Question 1

Using break-even analysis,what is Gunther's contribution margin?

Accepted Answer

A) 4 percent 
B) 32 percent 
C) 24 percent 
D) 12 percent 
A) 4 percent 
B) 32 percent 
C) 24 percent 
D) 12 percent

Question 2

The ________ ratio measures a company's ability to generate sales in relation to its assets.

Accepted Answer

A) net sales-to-working capital 
B) net sales to total assets 
C) average collection period 
D) average inventory turnover 
A) net sales-to-working capital 
B) net sales to total assets 
C) average collection period 
D) average inventory turnover

Question 3

The small business with a high debt-to-net worth ratio has more borrowing capacity than a firm with a low ratio.

Accepted Answer

A) True 
 B)False

Question 4

A company with a times-interest-earned ratio that is well above the industry average would likely have difficulty making the interest payments on its loans,as creditors would see that it was overextended in its debts.

Accepted Answer

A) True 
 B)False

Question 5

Comparing a company's current income statement to those of prior accounting periods rarely reveals valuable information about key trends.

Accepted Answer

A) True 
 B)False

Question 6

You are provided this information about a retail store called "BoardSports:" BoardSports Industry Mean
Current Ratio 1.5 : 1 2: 1
Quick ratio .75 : 1 1 : 1
Debt ratio 0.87 : 1 0.75 : 1
Average collection ratio 46 days 33 days
Net profit on sales ratio 5.5% 8.2%
Net profit to equity ratio 7.7% 13.2%
What can you reasonably assess about the current financial status of this company?

Accepted Answer

A) The company is in excellent financial condition with no changes required. 
B) The company is in respectable financial condition with no changes required. 
C) The company is in questionable financial condition with minor changes required. 
D) The company is in poor financial condition with significant changes required. 
A) The company is in excellent financial condition with no changes required. 
B) The company is in respectable financial condition with no changes required. 
C) The company is in questionable financial condition with minor changes required. 
D) The company is in poor financial condition with significant changes required.

Question 7

The ________ ratio shows the portion of each sales dollar remaining after deducting all expenses.

Accepted Answer

A) net profit on sales 
B) net profit to equity 
C) net sales to total assets 
D) net sales to working capital 
A) net profit on sales 
B) net profit to equity 
C) net sales to total assets 
D) net sales to working capital

Question 8

Michelle Becker's target income in her business for the upcoming year is $78,500.The company's gross profit margin averages 32.6 percent of sales,and its total operating expenses run 24.7 percent of sales.To achieve her target income,sales of Michelle's company should be:

Accepted Answer

A) $148,773. 
B) $993,671. 
C) $317,814. 
D) $1,271,348. 
A) $148,773. 
B) $993,671. 
C) $317,814. 
D) $1,271,348.

Question 9

Creditors often look for a times-interest-earned ratio of at least 4:1 to 6:1 before pronouncing a company a good credit risk.

Accepted Answer

A) True 
 B)False

Question 10

What is the return on net worth ratio for Meters,Inc.?

Accepted Answer

A) 8.5 percent 
B) 1.91:1 
C) 21.8 percent 
D) 29.3 percent 
A) 8.5 percent 
B) 1.91:1 
C) 21.8 percent 
D) 29.3 percent

Question 11

Port Royal's net profit-to-equity ratio is:

Accepted Answer

A) 23.8 percent. 
B) 37.4 percent. 
C) 16.1 percent. 
D) 232.7 percent. 
A) 23.8 percent. 
B) 37.4 percent. 
C) 16.1 percent. 
D) 232.7 percent.

Question 12

Sarah's Smart Shop has an inventory turnover ratio of 3 times per year and an average inventory of $156,000.If Sarah could manage her inventory better and increase the number of turnovers to the industry average of 6 times per year,what average inventory would she need to generate the same level of sales?

Accepted Answer

A) $78,000 
B) $52,000 
C) $468,000 
D) $312,000 
A) $78,000 
B) $52,000 
C) $468,000 
D) $312,000

Question 13

Were the bankers correct? Do you think Jim should expand the business?

Accepted Answer

Bowden needs to increase sales,and expan

Question 14

Typically,in a start-up firm,salaries are not the best use of cash.A guideline is for the owner to draw a salary that is about ________ below the market rate for a similar position.

Accepted Answer

A) 5-10 percent 
B) 10-20 percent 
C) 20-25 percent 
D) 25-30 percent 
A) 5-10 percent 
B) 10-20 percent 
C) 20-25 percent 
D) 25-30 percent

Question 15

Ratio analysis allows a business owner to identify potential problem areas in her business before they become business-threatening crises.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an assumption of break-even analysis?

