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ENTREPRENEURSHIP 2017 - Quiz Answer : Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) - Chapter 8

Entrepreneurship and Start Up

ENTREPRENEURSHIP 2017 - Quiz Answer and Case Study Guides

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland)

Quiz Answers and Case Guides

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland)

Chapter 8   Assessing a New Venture's Financial Strength and Viability

 

1) GymFlow, the company profiled in the opening feature in Chapter 8, created a mobile app that shows how busy a gym is at any given point in time. According to the case, in regard to financial management, the cofounders of GymFlow found that ________ was one of their most difficult challenges.

  1. A) managing accounts payable
  2. B) managing accounts receivable
  3. C) projecting future income
  4. D) projecting future expenses
  5. E) completing financial statements

Answer:  C

Diff: 1      Page Ref: 259

LO:  8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB:  Reflective Thinking

 

2) Financial management deals with two things-managing a company's finances and ________.

  1. A) operations management
  2. B) inventory control
  3. C) raising money
  4. D) production management
  5. E) supply chain management

Answer:  C

Diff: 1      Page Ref: 261

LO:  8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB:  Reflective Thinking

 

3) Financial management deals with raising money and managing a company's finances in a way that achieves the highest rate of return.

Answer:  TRUE

Diff: 1      Page Ref: 261

LO:  8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB:  Reflective Thinking

 

 

4) Which of the following was not identified as one of the four main financial objectives of a firm?

  1. A) Stability
  2. B) Efficiency
  3. C) Timeliness
  4. D) Liquidity
  5. E) Profitability

Answer:  C

Diff: 1      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

5) The four main financial objectives of a firm are _________.

  1. A) efficiency, effectiveness, strength, and flexibility
  2. B) power, success, efficiency, and effectiveness
  3. C) control, effectiveness, liquidity, and power
  4. D) success, strength, liquidity, and profitability
  5. E) profitability, liquidity, efficiency, and stability

Answer:  E

Diff: 1      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

6) Match the financial objective with its correct definition.

  1. A) stability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio
  2. B) profitability — how productively a firm utilizes its assets
  3. C) liquidity — a company's ability to make a profit
  4. D) efficiency — a company's ability to meet its short-term obligations
  5. E) profitability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio

Answer:  A

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Analytical Thinking

 

 

 

 

7) ________ is a company's ability to meet its short-term financial obligations.

  1. A) Liquidity
  2. B) Profitability
  3. C) Effectiveness
  4. D) Stability
  5. E) Efficiency

Answer:  A

Diff: 1      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

8) A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as ________.

  1. A) efficiency
  2. B) effectiveness
  3. C) stability
  4. D) liquidity
  5. E) profitability

Answer:  A

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

9) Money owed to a company by its customers is referred to as ________.

  1. A) accounts obtainable
  2. B) accounts payable
  3. C) accounts receivable
  4. D) inventory
  5. E) accounts collectable

Answer:  C

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

10) Susan Howard owns a seafood restaurant in Naples, Florida. She is currently owed $21,000 by a corporation that she catered a series of meetings for and $3,000 on an overdue account. Amanda has $24,000 in ________.

  1. A) accounts receivable
  2. B) inventory
  3. C) accounts collectable
  4. D) accounts obtainable
  5. E) accounts payable

Answer:  A

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

11) A company's merchandise, raw materials, and products waiting to be sold are called its ________.

  1. A) set aside
  2. B) accumulation
  3. C) reserve
  4. D) inventory
  5. E) stock

Answer:  D

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

12) Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Peggy is taking account of her store's ________.

  1. A) long-term assets
  2. B) owners' equity
  3. C) accounts payable
  4. D) accounts receivable
  5. E) inventory

Answer:  E

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

13) Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's ________.

  1. A) efficiency
  2. B) effectiveness
  3. C) stability
  4. D) liquidity
  5. E) profitability

Answer:  A

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Analytical Thinking

 

14) The strength and vigor of a firm's overall financial posture is referred to as ________.

