Question 1

The higher the debt-to-net worth ratio,the lower the degree of protection afforded creditors should the business fail.

Accepted Answer

A) True 
 B)False

Question 2

Evaluates the firm's overall performance and show how effectively it is putting its resources to work.This is called:

Accepted Answer

A) operating ratios. 
B) debt to equity ratio. 
C) accounts receivable turnover ratio. 
D) All of the above 
A) operating ratios. 
B) debt to equity ratio. 
C) accounts receivable turnover ratio. 
D) All of the above

Question 3

The ________ ratio is a measure of a company's ability to make the interest payments on its debt.

Accepted Answer

A) debt-to-net worth 
B) times-interest-earned 
C) net sales-to-working capital 
D) net profit-to-equity 
A) debt-to-net worth 
B) times-interest-earned 
C) net sales-to-working capital 
D) net profit-to-equity

Question 4

________ measure how efficiently the firm is operating and offer information about its bottom line.

Accepted Answer

A) Operating ratios 
B) Profitability ratios 
C) Balance Sheet ratios 
D) All of the above 
A) Operating ratios 
B) Profitability ratios 
C) Balance Sheet ratios 
D) All of the above

Question 5

To get the best results,an entrepreneur should track as many ratios as possible.

Accepted Answer

A) True 
 B)False

Question 6

The cost of goods sold represents the total cost,including distribution,of the goods sold during the year.

Accepted Answer

A) True 
 B)False

Question 7

The current ratio can sometimes be misleading,because it does not show the quality of a company's current assets.

Accepted Answer

A) True 
 B)False

Question 8

Performing financial ratio analyses enables a business owner to identify problems early-before they become crises.

Accepted Answer

A) True 
 B)False

Question 9

To prepare the cash flow statement,the owner must assemble the balance sheets and the income statements summarizing the present year's operations.

Accepted Answer

A) True 
 B)False

Question 10

Concerning how much cash to have at start-up,a rule of thumb is to have enough to cover operating expenses (less depreciation)for two inventory turnover periods.

Accepted Answer

A) True 
 B)False

Question 11

Most small businesses prefer to express their break-even point in dollars rather than units produced or sold,unless they are retailing.

Accepted Answer

A) True 
 B)False

Question 12

The statement of cash flows shows the change in a firm's working capital.

Accepted Answer

A) True 
 B)False

Question 13

When comparing a company's ratios to industry standards,entrepreneurs should ask the which of the following questions:

Accepted Answer

A) Is there a significant difference in my company's ratio and the industry average? 
B) Is the difference good or bad? 
C) What are the possible causes of this difference? What is the most likely cause? 
D) All of the above 
A) Is there a significant difference in my company's ratio and the industry average? 
B) Is the difference good or bad? 
C) What are the possible causes of this difference? What is the most likely cause? 
D) All of the above

Question 14

The pro forma shows the company's current overall financial condition.

Accepted Answer

A) True 
 B)False

Question 15

The break-even analysis provides an opportunity for integrated analysis of sales volume,expenses,income,and other relevant factors.

Accepted Answer

A) True 
 B)False

Question 16

Total profits minus total expenses gives the company's net income.

Accepted Answer

A) True 
 B)False

Question 17

Generally,the higher the small firm's average collection period ratio,the lower the chance of bad debt losses.

Accepted Answer

A) True 
 B)False

Question 18

The difference between the total sources of funds and the total uses of funds represents the increase or decrease in a firm's working capital.

Accepted Answer

A) True 
 B)False

Question 19

Joe is examining the percentage of total funds in a business provided by its creditors.He is working with the ________ ratio.

Accepted Answer

A) current 
B) quick 
C) debt 
D) turnover 
A) current 
B) quick 
C) debt 
D) turnover

Question 20

The most meaningful basis for comparing operating ratios is:

Accepted Answer

A) other companies of similar size in the same industry. 
B) companies within the neighborhood. 
C) major corporations in the same industry. 
D) all publicly traded companies. 
A) other companies of similar size in the same industry. 
B) companies within the neighborhood. 
C) major corporations in the same industry. 
D) all publicly traded companies.

Exam 14: Creating a Solid Financial Plan

The higher the debt-to-net worth ratio,the lower the degree of protection afforded creditors should the business fail.

Evaluates the firm's overall performance and show how effectively it is putting its resources to work.This is called:

The ________ ratio is a measure of a company's ability to make the interest payments on its debt.

________ measure how efficiently the firm is operating and offer information about its bottom line.

To get the best results,an entrepreneur should track as many ratios as possible.

The cost of goods sold represents the total cost,including distribution,of the goods sold during the year.

The current ratio can sometimes be misleading,because it does not show the quality of a company's current assets.

Performing financial ratio analyses enables a business owner to identify problems early-before they become crises.

To prepare the cash flow statement,the owner must assemble the balance sheets and the income statements summarizing the present year's operations.

Concerning how much cash to have at start-up,a rule of thumb is to have enough to cover operating expenses (less depreciation)for two inventory turnover periods.

Most small businesses prefer to express their break-even point in dollars rather than units produced or sold,unless they are retailing.

The statement of cash flows shows the change in a firm's working capital.

When comparing a company's ratios to industry standards,entrepreneurs should ask the which of the following questions:

The pro forma shows the company's current overall financial condition.

The break-even analysis provides an opportunity for integrated analysis of sales volume,expenses,income,and other relevant factors.

Total profits minus total expenses gives the company's net income.

Generally,the higher the small firm's average collection period ratio,the lower the chance of bad debt losses.

The difference between the total sources of funds and the total uses of funds represents the increase or decrease in a firm's working capital.

Joe is examining the percentage of total funds in a business provided by its creditors.He is working with the ________ ratio.

The most meaningful basis for comparing operating ratios is:

Entrepreneurs: the Driving Force Behind Small Business

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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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