Question 1

Describe the purpose of the income statement, the balance sheet, and the statement of cash flows.

Accepted Answer

The income statement reflects the result

Question 2

________ is a company's ability to meet its short-term financial obligations.

Accepted Answer

A)  Liquidity 
B)  Profitability 
C)  Effectiveness 
D)  Stability 
E)  Efficiency 
A)  Liquidity 
B)  Profitability 
C)  Effectiveness 
D)  Stability 
E)  Efficiency

Question 3

________ financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future.

Accepted Answer

A)  Chronological 
B)  Pro forma 
C)  Ad-hoc 
D)  Concurrent 
E)  Historical 
A)  Chronological 
B)  Pro forma 
C)  Ad-hoc 
D)  Concurrent 
E)  Historical

Question 4

GymFlow, the company profiled in the opening feature in Chapter 8, created a mobile app that shows how busy a gym is at any given point in time. According to the case, in regard to financial management, the cofounders of GymFlow found that ________ was one of their most difficult challenges.

Accepted Answer

A)  managing accounts payable 
B)  managing accounts receivable 
C)  projecting future income 
D)  projecting future expenses 
E)  completing financial statements 
A)  managing accounts payable 
B)  managing accounts receivable 
C)  projecting future income 
D)  projecting future expenses 
E)  completing financial statements

Question 5

A firm's pro forma financial statements are similar to its historical financial statements except that they ________.

Accepted Answer

A)  do not include the income statement 
B)  are required by the SEC in all cases 
C)  look back rather than forward 
D)  look forward rather than back 
E)  do not include the statement of cash flows 
A)  do not include the income statement 
B)  are required by the SEC in all cases 
C)  look back rather than forward 
D)  look forward rather than back 
E)  do not include the statement of cash flows

Question 6

What is ratio analysis? Why is it important?

Accepted Answer

The most practical way to interpret or m

Question 7

Which of the following was not identified as one of the four main financial objectives of a firm?

Accepted Answer

A)  Stability 
B)  Efficiency 
C)  Timeliness 
D)  Liquidity 
E)  Profitability 
A)  Stability 
B)  Efficiency 
C)  Timeliness 
D)  Liquidity 
E)  Profitability

Question 8

In the context of a firm's statement of cash flows, ________ activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

Accepted Answer

A)  operating 
B)  investing 
C)  capital 
D)  financing 
E)  liquidity 
A)  operating 
B)  investing 
C)  capital 
D)  financing 
E)  liquidity

Question 9

When evaluating a balance sheet, the two primary questions are ________.

Accepted Answer

A)  whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable 
B)  whether a firm is profitable and whether a firm is financially sound 
C)  whether a firm's cost of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends 
D)  whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound 
E)  whether a firm is profitable and whether it is generating excess cash that could be used to pay down debt or pay dividends 
A)  whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable 
B)  whether a firm is profitable and whether a firm is financially sound 
C)  whether a firm's cost of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends 
D)  whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound 
E)  whether a firm is profitable and whether it is generating excess cash that could be used to pay down debt or pay dividends

Question 10

A firm's profit margin, or return on sales, is computed by dividing ________.

Accepted Answer

A)  net income by net sales 
B)  gross profit by net sales 
C)  net income by gross profit 
D)  net income by cost of sales 
E)  operating income by gross profit 
A)  net income by net sales 
B)  gross profit by net sales 
C)  net income by gross profit 
D)  net income by cost of sales 
E)  operating income by gross profit

Question 11

A statement of cash flows is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

Accepted Answer

A) True 
 B)False

Question 12

Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ assets on a firm's balance sheet.

Accepted Answer

A)  other 
B)  intermediate term 
C)  temporary 
D)  current 
E)  fixed 
A)  other 
B)  intermediate term 
C)  temporary 
D)  current 
E)  fixed

Question 13

If a firm determines it can use the percentage-of-sales method and it follows the procedure described in the textbook, then the net result is that each expense item on its income statement (with the exception of those items that can be individually forecast) will grow at the same rate as sales. This approach is called the ________.

Accepted Answer

A)  continuous percentage method of forecasting 
B)  stable fraction method of forecasting 
C)  regular proportion method of forecasting 
D)  constant ratio method of forecasting 
E)  steady percentage method of forecasting 
A)  continuous percentage method of forecasting 
B)  stable fraction method of forecasting 
C)  regular proportion method of forecasting 
D)  constant ratio method of forecasting 
E)  steady percentage method of forecasting

Question 14

According to the textbook, the three numbers that receive the most attention when evaluating an income statement are ________.

Accepted Answer

A)  depreciation, interest income, and income tax expense 
B)  cost of sales, gross profit, and operating expenses 
C)  net sales, cost of sales, and operating expenses 
D)  gross profit, net sales, and incomes tax expense 
E)  gross profit, other income, and net income 
A)  depreciation, interest income, and income tax expense 
B)  cost of sales, gross profit, and operating expenses 
C)  net sales, cost of sales, and operating expenses 
D)  gross profit, net sales, and incomes tax expense 
E)  gross profit, other income, and net income

Question 15

Describe the difference between historical and pro forma financial statements.