  1. A) liquidity
  2. B) effectiveness
  3. C) stability
  4. D) profitability
  5. E) efficiency

Answer:  C

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

15) Efficiency is the ability to earn a profit.

Answer:  FALSE

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

 

16) Stability is a company's ability to meet its short-term financial obligations.

Answer:  FALSE

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

17) A company's accounts receivable is money owed to it by its customers.

Answer:  TRUE

Diff: 1      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

 

18) If a firm's debt-to-equity ratio gets too high, it may have trouble meeting its obligations and securing the level of financing needed to fuel its growth.

Answer:  TRUE

Diff: 2      Page Ref: 262

LO:  8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB:  Reflective Thinking

19) A financial statement is a(n) ________.

  1. A) set of ratios which depict relationships between a firm's financial items
  2. B) estimate of a firm's future income and expenses
  3. C) hybrid statement of cash flows
  4. D) itemized forecast of a company's income, expenses, and capital needs
  5. E) written report that quantitatively describes a firm's financial health

Answer:  E

Diff: 2      Page Ref: 262

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

 

20) ________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

  1. A) Calculation statements
  2. B) Forecasts
  3. C) Statements of cash flow
  4. D) Financial statements
  5. E) Prediction statements

Answer:  B

Diff: 2      Page Ref: 263

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

 

 

21) ________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

  1. A) Profitability statements
  2. B) Financial statements
  3. C) Owners' equity statements
  4. D) Budgets
  5. E) Statements of cash flows

Answer:  D

Diff: 2      Page Ref: 263

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

 

22) Match the financial term with its proper definition.

  1. A) Forecasts — depict relationships between items on a firm's financial statements
  2. B) Forecasts — written reports that quantitatively describe a firm's financial health
  3. C) Budget — itemized forecasts of a company's income, expenses, and capital needs
  4. D) Financial ratios — written report that quantitatively describes a firm's financial health
  5. E) Financial statements — an estimate of a firm's future income and expenses

Answer:  C

Diff: 2      Page Ref: 263

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

23) In regard to budgets, which of the following statements is not true?

  1. A) Budgets include an itemized forecast of a company's expenses.
  2. B) Budgets are a poor tool for financial control.
  3. C) Budgets are an important tool for financial planning.
  4. D) Budgets include an itemized forecast of a company's capital needs.
  5. E) Budgets include an itemized forecast of a company's income.

Answer:  B

Diff: 3      Page Ref: 263

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

 

 

24) The Partnering for Success feature in Chapter 8 focuses on buying groups, and recommends that small businesses seek out buying groups to participate in. What is a "buying group" in the context of the feature?

  1. A) A partnership that bands small businesses together to attain volume discounts on common products and services that they buy
  2. B) A partnership that bands small businesses together to collectively make the commitment to "buy local" at every available opportunity
  3. C) A partnership that bands small businesses together to get the best prices possible from foreign importers and manufacturers
  4. D) A partnership that bands small businesses together to get the best possible terms from finance companies
  5. E) A partnership that bands small businesses together to get the best possible rates on property and liability insurance

Answer:  A

Diff: 2      Page Ref: 263

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

 

25) ________ depict relationships between items on a firm's financial statements.

  1. A) Financial proportions
  2. B) Fiscal relations
  3. C) Fiscal projections
  4. D) Monetary balances
  5. E) Financial ratios

Answer:  E

Diff: 2      Page Ref: 264

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

 

26) Budgets are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

Answer:  TRUE

Diff: 2      Page Ref: 263

LO:  8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB:  Reflective Thinking

27) ________ financial statements reflect past performance and are usually prepared on a quarterly and annual basis.

  1. A) Chronological
  2. B) Ad-hoc
  3. C) Historical
  4. D) Concurrent
  5. E) Pro forma

Answer:  C

Diff: 2      Page Ref: 265

LO:  8.4: Explain the difference between historical and pro forma financial statements.

