Question 1

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 2

A golf club should break down its annual cash budget into shorter time units because

Accepted Answer

A)  of the seasonality of its sales. 
B)  one year is too far into the future to predict. 
C)  the marketing plans may change during the year. 
D)  production breakdowns may alter the company's situation. 
A)  of the seasonality of its sales. 
B)  one year is too far into the future to predict. 
C)  the marketing plans may change during the year. 
D)  production breakdowns may alter the company's situation.

Question 3

Mark wants to make sure he does not run out of cash so he is preparing a monthly cash budget. After determining the percentage of cash collections by month, he should

Accepted Answer

A)  estimate the amount and timing of cash disbursements. 
B)  calculate cash flow from operations. 
C)  determine the end-of-month cash balance. 
D)  determine the beginning-of-the-month cash balance. 
A)  estimate the amount and timing of cash disbursements. 
B)  calculate cash flow from operations. 
C)  determine the end-of-month cash balance. 
D)  determine the beginning-of-the-month cash balance.

Question 4

Jake has prepared pro forma financial statements for his landscaping business. At the minimum, he should check results and make modifications

Accepted Answer

A)  annually. 
B)  quarterly. 
C)  monthly. 
D)  weekly. 
A)  annually. 
B)  quarterly. 
C)  monthly. 
D)  weekly.

Question 5

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 6

Match the term with its definition.
-A listing of cash receipts and cash disbursements, usually for a relatively short time period, such as a week or a month

Accepted Answer

A) cash budget 
B) line of credit 
C) net working capital 
D) percentage-of-sales technique 
E) pro forma financial statements
F)spontaneous debt financing 
A) cash budget 
B) line of credit 
C) net working capital 
D) percentage-of-sales technique 
E) pro forma financial statements
F)spontaneous debt financing

Question 7

Verlin wants to avoid a common mistake often made by new entrepreneurs. Which of the following would you advise him to do?

Accepted Answer

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

Question 8

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 9

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 10

As her accounts payable and accrued expenses rose along with her firm's sales, Ariel noticed that _____ occurs.

Accepted Answer

A)  spontaneous debt financing 
B)  trade credit financing 
C)  escalating debt 
D)  asset-based financing 
A)  spontaneous debt financing 
B)  trade credit financing 
C)  escalating debt 
D)  asset-based financing

Question 11

As Willard's business grows and prospers, 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 12

For the typical small firm, the primary source of equity capital for financing growth is

Accepted Answer

A)  operating profits. 
B)  outside investors. 
C)  spontaneous debt financing. 
D)  retained earnings. 
A)  operating profits. 
B)  outside investors. 
C)  spontaneous debt financing. 
D)  retained earnings.

Question 13

Financial projections should be limited to the income statement to prevent information overload on lenders and investors.

Accepted Answer

A) True 
 B)False

Question 14

The percentage-of-sales technique is an effective method for a new company to estimate asset requirements because assets-to-liabilities ratios tend to be relatively constant within an industry.

Accepted Answer

A) True 
 B)False

Question 15

Mark follows the cash budget like it was carved in stone. He has fallen prey to the one real danger in overreliance on a cash budget which is

Accepted Answer

A)  inflexibility. 
B)  pliability. 
C)  exaggeration. 
D)  errors. 
A)  inflexibility. 
B)  pliability. 
C)  exaggeration. 
D)  errors.

Question 16

Profits that are retained within the company rather than being distributed to the owners are referred to as retained income.

Accepted Answer

A) True 
 B)False

Question 17

Spontaneous debt financing results when accounts payable increase in proportion to a firm's sales.

Accepted Answer

A) True 
 B)False

Question 18

Even though Miriam projected an annual positive cash flow, she may run out of cash if

Accepted Answer

A)  customers use debit cards for their purchases. 
B)  her sales are seasonal. 
C)  sales exceed her projections. 
D)  she finds a less expensive supplier. 
A)  customers use debit cards for their purchases. 
B)  her sales are seasonal. 
C)  sales exceed her projections. 
D)  she finds a less expensive supplier.

Question 19

Serena is preparing her budget for the upcoming year. This would be good time for her to

Accepted Answer

A)  communicate with her suppliers and scrutinize her relationships with them. 
B)  enforce a cost-containment strategy. 
C)  up her expectations for the upcoming year. 
D)  run best-case and worst-case scenarios. 
A)  communicate with her suppliers and scrutinize her relationships with them. 
B)  enforce a cost-containment strategy. 
C)  up her expectations for the upcoming year. 
D)  run best-case and worst-case scenarios.

Question 20

Financial forecasts are required by lenders because they want to know how they will be paid back; investors will use the forecasts to value the company.

Accepted Answer

A) True 
 B)False

Exam 11: Forecasting Financial Requirements

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

A golf club should break down its annual cash budget into shorter time units because

Mark wants to make sure he does not run out of cash so he is preparing a monthly cash budget. After determining the percentage of cash collections by month, he should

Jake has prepared pro forma financial statements for his landscaping business. At the minimum, he should check results and make modifications

Liquid assets include

Match the term with its definition. -A listing of cash receipts and cash disbursements, usually for a relatively short time period, such as a week or a month

Verlin wants to avoid a common mistake often made by new entrepreneurs. Which of the following would you advise him to do?

Entrepreneurs determine financial requirements based on

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

As her accounts payable and accrued expenses rose along with her firm's sales, Ariel noticed that _____ occurs.

As Willard's business grows and prospers, his company's total assets requirements will equal

For the typical small firm, the primary source of equity capital for financing growth is

Financial projections should be limited to the income statement to prevent information overload on lenders and investors.

The percentage-of-sales technique is an effective method for a new company to estimate asset requirements because assets-to-liabilities ratios tend to be relatively constant within an industry.

Mark follows the cash budget like it was carved in stone. He has fallen prey to the one real danger in overreliance on a cash budget which is

Profits that are retained within the company rather than being distributed to the owners are referred to as retained income.

Spontaneous debt financing results when accounts payable increase in proportion to a firm's sales.

Even though Miriam projected an annual positive cash flow, she may run out of cash if

Serena is preparing her budget for the upcoming year. This would be good time for her to

Financial forecasts are required by lenders because they want to know how they will be paid back; investors will use the forecasts to value the company.

The Entrepreneurial Lifethe Entrepreneurial Life

Integrity, Ethics, and Social Entrepreneurship

Starting a Small Business

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

The Location Plan

Understanding a Firms Financial Statements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Businesses

Professional Management and the Small Business

Managing Human Resources

Managing Small Business Operations

Managing the Firms Assets

Managing Risk

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