Question 1

Explain the percentage-of-sales technique.Will this technique differ by industry type?

Accepted Answer

Although the assets-to-sales relationship varies over time and with individual business,the relationship tends to remain constant within an industry,allowing a firm to forecast its asset requirements as a percentage of predicted sales.While the technique will not differ by industry type,ratios will differ by industry.Therefore it is important to determine industry norms.

Question 2

Maria is projecting sales for her company for the upcoming new year.To be financially effective,she

Accepted Answer

A) can over-project for sales if she has done research. 
B) should develop realistic sales projections. 
C) would be better served by under-projecting sales so she won't be disappointed. 
D) ignore projections until after 1 year of operations when she can realistic project. 
A) can over-project for sales if she has done research. 
B) should develop realistic sales projections. 
C) would be better served by under-projecting sales so she won't be disappointed. 
D) ignore projections until after 1 year of operations when she can realistic project. B

Question 3

To project pro forma financial statements,speaking to others in the industry and researching industry averages are good starting points.

Accepted Answer

A) True 
 B)False  True

Question 4

Mario has high hopes for his new business,anticipating a very large profit margin.For the preparation of his forecasts,he should use industry averages regardless of his hopes.

Accepted Answer

A) True 
 B)False

Question 5

Many small firms have a tendency to underestimate the amount of capital the business requires when beginning operations.

Accepted Answer

A) True 
 B)False

Question 6

Natasha has been in business for a little over a year with her Sips and Munchies Coffee Shop where she sells an array of coffees and pastries.She rents a building with a downtown location and manages the business and employees herself.Discuss factors that drive the company's profits.

Accepted Answer

- Amount of sales: Natasha should consid

Question 7

A simple listing of expected cash inflows and outflows provides the entrepreneur with a(n)

Accepted Answer

A) income statement. 
B) cash budget. 
C) pro forma balance sheet. 
D) net equity computation. 
A) income statement. 
B) cash budget. 
C) pro forma balance sheet. 
D) net equity computation.

Question 8

The projection of profits,asset requirements,financing requirements and cash flows are essential in determining whether a venture is economically viable.

Accepted Answer

A) True 
 B)False

Question 9

Bettina plans to draw an income from her new business but her personal living expenses are not needed in the financial plan unless these expenses are part of the capitalization of the business.

Accepted Answer

A) True 
 B)False

Question 10

Liquid assets include

Accepted Answer

A) accounts payable. 
B) equipment. 
C) working capital. 
D) office supplies. 
A) accounts payable. 
B) equipment. 
C) working capital. 
D) office supplies.

Question 11

The cost of goods sold are always fixed.

Accepted Answer

A) True 
 B)False

Question 12

Briefly explain liquidity and its relationship to the current ratio.

Accepted Answer

Liquidity measures the degree to which a

Question 13

After pro forma statements are prepared,they should be checked against actual results every month so projections can be modified.

Accepted Answer

A) True 
 B)False

Question 14

Match the term with its definition.
a.Cash budget
b.Current ratio
c.Line of credit
d.Net working capital
e.pro forma financial statements
f.percentage-of-sales technique
g.spontaneous debt financing
-Short-term debts,such as accounts payable,that automatically increase in proportion to a firm's sales

Accepted Answer

The answer of Match the term with its definition.
a.Cash budget
b.Current...

Question 15

Zeno had a great idea but no cash so he asked the bank for a loan to finance the entire operation.It seems he forgot that a bank would never provide _______ % of the firm's financing.

Accepted Answer

A) 25 
B) 50 
C) 75 
D) 100 
A) 25 
B) 50 
C) 75 
D) 100

Question 16

David has a company decorating houses for the holidays.He has secured a $25,000 line of credit from his bank.For which purpose is David more likely to use this credit line?

Accepted Answer

A) a warehouse to store decorations until they are sold 
B) labor to install the decorations in November 
C) a truck with a ladder to put up lights 
D) a full-time,year-round office person to answer phones and take orders 
A) a warehouse to store decorations until they are sold 
B) labor to install the decorations in November 
C) a truck with a ladder to put up lights 
D) a full-time,year-round office person to answer phones and take orders

Question 17

Match the term with its definition.
a.Cash budget
b.Current ratio
c.Line of credit
d.Net working capital
e.pro forma financial statements
f.percentage-of-sales technique
g.spontaneous debt financing
-A method of forecasting asset requirements

Accepted Answer

The answer of Match the term with its definition.
a.Cash budget
b.Current...

Question 18

The greater a firm's sales,the greater need for financing because of greater _____ requirements.

Accepted Answer

A) asset 
B) employee 
C) marketing 
D) operational 
A) asset 
B) employee 
C) marketing 
D) operational

Question 19

Match the term with its definition.
a.Cash budget
b.Current ratio
c.Line of credit
d.Net working capital
e.pro forma financial statements
f.percentage-of-sales technique
g.spontaneous debt financing
-Current assets less current liabilities

Accepted Answer

The answer of Match the term with its definition.
a.Cash budget
b.Current...

Question 20

D&R Products forecasts that it will require $10,000 for equipment and depreciation will be over 5 years.The $10,000 will be reflected in the balance sheet as _____.

Accepted Answer

A) inventory 
B) gross fixed assets 
C) net fixed assets 
D) accounts payable 
A) inventory 
B) gross fixed assets 
C) net fixed assets 
D) accounts payable

Exam 11: Forecasting Financial Requirements

Explain the percentage-of-sales technique.Will this technique differ by industry type?

Maria is projecting sales for her company for the upcoming new year.To be financially effective,she

To project pro forma financial statements,speaking to others in the industry and researching industry averages are good starting points.

Mario has high hopes for his new business,anticipating a very large profit margin.For the preparation of his forecasts,he should use industry averages regardless of his hopes.

Many small firms have a tendency to underestimate the amount of capital the business requires when beginning operations.

Natasha has been in business for a little over a year with her Sips and Munchies Coffee Shop where she sells an array of coffees and pastries.She rents a building with a downtown location and manages the business and employees herself.Discuss factors that drive the company's profits.

A simple listing of expected cash inflows and outflows provides the entrepreneur with a(n)

The projection of profits,asset requirements,financing requirements and cash flows are essential in determining whether a venture is economically viable.

Bettina plans to draw an income from her new business but her personal living expenses are not needed in the financial plan unless these expenses are part of the capitalization of the business.

Liquid assets include

The cost of goods sold are always fixed.

Briefly explain liquidity and its relationship to the current ratio.

After pro forma statements are prepared,they should be checked against actual results every month so projections can be modified.

Zeno had a great idea but no cash so he asked the bank for a loan to finance the entire operation.It seems he forgot that a bank would never provide _______ % of the firm's financing.

David has a company decorating houses for the holidays.He has secured a $25,000 line of credit from his bank.For which purpose is David more likely to use this credit line?

Match the term with its definition. a.Cash budget b.Current ratio c.Line of credit d.Net working capital e.pro forma financial statements f.percentage-of-sales technique g.spontaneous debt financing -A method of forecasting asset requirements

The greater a firm's sales,the greater need for financing because of greater _____ requirements.

Match the term with its definition. a.Cash budget b.Current ratio c.Line of credit d.Net working capital e.pro forma financial statements f.percentage-of-sales technique g.spontaneous debt financing -Current assets less current liabilities

D&R Products forecasts that it will require $10,000 for equipment and depreciation will be over 5 years.The $10,000 will be reflected in the balance sheet as _____.

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Starting a Small Business

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The Business Plan: Visualizing the Dream

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Understanding a Firms Financial Statements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

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Global Opportunities for Small Business

Professional Management and the Small Business

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