AACSB:  Reflective Thinking

 

28) ________ financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future.

  1. A) Chronological
  2. B) Pro forma
  3. C) Ad-hoc
  4. D) Concurrent
  5. E) Historical

Answer:  B

Diff: 2      Page Ref: 265

LO:  8.4: Explain the difference between historical and pro forma financial statements.

AACSB:  Reflective Thinking

 

29) Which of the following statements about pro forma financial statements is incorrect?

  1. A) Pro forma financial statements are projections for future periods based on forecasts.
  2. B) Pro forma financial statements are typically completed for two to three years into the future.
  3. C) Pro forma financial statements are required by the SEC.
  4. D) Most companies consider their pro forma financial statements to be confidential and reveal them to outsiders only on a "need to know basis."
  5. E) Pro forma financial statements are strictly planning tools.

Answer:  C

Diff: 3      Page Ref: 265

LO:  8.4: Explain the difference between historical and pro forma financial statements.

AACSB:  Reflective Thinking

 

30) Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis.

Answer:  TRUE

Diff: 1      Page Ref: 265

LO:  8.4: Explain the difference between historical and pro forma financial statements.

AACSB:  Reflective Thinking

 

31) Pro forma financial statements are projections for future periods based on forecasts and are typically completed for 2 to 3 years into the future.

Answer:  TRUE

Diff: 2      Page Ref: 265

LO:  8.4: Explain the difference between historical and pro forma financial statements.

AACSB:  Reflective Thinking

 

32) Describe the difference between historical and pro forma financial statements.

Answer:  Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis. Pro forma financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future. Pro forma financial statements are strictly planning tools, while historical financial statements reflect actual information.

Diff: 1      Page Ref: 265

LO:  8.4: Explain the difference between historical and pro forma financial statements.

AACSB:  Reflective Thinking

 

33) Which of the following selections correctly matches the financial statement with its description?

  1. A) Income statement — tells how much a firm is making or losing
  2. B) Income statement — depicts the structure of a firm's assets and liabilities
  3. C) Balance sheet — shows where a firm's cash is coming from
  4. D) Balance sheet — tells how much a firm is making or losing
  5. E) Statement of cash flows — depicts the structure of a firm's assets and liabilities

Answer:  A

Diff: 3      Page Ref: 266

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

34) A firm's ________ reflects the results of its operations over a specified period and shows whether it is making a profit or is experiencing a loss.

  1. A) statement of cash flows
  2. B) income statement
  3. C) forecast
  4. D) balance sheet
  5. E) operating budget

Answer:  B

Diff: 2      Page Ref: 266

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

35) Which financial statement records all of a firm's revenues and expenses for a given period and shows whether the firm is making a profit or experiencing a loss?

  1. A) Balance sheet
  2. B) Owner's equity statement
  3. C) Statement of cash flows
  4. D) Forecast
  5. E) Income statement

Answer:  E

Diff: 2      Page Ref: 266

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

36) On a firm's income statement, net sales consists of ________.

  1. A) operating expenses minus cost of sales
  2. B) total sales minus allowances for returned goods and discounts
  3. C) cost of sales minus allowances for returned goods and discounts
  4. D) cost of sales minus operating expenses
  5. E) total sales minus operating expenses

Answer:  B

Diff: 2      Page Ref: 266

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

37) According to the textbook, the three numbers that receive the most attention when evaluating an income statement are ________.

  1. A) depreciation, interest income, and income tax expense
  2. B) cost of sales, gross profit, and operating expenses
  3. C) net sales, cost of sales, and operating expenses
  4. D) gross profit, net sales, and incomes tax expense
  5. E) gross profit, other income, and net income

Answer:  C

Diff: 3      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

38) A firm's profit margin, or return on sales, is computed by dividing ________.

