Question 1

Which financial statement records all of a firm's revenues and expenses for a given period and shows whether the firm is making a profit or experiencing a loss?

Accepted Answer

A)  Balance sheet 
B)  Owner's equity statement 
C)  Statement of cash flows 
D)  Forecast 
E)  Income statement

Question 2

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

Question 3

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.

Question 4

A company's merchandise, raw materials, and products waiting to be sold are called its ________.

Accepted Answer

A)  set aside 
B)  accumulation 
C)  reserve 
D)  inventory 
E)  stock

Question 5

According to the textbook, the most important function of the pro forma statement of cash flows is to project whether the firm will have sufficient ________.

Accepted Answer

A)  income to meet its payroll on a weekly or monthly basis 
B)  income to exceed industry norms 
C)  cash to meet its needs 
D)  inventory to meet its sales and production forecasts 
E)  short-term assets to cover its short-term liabilities

Question 6

Financial management deals with two things-managing a company's finances and ________.

Accepted Answer

A)  operations management 
B)  inventory control 
C)  raising money 
D)  production management 
E)  supply chain management

Question 7

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

Question 8

The same financial ratios used to evaluate a firm's historical financial statement should be used to evaluate the pro forma financial statements.

Accepted Answer

A) True 
 B)False

Question 9

In the context of computing the cost of sales, the common way to do this is to use the percent-of-sales method, which is a method for expressing each expense item as a percentage of ________.

Accepted Answer

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

Question 10

A company's accounts receivable is money owed to it by its customers.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

The answer of Describe the purpose of the income statement,...

Question 12

________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

Accepted Answer

A)  Calculation statements 
B)  Forecasts 
C)  Statements of cash flow 
D)  Financial statements 
E)  Prediction statements

Question 13

A financial statement is a(n) ________.

Accepted Answer

A)  set of ratios which depict relationships between a firm's financial items 
B)  estimate of a firm's future income and expenses 
C)  hybrid statement of cash flows 
D)  itemized forecast of a company's income, expenses, and capital needs 
E)  written report that quantitatively describes a firm's financial health

Question 14

Which of the following selections correctly matches the financial statement with its description?

Accepted Answer

A)  Income statement - tells how much a firm is making or losing. 
B)  Income statement - depicts the structure of a firm's assets and liabilities. 
C)  Balance sheet - shows where a firm's cash is coming from. 
D)  Balance sheet - tells how much a firm is making or losing. 
E)  Statement of cash flows - depicts the structure of a firm's assets and liabilities.

Question 15

Budgets are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

Accepted Answer

A) True 
 B)False

Question 16

Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis.

Accepted Answer

A) True 
 B)False

Question 17

For Essentium Materials, the company profiled in the opening feature in Chapter 8, an essential financial metric is to work to grow its monthly revenues faster than its monthly ________ rate.

Accepted Answer

A)  accounts payable 
B)  accounts receivable 
C)  burn 
D)  return 
E)  profitability

Question 18

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

Accepted Answer

The answer of What are forecasts? What role do they...

Question 19

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

Accepted Answer

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

Question 20

The balance sheet reflects the results of the operations of a firm over a specified period of time.

Accepted Answer

A) True 
 B)False

Exam 8: Assessing a New Ventures Financial Strength and Viability

Which financial statement records all of a firm's revenues and expenses for a given period and shows whether the firm is making a profit or experiencing a loss?

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

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

A company's merchandise, raw materials, and products waiting to be sold are called its ________.

According to the textbook, the most important function of the pro forma statement of cash flows is to project whether the firm will have sufficient ________.

Financial management deals with two things-managing a company's finances and ________.

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

The same financial ratios used to evaluate a firm's historical financial statement should be used to evaluate the pro forma financial statements.

In the context of computing the cost of sales, the common way to do this is to use the percent-of-sales method, which is a method for expressing each expense item as a percentage of ________.

A company's accounts receivable is money owed to it by its customers.

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

________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

A financial statement is a(n) ________.

Which of the following selections correctly matches the financial statement with its description?

Budgets are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis.

For Essentium Materials, the company profiled in the opening feature in Chapter 8, an essential financial metric is to work to grow its monthly revenues faster than its monthly ________ rate.

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

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

The balance sheet reflects the results of the operations of a firm over a specified period of time.