Question 1

What does a business owner hope to gain from financial statement analysis? Support your answer

Accepted Answer

Through financial statement analysis, business owners hope to gain knowledge of how their business is performing and identify areas for improvement. This knowledge can then be used for effective control and planning purposes. For example, by examining inventory turnover ratios, business owners can gain a better understanding of how quickly their inventory is selling and then adjust their purchasing to reduce inventory holding costs. By examining their quick ratio, managers can better understand their ability to meet its debt obligations and then plan accordingly.

Question 2

Analysis of financial statements involves the comparison of a business's performance with that of other businesses in different industries

Accepted Answer

A) True 
 B)False  False

Question 3

Average number of days to inventory turnover = _______________

Accepted Answer

A)  Days in a year / Inventory turnover 
B)  (Average inventory x Inventory turnover) / Days in a year 
C)  (Days in a year x Inventory turnover) / Average inventory 
D)  Inventory turnover x Days in a year 
A)  Days in a year / Inventory turnover 
B)  (Average inventory x Inventory turnover) / Days in a year 
C)  (Days in a year x Inventory turnover) / Average inventory 
D)  Inventory turnover x Days in a year A

Question 4

ROA or the Rate of Return on Assets helps a venture owner to understand how management is performing with the resources available

Accepted Answer

A) True 
 B)False

Question 5

Working capital is a ratio measure of long-term financial position.

Accepted Answer

A) True 
 B)False

Question 6

Total Operating Expenses / Net Sales = ____________

Accepted Answer

A)  Current ratio 
B)  Operating-expense ratio 
C)  Acid-test ratio 
D)  Debt / Asset ratio 
A)  Current ratio 
B)  Operating-expense ratio 
C)  Acid-test ratio 
D)  Debt / Asset ratio

Question 7

Which ratio is of greater interest to the owner-manager, the rate of return on total assets or the rate of return on equity? Support your answer.

Accepted Answer

As an owner-manager and not just a manag

Question 8

A high Debt/Equity ratio (D/E ratio) indicates that creditors are financing most of a business's operations.

Accepted Answer

A) True 
 B)False

Question 9

Inventory turnover calculates the number of times, on average, inventory is replaced during the year.

Accepted Answer

A) True 
 B)False

Question 10

In?come-statement ratios provide information on current operating performance and effi?ciency.

Accepted Answer

A) True 
 B)False

Question 11

Net Sales / Average accounts receivable = ____________

Accepted Answer

A)  Accounts receivable turnover 
B)  Operating-expense ratio 
C)  Inventory turnover 
D)  Inventory/Cost ratio 
A)  Accounts receivable turnover 
B)  Operating-expense ratio 
C)  Inventory turnover 
D)  Inventory/Cost ratio

Question 12

Operating Income / Average Assets = _______________

Accepted Answer

A)  Quick ratio 
B)  Asset turnover ratio 
C)  Rate of return on total assets (RO
A)  
D)  Rate of return on equity (RO
E)  
A)  Quick ratio 
B)  Asset turnover ratio 
C)  Rate of return on total assets (RO
A)  
D)  Rate of return on equity (RO
E)

Question 13

List and explain three of the limitations of financial analysis

Accepted Answer

a. Companies may have different year end

Question 14

How does the cash budget help the owner-manager control operations? Include a description of this budget in your answer

Accepted Answer

Cash planning requirements for a new ven

Question 15

Cost of Goods Sold / Average Inventory = ________________

Accepted Answer

A)  Accounts receivable turnover 
B)  Operating-expense ratio 
C)  Inventory turnover 
D)  Inventory/Cost ratio 
A)  Accounts receivable turnover 
B)  Operating-expense ratio 
C)  Inventory turnover 
D)  Inventory/Cost ratio

Question 16

"Other" budgetary considerations include:

Accepted Answer

A)  Payroll budgets 
B)  Advertising / Selling budgets 
C)  Property, Plant, & Equipment budgets 
D)  All of the above 
A)  Payroll budgets 
B)  Advertising / Selling budgets 
C)  Property, Plant, & Equipment budgets 
D)  All of the above

Question 17

The Debt/Asset ratio is a measure of current financial performance

Accepted Answer

A) True 
 B)False

Question 18

The operating-expense ratio is calculated by dividing total operating expenses by net profit.

