Exam 8: Assessing a New Ventures Financial Strength and Viability

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:

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Question 1

Correct Answer:

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Describe the difference between historical and pro forma financial statements.

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Question 2

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Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis.Pro forma financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future.Pro forma financial statements are strictly planning tools, while historical financial statements reflect actual information.

Amanda Still owns a seafood restaurant in Clearwater, Florida. She is currently owed $19,000 by a corporation that she catered a meeting for and $2,000 on an overdue account. Amanda has $21,000 in:

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Question 3

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The major categories of assets listed on a balance sheet include current assets, fixed assets, and other assets.

(True/False)

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Question 4

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:

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Question 5

Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's:

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Question 6

________ reflect past performance and are usually prepared on a quarterly and annual basis.

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Question 7

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

(True/False)

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Question 8

Klymit, the company profiled in the opening feature in Chapter 8, makes cold weather apparel products and related accessories. According to the feature, one of the prominent challenges Klymit has faced is:

(Multiple Choice)

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Question 9

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

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Question 10

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

(True/False)

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Question 11

A company's merchandise, raw materials, and products waiting to be sold is called its:

(Multiple Choice)

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Question 12

If a firm's debt-to-equity ratio gets too high, it may have trouble meeting its obligations and securing the level of financing needed to fuel its growth.

(True/False)

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Question 13

The Savvy Entrepreneurial Firm feature for Chapter 8 focuses on Wise Acre Frozen Treats, a company that made organic popsicles from unrefined sweeteners. According to the feature, Wise Acre Frozen Treats failed largely because:

(Multiple Choice)

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Question 14

Match the financial term with its proper definition.

(Multiple Choice)

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Question 15

Match the financial objective with its correct definition.

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Question 16

A firm's ________ is its current assets divided by its current debt.

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Question 17

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

(Multiple Choice)

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Question 18

The income statement records all the revenues and expenses for a given period and shows whether the firm is making a profit or is experiencing a loss.

(True/False)

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Question 19

Efficiency is the ability to earn a profit.

(True/False)

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Question 20

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Describe the difference between historical and pro forma financial statements.

Amanda Still owns a seafood restaurant in Clearwater, Florida. She is currently owed $19,000 by a corporation that she catered a meeting for and $2,000 on an overdue account. Amanda has $21,000 in:

The major categories of assets listed on a balance sheet include current assets, fixed assets, and other assets.

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:

________ reflect past performance and are usually prepared on a quarterly and annual basis.

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

Klymit, the company profiled in the opening feature in Chapter 8, makes cold weather apparel products and related accessories. According to the feature, one of the prominent challenges Klymit has faced is:

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

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

A company's merchandise, raw materials, and products waiting to be sold is called its:

If a firm's debt-to-equity ratio gets too high, it may have trouble meeting its obligations and securing the level of financing needed to fuel its growth.

The Savvy Entrepreneurial Firm feature for Chapter 8 focuses on Wise Acre Frozen Treats, a company that made organic popsicles from unrefined sweeteners. According to the feature, Wise Acre Frozen Treats failed largely because:

Match the financial term with its proper definition.

Match the financial objective with its correct definition.

A firm's ________ is its current assets divided by its current debt.

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

The income statement records all the revenues and expenses for a given period and shows whether the firm is making a profit or is experiencing a loss.

Efficiency is the ability to earn a profit.

Introduction to Entrepreneurship

Recognizing Opportunities and Generating Ideas

Feasibility Analysis

Writing a Business Plan

Industry and Competitor Analysis

Developing an Effective Business Model

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

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