Accepted Answer

A) Fixed expenses remain constant for all levels of sales volume. 
B) Variable expenses change in direct proportion to changes in sales volume. 
C) Changes in sales volume have no effect on unit sales price. 
D) All of the above 
A) Fixed expenses remain constant for all levels of sales volume. 
B) Variable expenses change in direct proportion to changes in sales volume. 
C) Changes in sales volume have no effect on unit sales price. 
D) All of the above

Question 17

On the income statement,the cost of goods sold represents the total cost,excluding shipping,of the merchandise sold during the year.

Accepted Answer

A) True 
 B)False

Question 18

The first section of a balance sheet lists:

Accepted Answer

A) assets. 
B) liabilities. 
C) claims creditors have against the firm's assets payable within one year. 
D) the owner's equity in terms of initial capital invested and retained earnings. 
A) assets. 
B) liabilities. 
C) claims creditors have against the firm's assets payable within one year. 
D) the owner's equity in terms of initial capital invested and retained earnings.

Question 19

On a break-even chart,the break-even point occurs at the intersection of the fixed expense line and the total revenue line.

Accepted Answer

A) True 
 B)False

Question 20

Calculate Harry's break-even point.

Accepted Answer

Break-even Point: Variable Cos

Using break-even analysis,what is Gunther's contribution margin?

The ________ ratio measures a company's ability to generate sales in relation to its assets.

The small business with a high debt-to-net worth ratio has more borrowing capacity than a firm with a low ratio.

A company with a times-interest-earned ratio that is well above the industry average would likely have difficulty making the interest payments on its loans,as creditors would see that it was overextended in its debts.

Comparing a company's current income statement to those of prior accounting periods rarely reveals valuable information about key trends.

The ________ ratio shows the portion of each sales dollar remaining after deducting all expenses.

Michelle Becker's target income in her business for the upcoming year is $78,500.The company's gross profit margin averages 32.6 percent of sales,and its total operating expenses run 24.7 percent of sales.To achieve her target income,sales of Michelle's company should be:

Creditors often look for a times-interest-earned ratio of at least 4:1 to 6:1 before pronouncing a company a good credit risk.

What is the return on net worth ratio for Meters,Inc.?

Port Royal's net profit-to-equity ratio is:

Were the bankers correct? Do you think Jim should expand the business?

Typically,in a start-up firm,salaries are not the best use of cash.A guideline is for the owner to draw a salary that is about ________ below the market rate for a similar position.

Ratio analysis allows a business owner to identify potential problem areas in her business before they become business-threatening crises.

Which of the following is an assumption of break-even analysis?

On the income statement,the cost of goods sold represents the total cost,excluding shipping,of the merchandise sold during the year.

The first section of a balance sheet lists:

On a break-even chart,the break-even point occurs at the intersection of the fixed expense line and the total revenue line.

Calculate Harry's break-even point.

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Buying an Existing Business

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters

Exam 11: Creating a Successful Financial Plan

Using break-even analysis,what is Gunther's contribution margin?

The ________ ratio measures a company's ability to generate sales in relation to its assets.

The small business with a high debt-to-net worth ratio has more borrowing capacity than a firm with a low ratio.

A company with a times-interest-earned ratio that is well above the industry average would likely have difficulty making the interest payments on its loans,as creditors would see that it was overextended in its debts.

Comparing a company's current income statement to those of prior accounting periods rarely reveals valuable information about key trends.

The ________ ratio shows the portion of each sales dollar remaining after deducting all expenses.

Michelle Becker's target income in her business for the upcoming year is $78,500.The company's gross profit margin averages 32.6 percent of sales,and its total operating expenses run 24.7 percent of sales.To achieve her target income,sales of Michelle's company should be:

Creditors often look for a times-interest-earned ratio of at least 4:1 to 6:1 before pronouncing a company a good credit risk.

What is the return on net worth ratio for Meters,Inc.?

Port Royal's net profit-to-equity ratio is:

Were the bankers correct? Do you think Jim should expand the business?

Typically,in a start-up firm,salaries are not the best use of cash.A guideline is for the owner to draw a salary that is about ________ below the market rate for a similar position.

Ratio analysis allows a business owner to identify potential problem areas in her business before they become business-threatening crises.

Which of the following is an assumption of break-even analysis?

On the income statement,the cost of goods sold represents the total cost,excluding shipping,of the merchandise sold during the year.

The first section of a balance sheet lists:

On a break-even chart,the break-even point occurs at the intersection of the fixed expense line and the total revenue line.

Calculate Harry's break-even point.

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Buying an Existing Business

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters