Question 1

As Willard's business grows and propsers,his company's total assets requirements will equal ___________.

Accepted Answer

A) total sources of financing less owner's investment and retained earnings 
B) spontaneous debt financing plus bank loans plus owner's investment less retained earnings 
C) total sources of financing less net assets and owner's investment 
D) spontaneous debt financing plus bank loans plus owner's investment plus retained earnings 
A) total sources of financing less owner's investment and retained earnings 
B) spontaneous debt financing plus bank loans plus owner's investment less retained earnings 
C) total sources of financing less net assets and owner's investment 
D) spontaneous debt financing plus bank loans plus owner's investment plus retained earnings

Question 2

The method of forecasting asset requirements is called the ____________ technique.

Accepted Answer

A) percentage-of-inventory 
B) percentage-of-equity 
C) percentage-of-debt 
D) percentage-of-sales 
A) percentage-of-inventory 
B) percentage-of-equity 
C) percentage-of-debt 
D) percentage-of-sales

Question 3

Jill's business has current assets of $50,000 and current liabilities of $25,000.Which statement is true about the company's current ratio?

Accepted Answer

A) The ratio is 50% and is acceptable for most industries. 
B) The ratio is 2 and is acceptable for most industries. 
C) The ratio is $25,000 and is not acceptable for most industries. 
D) Current ratio can not be determined from the information given. 
A) The ratio is 50% and is acceptable for most industries. 
B) The ratio is 2 and is acceptable for most industries. 
C) The ratio is $25,000 and is not acceptable for most industries. 
D) Current ratio can not be determined from the information given.

Question 4

Pro forma financial statements are statements that have been prepared in the proper format by a CPA.

Accepted Answer

A) True 
 B)False

Question 5

Entrepreneurs determine financial requirements based on ________.

Accepted Answer

A) predictions 
B) suggestions 
C) assumptions 
D) projections 
A) predictions 
B) suggestions 
C) assumptions 
D) projections

Question 6

Which action will be a concern for a prospective investor?

Accepted Answer

A) Having too much cash in a bank account 
B) Searching for information with a trade association 
C) Inadequate provision for personal expenses of the entrepreneur 
D) Obtaining a line of credit before beginning operations 
A) Having too much cash in a bank account 
B) Searching for information with a trade association 
C) Inadequate provision for personal expenses of the entrepreneur 
D) Obtaining a line of credit before beginning operations

Question 7

High-tech businesses (such as computer manufacturers)generally require fewer assets than service businesses.

Accepted Answer

A) True 
 B)False

Question 8

The term net working capital equals current assets less total liabilities and is a measure of a company's liquidity.

Accepted Answer

A) True 
 B)False

Question 9

No single planning document is more important in the life of a company than the

Accepted Answer

A) income statement. 
B) cash budget. 
C) balance sheet. 
D) corporate charter. 
A) income statement. 
B) cash budget. 
C) balance sheet. 
D) corporate charter.

Question 10

The cash budget is concerned only with dollars received and dollars paid out.

Accepted Answer

A) True 
 B)False

Question 11

James is preparing his forecasts for the coming year.What kind of scenarios should he prepare when forecasting and budgeting?

Accepted Answer

A) best and worst case scenarios 
B) most-likely and break-even case scenarios 
C) break-even and worst case scenarios 
D) most-likely and best case scenarios 
A) best and worst case scenarios 
B) most-likely and break-even case scenarios 
C) break-even and worst case scenarios 
D) most-likely and best case scenarios

Question 12

Profits reward an owner for investing in a company and constitute a primary source of financing for future growth.

Accepted Answer

A) True 
 B)False

Question 13

Yvonne is planning a coffee shop.The cost of producing the coffee should be included in the ________ section of the pro forma financial statement.