  1. A) net income by net sales
  2. B) gross profit by net sales
  3. C) net income by gross profit
  4. D) net income by cost of sales
  5. E) operating income by gross profit

Answer:  A

Diff: 3      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Analytical Thinking

 

39) A(n) ________ is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

  1. A) income statement
  2. B) statement of cash flows
  3. C) effectiveness statement
  4. D) balance sheet
  5. E) efficiency statement

Answer:  D

Diff: 2      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

40) Which of the following statement is incorrect regarding how balance sheets are prepared?

  1. A) The left-hand side of a balance sheet shows a firm's assets.
  2. B) The assets on a balance sheet are shown in order of liquidity.
  3. C) Assets are recorded at fair market value rather than cost.
  4. D) The right-hand side of a balance sheet shows a firm's liabilities and its owners' equity.
  5. E) Intellectual property receives value in some cases and in some cases it does not.

Answer:  C

Diff: 2      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

41) Real estate, buildings, equipment and furniture are classified as ________ assets on a company's balance sheet.

  1. A) intermediate term
  2. B) fixed
  3. C) other
  4. D) permanent
  5. E) current

Answer:  B

Diff: 2      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

42) The Savvy Entrepreneurial Firm feature in Chapter 8 focuses on a scenario involving the selection of a new CEO for New Venture Fitness Drinks. The lesson learned from the feature was ________.

  1. A) compare a firm's financial ratios against its primary competitors and industry norms to fairly assess how well a firm is performing financially
  2. B) income statements are more effective in assessing how well a firm is performing financially than are balance sheets and statements of cash flow
  3. C) the most powerful instrument for understanding how well a firm is performing financially is the statement of cash flows
  4. D) ratio analysis is ineffective
  5. E) look at multiple years of an income statement rather than a single year to fairly assess how well a firm is performing financially

Answer:  E

Diff: 3      Page Ref: 268

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Analytical Thinking

 

 

43) Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ assets on a firm's balance sheet.

  1. A) other
  2. B) intermediate term
  3. C) temporary
  4. D) current
  5. E) fixed

Answer:  D

Diff: 2      Page Ref: 268

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Analytical Thinking

44) Which of the following is an example of a long-term liability?

  1. A) Accounts payable
  2. B) Real estate mortgage
  3. C) Accrued expenses
  4. D) Current portion of real estate mortgage
  5. E) Owners' equity

Answer:  B

Diff: 2      Page Ref: 269

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

45) When evaluating a balance sheet, the two primary questions are ________.

  1. A) whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable
  2. B) whether a firm is profitable and whether a firm is financially sound
  3. C) whether a firm's cost of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends
  4. D) whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound
  5. E) whether a firm is profitable and whether it is generating excess cash that could be used to pay down debt or pay dividends

Answer:  D

Diff: 3      Page Ref: 269

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Analytical Thinking

 

 

46) A firm's working capital is its ________.

  1. A) inventory and accounts receivable minus its current liabilities
  2. B) current assets minus its current liabilities
  3. C) total assets minus its total liabilities
  4. D) cash and cash equivalents minus its current liabilities
  5. E) accounts receivable minus its total accounts payable

Answer:  B

Diff: 2      Page Ref: 269

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

47) A firm's ________ is its current assets divided by its current debt.

  1. A) working share
  2. B) present share
  3. C) working capital
  4. D) owners' equity
  5. E) current ratio

Answer:  E

Diff: 2      Page Ref: 269

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

48) Which of the financial statements used by businesses to keep track of their financial affairs is the most similar to an ordinary person's end-of-the month bank statement?

  1. A) Income statement
  2. B) Balance sheet
  3. C) Statement of cash flows
  4. D) Statement of ratio analysis
  5. E) Statement of owners' equity

Answer:  C

Diff: 2      Page Ref: 270

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

49) The statement of cash flows is divided into three separate activities ________.

