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

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 ________.

The four main financial objectives of a firm are _________.

Pro forma financial statements are projections for future periods based on forecasts and are typically completed for 2 to 3 years into the future.

Shawn Jones was reading the business plan of New Venture Fitness Drinks, and noticed that prior to its financial forecasts, New Venture Fitness Drinks placed an explanation of the sources of the numbers for the forecast and the assumptions used to generate them. This explanation is called a(n) ________.

Efficiency is the ability to earn a profit.

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

Describe each of the four primary financial objectives of firms.

The pro forma balance sheet provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time.

The What Went Wrong? 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 it ________.

Which of the following is an example of a long-term liability?

A firm's working capital is defined as its fixed assets minus its long-term liabilities.

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

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.

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

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

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.

A firm's working capital is its ________.

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

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

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