Accepted Answer

A) variable expense 
B) amount of sales 
C) cost of goods sold 
D) operating expense 
A) variable expense 
B) amount of sales 
C) cost of goods sold 
D) operating expense

Question 14

Marcia uses other people's money whenever possible to finance her business.She prefers to minimize and control rather than maximize and own.This practice is known as:

Accepted Answer

A) high-stepping. 
B) bootstrapping. 
C) unethical business practice. 
D) taking advantage of others. 
A) high-stepping. 
B) bootstrapping. 
C) unethical business practice. 
D) taking advantage of others.

Question 15

To be realistic,an entrepreneur should project profits only one year into the future.

Accepted Answer

A) True 
 B)False

Question 16

A firm should finance its growth in such a way as to maintain adequate

Accepted Answer

A) liquidity. 
B) inventory. 
C) sales. 
D) volume. 
A) liquidity. 
B) inventory. 
C) sales. 
D) volume.

Question 17

Verlin wants to avoid a common mistake often made by new entrepreneurs.What advice would you give him?

Accepted Answer

A) Spend as little as possible. 
B) Carry no inventory. 
C) Make sure he has adequate financing. 
D) Do without anything that is not absolutely essential. 
A) Spend as little as possible. 
B) Carry no inventory. 
C) Make sure he has adequate financing. 
D) Do without anything that is not absolutely essential.

Question 18

Roland has already projected his company's sales.The next step in forecasting his company's income is to project:

Accepted Answer

A) operating expenses. 
B) interest expense. 
C) taxes. 
D) cost of goods sold. 
A) operating expenses. 
B) interest expense. 
C) taxes. 
D) cost of goods sold.

Question 19

The assets-to-sales relationship tends to be relatively constant within an industry,allowing for a(n)_____ technique to be utilized in projecting asset requirements.

Accepted Answer

A) percentage-of-sales 
B) bootstrap forecasting 
C) asset turnover ratio 
D) discounted sales 
A) percentage-of-sales 
B) bootstrap forecasting 
C) asset turnover ratio 
D) discounted sales

Question 20

Where should Rhonda put the administrative expenses for her business when she prepares the financial forecasts?

Accepted Answer

A) Administrative costs are subtracted from amount of sales. 
B) In the operating expenses section 
C) Administrative costs are included in cost of goods sold 
D) In the interest expense section 
A) Administrative costs are subtracted from amount of sales. 
B) In the operating expenses section 
C) Administrative costs are included in cost of goods sold 
D) In the interest expense section

Exam 11: Forecasting Financial Requirements

As Willard's business grows and propsers,his company's total assets requirements will equal ___________.

The method of forecasting asset requirements is called the ____________ technique.

Jill's business has current assets of $50,000 and current liabilities of $25,000.Which statement is true about the company's current ratio?

Pro forma financial statements are statements that have been prepared in the proper format by a CPA.

Entrepreneurs determine financial requirements based on ________.

Which action will be a concern for a prospective investor?

High-tech businesses (such as computer manufacturers)generally require fewer assets than service businesses.

The term net working capital equals current assets less total liabilities and is a measure of a company's liquidity.

No single planning document is more important in the life of a company than the

The cash budget is concerned only with dollars received and dollars paid out.

James is preparing his forecasts for the coming year.What kind of scenarios should he prepare when forecasting and budgeting?

Profits reward an owner for investing in a company and constitute a primary source of financing for future growth.

Yvonne is planning a coffee shop.The cost of producing the coffee should be included in the ________ section of the pro forma financial statement.

Marcia uses other people's money whenever possible to finance her business.She prefers to minimize and control rather than maximize and own.This practice is known as:

To be realistic,an entrepreneur should project profits only one year into the future.

A firm should finance its growth in such a way as to maintain adequate

Verlin wants to avoid a common mistake often made by new entrepreneurs.What advice would you give him?

Roland has already projected his company's sales.The next step in forecasting his company's income is to project:

The assets-to-sales relationship tends to be relatively constant within an industry,allowing for a(n)_____ technique to be utilized in projecting asset requirements.

Where should Rhonda put the administrative expenses for her business when she prepares the financial forecasts?

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