  1. A) profitability activities, stability activities, and investing activities
  2. B) stability activities, earning activities, and financing activities
  3. C) operating activities, capital activities, and liquidity activities
  4. D) spending activities, earning activities, and capital activities
  5. E) operating activities, investing activities, and financing activities

Answer:  E

Diff: 2      Page Ref: 271

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

 

50) In the context of a firm's statement of cash flows, ________ activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

  1. A) operating
  2. B) investing
  3. C) capital
  4. D) financing
  5. E) liquidity

Answer:  B

Diff: 2      Page Ref: 271

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

51) In the context of a firm's statement of cash flows, ________ activities include cash raised during the period by borrowing money or selling stock and/or cash used during the period by paying dividends, buying back outstanding stock, or buying back outstanding bonds.

  1. A) investing
  2. B) financing
  3. C) operating
  4. D) liquidity
  5. E) capital

Answer:  B

Diff: 2      Page Ref: 271

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

52) According to the textbook, the most practical way to interpret or make sense of a firm's historical financial statements is through ________.

  1. A) profit analysis
  2. B) regression analysis
  3. C) the preparation of pro forma financial statements
  4. D) ratio analysis
  5. E) percentage analysis

Answer:  D

Diff: 2      Page Ref: 271

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

53) The income statement records all the revenues and expenses for a given period and shows whether the firm is making a profit or is experiencing a loss.

Answer:  TRUE

Diff: 1      Page Ref: 266

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

 

54) The balance sheet reflects the results of the operations of a firm over a specified period of time.

Answer:  FALSE

Diff: 2      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

55) A firm's profit margin, or return on sales, is computed by dividing net income by net sales.

Answer:  TRUE

Diff: 3      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

56) The major categories of assets listed on a balance sheet include current, fixed, and other assets.

Answer:  TRUE

Diff: 3      Page Ref: 267

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

57) A statement of cash flows is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

Answer:  FALSE

Diff: 2      Page Ref: 270

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

58) A firm's working capital is defined as its fixed assets minus its long-term liabilities.

Answer:  FALSE

Diff: 2      Page Ref: 270

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

59) The statement of cash flows summarizes the changes in a firm's cash position for a specified period of time and details why the change occurred.

Answer:  TRUE

Diff: 2      Page Ref: 271

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

60) In the context of a firm's statement of cash flows, operating activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

Answer:  FALSE

Diff: 2      Page Ref: 271

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

61) Describe the purpose of the income statement, the balance sheet, and the statement of cash flows.

Answer:  The income statement reflects the results of the operations of a firm over a specified period of time. It records all the revenues and expenses for the given period and shows whether the firm is making a profit or is experiencing a loss. Unlike the income statement, which covers a specified period of time, a balance sheet is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time. The statement of cash flows summarizes the changes in a firm's cash position for a specified period of time and details why the change occurred. The statement of cash flows is similar to a month-end bank statement. It reveals how much cash is on hand at the end of the month as well as how the cash was acquired and spent during the month.

Diff: 2      Page Ref: 266

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

62) What is ratio analysis? Why is it important?

Answer:  The most practical way to interpret or make sense of a firm's historical and pro forma financial statements is through ratio analysis. The ratios described in the textbook are divided into profitability ratios, liquidity ratios, and overall financially stability ratios. These ratios provide a means of interpreting the historical and pro forma financial ratios for a firm.

Diff: 2      Page Ref: 271

LO:  8.5: Describe the different historical financial statements and their purposes.

AACSB:  Reflective Thinking

 

63) Shawn Jones was reading the business plan of New Venture Fitness Drinks, and noticed that prior to its financial forecasts, New Venture Fitness Drinks placed an explanation of the sources of the numbers for the forecast and the assumptions used to generate them. This explanation is called a(n) ________.

  1. A) forecast sheet
  2. B) forecast hypothesis
  3. C) estimate statement
  4. D) assumption sheet
  5. E) hypothesis sheet

Answer:  D

Diff: 2      Page Ref: 273

LO:  8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB:  Reflective Thinking

 

64) In the context of computing the cost of sales, the common way to do this is to use the percent-of-sales method, which is a method for expressing each expense item as a percentage of ________.

