Question 1

The ________ ratio measures the owner's rate of return on the investment in the business.

Accepted Answer

A) net profit-to-equity 
B) net profit on sales 
C) quick profit 
D) net sales-to-working capital 
A) net profit-to-equity 
B) net profit on sales 
C) quick profit 
D) net sales-to-working capital

Question 2

Since conditions and markets change so rapidly,entrepreneurs developing financial forecasts for start-ups should focus on creating projections for 6 months into the future.

Accepted Answer

A) True 
 B)False

Question 3

________ is one indication that a small business may be undercapitalized.

Accepted Answer

A) A current ratio below 1:1 
B) A quick ratio above 2:1 
C) A debt-to-net worth ratio above 1:1 
D) A net-sales-to-working capital ratio equal to 3:1 
A) A current ratio below 1:1 
B) A quick ratio above 2:1 
C) A debt-to-net worth ratio above 1:1 
D) A net-sales-to-working capital ratio equal to 3:1

Question 4

The times-interest-earned ratio expresses the relationship between the capital contributions of creditors and those of the owners.

Accepted Answer

A) True 
 B)False

Question 5

The small firm's net sales to total assets ratio measures how many dollars in sales the business makes for every dollar of working capital.

Accepted Answer

A) True 
 B)False

Question 6

The higher the current ratio,the stronger the small firm's financial position.

Accepted Answer

A) True 
 B)False

Question 7

One of the most important tasks facing an entrepreneur is:

Accepted Answer

A) establishing a large enough reserve of capital. 
B) earning enough the first year to provide an adequate return on investment. 
C) the deferment of taxes. 
D) determining the funds needed for a company start-up. 
A) establishing a large enough reserve of capital. 
B) earning enough the first year to provide an adequate return on investment. 
C) the deferment of taxes. 
D) determining the funds needed for a company start-up.

Question 8

Describe what operating ratios are.Identify the five operating ratios covered in your text,explaining how each of the five helps the small business owner manage his/her business.

Accepted Answer

Operating ratios help entrepreneu

Question 9

Depreciation is:

Accepted Answer

A) the difference between the total sources available to the owner and the total uses of those assets. 
B) listed as a source of funds because it is a noncash expense,deducted as a cost of doing business. 
C) the owner's total investment at the company's inception plus retained earnings. 
D) creditors' total claims against the firm's assets. 
A) the difference between the total sources available to the owner and the total uses of those assets. 
B) listed as a source of funds because it is a noncash expense,deducted as a cost of doing business. 
C) the owner's total investment at the company's inception plus retained earnings. 
D) creditors' total claims against the firm's assets.

Question 10

The net profit to equity ratio (or the return on net worth ratio)measures the owners' rate of return on investment.

Accepted Answer

A) True 
 B)False

Question 11

Ideally,the average payable period should match or exceed the time it takes to convert inventory into sales and sales into cash.

Accepted Answer

A) True 
 B)False

Question 12

When determining the owner's target income,you must consider a reasonable salary for the time spent running the business,less the depreciation of assets.

Accepted Answer

A) True 
 B)False

Question 13

A ratio greater than ________ days would indicate poor collection procedures.

Accepted Answer

A) 29 
B) 40 
C) 60 
D) 90 
A) 29 
B) 40 
C) 60 
D) 90

Question 14

The ________ ratio is the liquidity ratio most commonly used as a measure of short-term solvency.

Accepted Answer

A) working capital ratio 
B) quick 
C) debt-to-net worth 
D) turnover 
A) working capital ratio 
B) quick 
C) debt-to-net worth 
D) turnover

Question 15

An adequate profit in a small business must include a reasonable return on the owner's total investment in the business.

Accepted Answer

A) True 
 B)False

Question 16

Dividing gross profit by net sales produces:

Accepted Answer

A) operating expenses. 
B) gross profit margin. 
C) long-term profitability. 
D) gross profit flow. 
A) operating expenses. 
B) gross profit margin. 
C) long-term profitability. 
D) gross profit flow.

Question 17

Liquidity ratios measure the financing supplied by the firm's owners against that provided by its creditors.

Accepted Answer

A) True 
 B)False

Question 18

The break-even point occurs where:

Accepted Answer

A) the firm's fixed expenses equal its variable expenses. 
B) the creditors' interest equals the owner's interest in the business. 
C) total revenue equals total expenses. 
D) assets and liabilities are equal on the balance sheet. 
A) the firm's fixed expenses equal its variable expenses. 
B) the creditors' interest equals the owner's interest in the business. 
C) total revenue equals total expenses. 
D) assets and liabilities are equal on the balance sheet.

Question 19

Which of the following expenses would be considered "fixed"?

Accepted Answer

A) Wages 
B) Raw materials 
C) Utilities 
D) Rent 
A) Wages 
B) Raw materials 
C) Utilities 
D) Rent

Question 20

The ________ is built on the basic accounting equation: Assets = Liabilities + Owner's Equity.

Accepted Answer

A) income statement 
B) sources and uses of funds statement 
C) balance sheet 
D) cash budget 
A) income statement 
B) sources and uses of funds statement 
C) balance sheet 
D) cash budget

Exam 14: Creating a Solid Financial Plan

The ________ ratio measures the owner's rate of return on the investment in the business.

Since conditions and markets change so rapidly,entrepreneurs developing financial forecasts for start-ups should focus on creating projections for 6 months into the future.

________ is one indication that a small business may be undercapitalized.

The times-interest-earned ratio expresses the relationship between the capital contributions of creditors and those of the owners.

The small firm's net sales to total assets ratio measures how many dollars in sales the business makes for every dollar of working capital.

The higher the current ratio,the stronger the small firm's financial position.

One of the most important tasks facing an entrepreneur is:

Describe what operating ratios are.Identify the five operating ratios covered in your text,explaining how each of the five helps the small business owner manage his/her business.

Depreciation is:

The net profit to equity ratio (or the return on net worth ratio)measures the owners' rate of return on investment.

Ideally,the average payable period should match or exceed the time it takes to convert inventory into sales and sales into cash.

When determining the owner's target income,you must consider a reasonable salary for the time spent running the business,less the depreciation of assets.

A ratio greater than ________ days would indicate poor collection procedures.

The ________ ratio is the liquidity ratio most commonly used as a measure of short-term solvency.

An adequate profit in a small business must include a reasonable return on the owner's total investment in the business.

Dividing gross profit by net sales produces:

Liquidity ratios measure the financing supplied by the firm's owners against that provided by its creditors.

The break-even point occurs where:

Which of the following expenses would be considered "fixed"?

The ________ is built on the basic accounting equation: Assets = Liabilities + Owner's Equity.

Entrepreneurs: the Driving Force Behind Small Business

Ethics and Social Responsibility: Doing the Right Thing

Creativity and Innovation: Keys to Entrepreneurial Success

Strategic Management and the Entrepreneur

Choosing a Form of Ownership

Franchising and the Entrepreneur

Buying an Existing Business

New Business Planning Process: Feasibility Analysis,business Modeling,

Building a Bootstrap Marketing Plan

Creative Use of Advertising and Promotion

Pricing and Credit Strategies

Global Marketing Strategies

E-Commerce and Entrepreneurship

Managing Cash Flow

Sources of Equity Financing

Sources of Debt Financing

Location,layout,and Physical Facilities

Supply Chain Management

Managing Inventory

Staffing and Leading a Growing Company

Management Succession and Risk Management Strategies in the Family Business

The Legal Environment: Business Law and Government Regulation

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