debt

B. short-term debt, long-term debt, and stock issuance

The internal rate of return method shows A. the increase in future average income B. the profitability of investments and takes into account the time value of money C. the time value of money D. the profitability of investments without taking into account the time value of money

B. the profitability of investments and takes into account the time value of money

ABC company is analysis cash flow data for last year. Which of the following transactions reflects a cash inflow to the ABC company? A.ABC company generated 4 million dollars in contracts for the year B.ABC company collected 1 million dollars in accounts receivable for the year C.ABC company decreased its accounts payable by $500,000 last year D.ABC company purchased a 2-million-dollar manufacturing plant last year

B.ABC company collected 1 million dollars in accounts receivable for the year

Typical types of insurance for small businesses include A. Manager's compensation B. Asset gain C. Business interruption D. Death and disability of all employees

C. Business interruption

When considering the sales cycle's impact on cash flows in a manufacturing business offering credit, which of the following statements is false? A. The purchase of raw materials represents a cash outflow. B. Cash is spent on the process of converting raw materials into finished goods. C. Selling the product and collecting the cash for credit sales occur simultaneously. D. Cash inflows occur when receivables are collected.

C. Selling the product and collecting the cash for credit sales occur simultaneously.

Which of the following is not one of the functions of inventory? A. To hedge against inflation B. To take advantage of quantity discounts C. To combine or couple parts of the production process D. To decouple the firm from fluctuations in demand

C. To combine or couple parts of the production process

If you offer credit to your customers, which of the following is least likely to occur as a result of you offering that credit? A. You could incur costs related to managing the receivables. B. Some of your customers may not pay. C. Your sales will likely decrease. D. You may experience cash flow issues if customers pay late.

C. Your sales will likely decrease.

Strategic planning for the purchase of a new piece of manufacturing equipment would be an example of: A. product prioritization B. operational budgeting C. capital budgeting D. process prioritization

C. capital budgeting

If you are valuing a piece of equipment by considering its replacement cost today less any depreciation or wear and tear, you are utilizing the asset valuation technique referred to as ________. A. market approach B. discounted cash flow approach C. cost approach D. income approach

C. cost approach

Your furniture business sells couches. You price those couches to account for the cost you paid for the couches plus a standard markup you have established. You are using a ________ strategy. A. competitive pricing B. value-based pricing C. cost-based pricing D. market penetration

C. cost-based pricing

Which of the techniques listed below can be used to evaluate an investment A. net future value B. internal rate of success C. discounted cash flow D. compounded cash flow

C. discounted cash flow

Multiplying a company's price-to-book ratio by a company's book value per share is an application of _______ to value a business. A. earnings multiples B. income multiples C. equity multiples D. sales multiples

C. equity multiples

Recently, you recognized the need for help and hired two new employees to count and sort inventory in your warehouse facility. This is an example of _____ costs. A. management B. facility C. human capital D. service level

C. human capital

Which of the following is one of the potential drawbacks of the top-down budgeting approach? A. time intensive B. expensive C. lack of insight from front-line managers and segment needs D. lack of strategic vision and long-term goals

C. lack of insight from front-line managers and segment needs

To accomplish your goal of gaining substantial market share in a new market with your unique product, you decide to set your prices as low as possible with hopes that you can raise them once you have a substantial customer-base. This strategy is referred to as ___________. A. competitive pricing B. value-based pricing C. market penetration D. cost-based pricing

C. market penetration

Forecasts are created in A. operations B. production C. marketing D. research & development

C. marketing

Cash flow is one of the highest business priorities because: A. "cash flow death" is inevitable for all companies B. raw cash flow data is the best indicator of company performance C. profitable companies may still experience cash flow problems D. it is impossible to budget or plan for cash flows

C. profitable companies may still experience cash flow problems

You have received a shipment of product components but they have not yet been processed in your facility. These goods would be an example of ____________. A. work-in-process B. finished goods C. raw material D. maintenance/repair/operating (MRO)

C. raw material