  1. A) net sales
  2. B) gross profit
  3. C) net income
  4. D) operating income
  5. E) cost of sales

Answer:  A

Diff: 2      Page Ref: 275

LO:  8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB:  Reflective Thinking

 

65) If a firm determines it can use the percentage-of-sales method and it follows the procedure described in the textbook, then the net result is that each expense item on its income statement (with the exception of those items that can be individually forecast) will grow at the same rate as sales. This approach is called the ________.

  1. A) continuous percentage method of forecasting
  2. B) stable fraction method of forecasting
  3. C) regular proportion method of forecasting
  4. D) constant ratio method of forecasting
  5. E) steady percentage method of forecasting

Answer:  D

Diff: 3      Page Ref: 275

LO:  8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB:  Reflective Thinking

 

66) The break-even point for a new restaurant or product is the point where the total revenue received equals total costs associated with the output of the restaurant or the sale of the product.

Answer:  TRUE

Diff: 2      Page Ref: 275

LO:  8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB:  Analytical Thinking

 

67) What are forecasts? What role do they play in the preparation of pro forma financial statements?

Answer:  Forecasts are projections of a firm's future sales, expenses, income, and capital expenditures. A firm's forecasts provide the basis for its pro forma financial statements. A well-developed set of pro forma financial statements helps a firm create accurate budgets, build financial plans, and manage its finances in a proactive rather than a reactive manner.

Diff: 2      Page Ref: 273

LO:  8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB:  Reflective Thinking

 

68) A firm's pro forma financial statements are similar to its historical financial statements except that they ________.

  1. A) do not include the income statement
  2. B) are required by the SEC in all cases
  3. C) look back rather than forward
  4. D) look forward rather than back
  5. E) do not include the statement of cash flows

Answer:  D

Diff: 1      Page Ref: 277

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Reflective Thinking

 

69) The What Went Wrong? feature for Chapter 8 focuses on Wise Acre Frozen Treats, a company that made organic popsicles from unrefined sweeteners. According to the feature, Wise Acre Frozen Treats failed largely because it ________.

  1. A) grew too quickly, which overwhelmed its cash flow
  2. B) was not careful enough in preparing its pro forma financial statements
  3. C) was not efficient in the way it utilized its assets
  4. D) spent too much money on marketing
  5. E) did not compare its financial ratios to industry peers

Answer:  A

Diff: 1      Page Ref: 279

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Analytical Thinking

 

70) The pro forma ________ provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time.

  1. A) balance sheet
  2. B) statement of cash flows
  3. C) income statement
  4. D) expense statement
  5. E) statement of owners' equity

Answer:  A

Diff: 2      Page Ref: 279

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Reflective Thinking

 

 

71) According to the textbook, the most important function of the pro forma statement of cash flows is to project whether the firm will have sufficient ________.

  1. A) income to meet its payroll on a weekly or monthly basis
  2. B) income to exceed industry norms
  3. C) cash to meet its needs
  4. D) inventory to meet its sales and production forecasts
  5. E) short-term assets to cover its short-term liabilities

Answer:  C

Diff: 2      Page Ref: 280

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Reflective Thinking

72) The pro forma balance sheet provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time.

Answer:  TRUE

Diff: 2      Page Ref: 277

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Reflective Thinking

 

73) The pro forma income statement shows the projected flow of cash into and out of the company during a specified period.

Answer:  FALSE

Diff: 2      Page Ref: 278

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Reflective Thinking

 

74) The same financial ratios used to evaluate a firm's historical financial statement should be used to evaluate the pro forma financial statements.

Answer:  TRUE

Diff: 2      Page Ref: 283

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Reflective Thinking

 

75) Describe each of the four primary financial objectives of firms.

