Exam 11: Financial Preparation for Entrepreneurial Ventures

The first step in constructing an operating budget is

The set of assumptions on which financial projections are based have little meaning.

The contribution margin approach formula is

The principle objective of capital budgeting is to

List the elements of a capital budget and define its main objective.

Production requirements are figured by subtracting the period's beginning inventory from

Accounts receivable turnover measures the rate at which accounts receivable are being collected on an monthly basis.

Break-even analysis is used to assess

It is typical for a firm to prepare an operating budget but not a cash budget.

More established ventures will use a sales forecast model where the estimation of current sales will increase a certain percentage over the prior period's sales. This percentage is based upon

When using the internal rate of return method, the future cash flows are discounted at a rate that makes the net present value equal to

The principal objective of capital budgeting is to maximize the value of the firm.

Contribution margin is the difference between the selling price and the fixed cost per unit.

In handling questionable costs, the cost in question is substituted first as a _____ and then as a _____.

The cash flow budget describes

The traditional accounting equation is: assets + liabilities = owner's equity.

Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price.

Define break-even analysis and identify some useful methods for finding the break-even point.