Accepted Answer

A) True 
 B)False

Question 19

[Current Assets (Less Inventory & Prepaid Expenses) ] / Current liabilities = ___________

Accepted Answer

A)  Current ratio 
B)  Acid-test ratio 
C)  Debt / Asset ratio 
D)  Inventory turnover 
A)  Current ratio 
B)  Acid-test ratio 
C)  Debt / Asset ratio 
D)  Inventory turnover

Question 20

In a Cash Budget, usually a business will estimate its needs for a ___________ day period and then determine how much money it is likely to collect during this time.

Accepted Answer

A)  7 to 14 
B)  14 to 30 
C)  30 to 60 
D)  60 to 90 
A)  7 to 14 
B)  14 to 30 
C)  30 to 60 
D)  60 to 90

What does a business owner hope to gain from financial statement analysis? Support your answer

Analysis of financial statements involves the comparison of a business's performance with that of other businesses in different industries

Average number of days to inventory turnover = _______________

ROA or the Rate of Return on Assets helps a venture owner to understand how management is performing with the resources available

Working capital is a ratio measure of long-term financial position.

Total Operating Expenses / Net Sales = ____________

Which ratio is of greater interest to the owner-manager, the rate of return on total assets or the rate of return on equity? Support your answer.

A high Debt/Equity ratio (D/E ratio) indicates that creditors are financing most of a business's operations.

Inventory turnover calculates the number of times, on average, inventory is replaced during the year.

In?come-statement ratios provide information on current operating performance and effi?ciency.

Net Sales / Average accounts receivable = ____________

Operating Income / Average Assets = _______________

List and explain three of the limitations of financial analysis

How does the cash budget help the owner-manager control operations? Include a description of this budget in your answer

Cost of Goods Sold / Average Inventory = ________________

"Other" budgetary considerations include:

The Debt/Asset ratio is a measure of current financial performance

The operating-expense ratio is calculated by dividing total operating expenses by net profit.

[Current Assets (Less Inventory & Prepaid Expenses) ] / Current liabilities = ___________

In a Cash Budget, usually a business will estimate its needs for a ___________ day period and then determine how much money it is likely to collect during this time.

New Ventures: The Quiet Giant

Ideation: The Concept

Venture Choices

Marketing: The Customer

Legal Considerations: The Parameters

Strategic Pricing: The Hook

Startup Capital: The Injection

Financial Statements: The Scorecard

HR and the Development of Teams: The People

Successful Business Plans: The Compass

Scaling Ventures: The Future

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Exam 9: Financial Analysis: The Gauges

What does a business owner hope to gain from financial statement analysis? Support your answer

Analysis of financial statements involves the comparison of a business's performance with that of other businesses in different industries

Average number of days to inventory turnover = _______________

ROA or the Rate of Return on Assets helps a venture owner to understand how management is performing with the resources available

Working capital is a ratio measure of long-term financial position.

Total Operating Expenses / Net Sales = ____________

Which ratio is of greater interest to the owner-manager, the rate of return on total assets or the rate of return on equity? Support your answer.

A high Debt/Equity ratio (D/E ratio) indicates that creditors are financing most of a business's operations.

Inventory turnover calculates the number of times, on average, inventory is replaced during the year.

In?come-statement ratios provide information on current operating performance and effi?ciency.

Net Sales / Average accounts receivable = ____________

Operating Income / Average Assets = _______________

List and explain three of the limitations of financial analysis

How does the cash budget help the owner-manager control operations? Include a description of this budget in your answer

Cost of Goods Sold / Average Inventory = ________________

"Other" budgetary considerations include:

The Debt/Asset ratio is a measure of current financial performance

The operating-expense ratio is calculated by dividing total operating expenses by net profit.

[Current Assets (Less Inventory & Prepaid Expenses) ] / Current liabilities = ___________

In a Cash Budget, usually a business will estimate its needs for a ___________ day period and then determine how much money it is likely to collect during this time.

New Ventures: The Quiet Giant

Ideation: The Concept

Venture Choices

Marketing: The Customer

Legal Considerations: The Parameters

Strategic Pricing: The Hook

Startup Capital: The Injection

Financial Statements: The Scorecard

HR and the Development of Teams: The People

Successful Business Plans: The Compass

Scaling Ventures: The Future

Filters