Answer:  The four primary financial objectives of most firms are: profitability, liquidity, efficiency, and stability. Profitability is the ability to earn a profit. Liquidity is a company's ability to meet its short-term financial obligations. Efficiency is how productively a firm utilizes its assets relative to its revenue and its profits. Stability is the strength and vigor of the firm's overall financial posture.

Diff: 2      Page Ref: 262

LO:  8.7: Explain the purpose of pro forma financial statements.

AACSB:  Reflective Thinking

 

 

-----
Entrepreneurship: Starting and Operating A Small Business, 4th Edition, 2016, Steve Mariotti
Entrepreneurship: Successfully Launching New Ventures, 5th Edition, 2016, Bruce R. Barringer
Essentials of Entrepreneurship and Small Business Management, 8th Edition, 2016, Norman M. Scarborough
Fundamentals for Becoming a Successful Entrepreneur: From Business Idea to Launch and Management, 2016, Malin Brannback, Alan Carsrud
Entrepreneurship and Effective Small Business Management, 11th Edition, 2015, Norman M. Scarborough

------
PART 1: Decision to Become an Entrepreneur
1. Introduction to Entrepreneurship
PART 2: Developing Successful Business Ideas
3. Feasibility Analysis
4. Developing an Effective Business Model
5. Industry and Competitor Analysis
6. Writing a Business Plan
PART 3: Moving from an Idea to an Entrepreneurial Firm
7. Preparing the Proper Ethical and Legal Foundation
8. Assessing a New Venture’s Financial Strength and Viability
9. Building a New-Venture Team
10. Getting Financing or Funding
PART 4: Managing and Growing an Entrepreneurial Firm
11. Unique Marketing Issues
12. The Importance of Intellectual Property
13. Preparing for and Evaluating the Challenges of Growth
14. Strategies for Firm Growth
15. Franchising

------
PART I. STARTING THE PROCESS
Chapter 1. Why Plan?
PART II. WHAT TO DO BEFORE THE BUSINESS PLAN IS WRITTEN
Chapter 2. Developing and Screening Business Ideas
Chapter 3. Feasibiity Analysis
PART III. PREPARING A BUSINESS PLAN
Chapter 4. Introductory Material, Executive Summary, and Description of the Business
Chapter 5. Industry Analysis
Chapter 6. Market Analysis
Chapter 7. Marketing Plan
Chapter 8. Management Team and Company Structure
Chapter 9. Operations Plan and Product (or Service) Design and Development Plan
Chapter 10. Financial Projections
PART IV. PRESENTING THE BUSINESS PLAN
Chapter 11. Presenting the Plan with Confidence