Accepted Answer

Historical financial statements reflect

Question 16

In regard to budgets, which of the following statements is not true?

Accepted Answer

A)  Budgets include an itemized forecast of a company's expenses. 
B)  Budgets are a poor tool for financial control. 
C)  Budgets are an important tool for financial planning. 
D)  Budgets include an itemized forecast of a company's capital needs. 
E)  Budgets include an itemized forecast of a company's income. 
A)  Budgets include an itemized forecast of a company's expenses. 
B)  Budgets are a poor tool for financial control. 
C)  Budgets are an important tool for financial planning. 
D)  Budgets include an itemized forecast of a company's capital needs. 
E)  Budgets include an itemized forecast of a company's income.

Question 17

A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as ________.

Accepted Answer

A)  efficiency 
B)  effectiveness 
C)  stability 
D)  liquidity 
E)  profitability 
A)  efficiency 
B)  effectiveness 
C)  stability 
D)  liquidity 
E)  profitability

Question 18

The strength and vigor of a firm's overall financial posture is referred to as ________.

Accepted Answer

A)  liquidity 
B)  effectiveness 
C)  stability 
D)  profitability 
E)  efficiency 
A)  liquidity 
B)  effectiveness 
C)  stability 
D)  profitability 
E)  efficiency

Question 19

What are forecasts? What role do they play in the preparation of pro forma financial statements?

Accepted Answer

Forecasts are projections of a firm's fu

Question 20

Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Peggy is taking account of her store's ________.

Accepted Answer

A)  long-term assets 
B)  owners' equity 
C)  accounts payable 
D)  accounts receivable 
E)  inventory 
A)  long-term assets 
B)  owners' equity 
C)  accounts payable 
D)  accounts receivable 
E)  inventory

Describe the purpose of the income statement, the balance sheet, and the statement of cash flows.

________ is a company's ability to meet its short-term financial obligations.

________ financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future.

GymFlow, the company profiled in the opening feature in Chapter 8, created a mobile app that shows how busy a gym is at any given point in time. According to the case, in regard to financial management, the cofounders of GymFlow found that ________ was one of their most difficult challenges.

A firm's pro forma financial statements are similar to its historical financial statements except that they ________.

What is ratio analysis? Why is it important?

Which of the following was not identified as one of the four main financial objectives of a firm?

In the context of a firm's statement of cash flows, ________ activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

When evaluating a balance sheet, the two primary questions are ________.

A firm's profit margin, or return on sales, is computed by dividing ________.

A statement of cash flows is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ assets on a firm's balance sheet.

According to the textbook, the three numbers that receive the most attention when evaluating an income statement are ________.

Describe the difference between historical and pro forma financial statements.

In regard to budgets, which of the following statements is not true?

A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as ________.

The strength and vigor of a firm's overall financial posture is referred to as ________.

What are forecasts? What role do they play in the preparation of pro forma financial statements?

Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Peggy is taking account of her store's ________.

Introduction to Entrepreneurship

Recognizing Opportunities and Generating Ideas

Feasibility Analysis

Developing an Effective Business Model

Industry and Competitor Analysis

Writing a Business Plan

Preparing the Proper Ethical and Legal Foundation

Building a New-Venture Team

Getting Financing or Funding

Unique Marketing Issues

The Importance of Intellectual Property

Preparing for and Evaluating the Challenges of Growth

Strategies for Firm Growth

Franchising

Filters

Exam 8: Assessing a New Venture's Financial Strength and Viability

Describe the purpose of the income statement, the balance sheet, and the statement of cash flows.

________ is a company's ability to meet its short-term financial obligations.

________ financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future.

GymFlow, the company profiled in the opening feature in Chapter 8, created a mobile app that shows how busy a gym is at any given point in time. According to the case, in regard to financial management, the cofounders of GymFlow found that ________ was one of their most difficult challenges.

A firm's pro forma financial statements are similar to its historical financial statements except that they ________.

What is ratio analysis? Why is it important?

Which of the following was not identified as one of the four main financial objectives of a firm?

In the context of a firm's statement of cash flows, ________ activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

When evaluating a balance sheet, the two primary questions are ________.

A firm's profit margin, or return on sales, is computed by dividing ________.

A statement of cash flows is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ assets on a firm's balance sheet.

According to the textbook, the three numbers that receive the most attention when evaluating an income statement are ________.

Describe the difference between historical and pro forma financial statements.

In regard to budgets, which of the following statements is not true?

A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as ________.

The strength and vigor of a firm's overall financial posture is referred to as ________.

What are forecasts? What role do they play in the preparation of pro forma financial statements?

Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Peggy is taking account of her store's ________.

Introduction to Entrepreneurship

Recognizing Opportunities and Generating Ideas

Feasibility Analysis

Developing an Effective Business Model

Industry and Competitor Analysis

Writing a Business Plan

Preparing the Proper Ethical and Legal Foundation

Building a New-Venture Team

Getting Financing or Funding

Unique Marketing Issues

The Importance of Intellectual Property

Preparing for and Evaluating the Challenges of Growth

Strategies for Firm Growth

Franchising

Filters