------
BRIEF CONTENTS
UNIT 1 Entrepreneurial Pathways
Chapter 1 Entrepreneurs Recognize Opportunities
Chapter 2 Franchising
Chapter 3 Finding Opportunity in an Existing Business
Chapter 4 The Business Plan: Road Map to Success
Honest Tea Business Plan
Unit 1 Case Study: Spanx
UNIT 2 Who Are Your Customers?
Chapter 5 Creating Business from Opportunity
Chapter 6 Exploring Your Market
Unit 2 Case Study: Kitchen Arts & Letters, Inc.
UNIT 3 Integrated Marketing
Chapter 7 Developing the Right Marketing Mix and Plan
Chapter 8 Pricing and Credit Strategies
Chapter 9 Integrated Marketing Communications
Chapter 10 Marketing Globally
Chapter 11 Smart Selling and Effective Customer Service
Unit 3 Case Study: Empact
UNIT 4 Show Me the Money: Finding, Securing, and Managing It
Chapter 12 Understanding and Managing Start-Up, Fixed, and Variable Costs
Chapter 13 Using Financial Statements to Guide a Business
Chapter 14 Cash Flow and Taxes
Chapter 15 Financing Strategy: Debt, Equity, or Both?
Unit 4 Case Study: Lee’s Ice Cream
UNIT 5 Operating a Small Business Effectively
Chapter 16 Addressing Legal Issues and Managing Risk
Chapter 17 Operating for Success
Chapter 18 Location, Facilities, and Layout
Chapter 19 Human Resources and Management
Unit 5 Case Study: ONLC
UNIT 6 Leadership, Ethics, and Exits
Chapter 20 Leadership and Ethical Practices
Chapter 21 Franchising, Licensing, and Harvesting: Cashing in Your Brand
Unit 6 Case Study: Honest Tea
Appendix 1 Sample Student Business Plan: University Parent, Inc.
Appendix 2 BizBuilder Business Plan
Appendix 3 Resources for Entrepreneurs
Appendix 4 Useful Formulas and Equations
------
Section 1: The Rewards and Challenges of Entrepreneurship
1. Entrepreneurs: The Driving Force Behind Small Business
2. Ethics and Social Responsibility: Doing the Right Thing
3. Creativity and Innovation: Keys to Entrepreneurial Success
4. Strategic Management and the Entrepreneur
Section 2: Launching a Venture: Entry Strategies
5. Choosing a Form of Ownership
6. Franchising and the Entrepreneur
7. Buying an Existing Business
8. New Business Planning Process: Feasibility Analysis, Business Modeling, and Crafting a Winning Business Plan
Section 3: Building a Marketing Plan
9. Building a Bootstrap Marketing Plan
10. Creative Use of Advertising and Promotion
11. Pricing and Credit Strategies
12. Global Marketing Strategies
13. E-Commerce and Entrepreneurship
Section 4: Building a Financial Plan
14. Creating a Solid Financial Plan
15. Managing Cash Flow
16. Sources of Equity Financing
17. Sources of Debt Financing
Section 5: Building an Operating Plan
18. Location, Layout, and Physical Facilities
19. Supply Chain Management
20. Managing Inventory
21. Staffing and Leading a Growing Company
Section 6: Legal Aspects of Small Business: Succession, Ethics, and Government Regulation
22. Management Succession and Risk Management Strategies in the Family Business
23. The Legal Environment: Business Law and Government Regulation
------
Section I: The Challenge of Entrepreneurship 
1. The Foundations of Entrepreneurship
2. Ethics and Social Responsibility: Doing the Right Thing
3. Inside the Entrepreneurial Mind: From Ideas to Reality
Section II: The Entrepreneurial Journey Begins
4. Conducting a Feasibility Analysis and Designing a Business Model
5. Crafting a Business Plan and Building a Solid Strategic Plan
6. Forms of Business Ownership and Buying an Existing Business
7. Franchising and the Entrepreneur
Section III: Launching the Business
8. Building a Powerful Bootstrap Marketing Plan
9. E-commerce and the Entrepreneur
10. Pricing and Credit Strategies
11. Creating a Successful Financial Plan
12. Managing Cash Flow
Section IV: Putting the Business Plan to Work: Sources of Funds
13. Sources of Financing: Equity and Debt
14. Choosing the Right Location and Layout
15. Global Aspects of Entrepreneurship
16. Building a New Venture Team and Planning the Next Generation
------

 

ENTREPRENEURSHIP 2017 - NEW COLLECTION 2016 - 2017

1. Youtube Playlist: See the collection of videos - www.youtube.com/ecomftu2012

2. Download Power Point Slides Free

Entrepreneurship: Starting and Operating A Small Business, 4th Edition, 2016, Steve Mariotti - LINK
Entrepreneurship: Successfully Launching New Ventures, 5th Edition, 2016, Bruce R. Barringer  - LINK
Essentials of Entrepreneurship and Small Business Management, 8th Edition, 2016, Norman M. Scarborough - LINK
Fundamentals for Becoming a Successful Entrepreneur: From Business Idea to Launch and Management, 2016, Malin Brannback - LINK
Entrepreneurship and Effective Small Business Management, 11th Edition, 2015, Norman M. Scarborough - LINK

 

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