Question 1

What are the advantages and the disadvantages of using break-even analysis?

Accepted Answer

As a key component in a sound financial

Question 2

If a market survey indicates that your firm's sales would be $620,000,what net profit would you expect to earn?

Accepted Answer

First,find net profit margin percentage

Question 3

Refer to the income statement and balance sheet.Prepare a ratio analysis for Bowden Brake Service.In addition,use the following industry statistics for firms like Jim's to explain and interpret what these ratios mean.

Accepted Answer

Current Ratio 1.4 : 1 Quick Ratio 0.7 :

Question 4

Suppose that a market survey indicates that Anthony's proposed business is likely to generate only $190,000 in sales.What net profit should Anthony expect to earn?

Accepted Answer

If expected sales ar

Question 5

Analyzing financial ratios could alert a business owner to which of these problems?

Accepted Answer

A) Excessive inventory 
B) Overextending credit 
C) Too much debt 
D) All of the above 
A) Excessive inventory 
B) Overextending credit 
C) Too much debt 
D) All of the above

Question 6

A technique that allows the small business owner to perform financial analysis by understanding the relationship between two accounting elements is called:

Accepted Answer

A) creating the pro forma. 
B) budgeting. 
C) break-even analysis. 
D) ratio analysis. 
A) creating the pro forma. 
B) budgeting. 
C) break-even analysis. 
D) ratio analysis.

Question 7

If Jim were to reduce his fixed costs by 10 percent by reducing a middle management position,what benefit would that be to him and the company? What would his new contribution margin be?

Accepted Answer

By reducing his fixed costs,Jim improves

Question 8

The ________ ratio tells how many times the company's earnings cover the interest payments on the debt it is carrying.

Accepted Answer

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

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

A company with a low debt-to-net worth ratio has less capacity to borrow than a company with a high debt-to-net worth ratio.

Accepted Answer

A) True 
 B)False

Question 11

________ is one indication that a small business may be undercapitalized.

Accepted Answer

A) A current ratio below 1:1 
B) A quick ratio above 2:1 
C) A debt-to-net worth ratio above 1:1 
D) A net sales-to-working capital ratio equal to 3:1 
A) A current ratio below 1:1 
B) A quick ratio above 2:1 
C) A debt-to-net worth ratio above 1:1 
D) A net sales-to-working capital ratio equal to 3:1

Question 12

Concerning how much cash to have at startup,one 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 13

When a company is forced into liquidation,owners are most likely to incur a loss when selling:

Accepted Answer

A) accounts receivable. 
B) inventory. 
C) marketable securities. 
D) real estate. 
A) accounts receivable. 
B) inventory. 
C) marketable securities. 
D) real estate.

Question 14

Financial analysts suggest that a small business should maintain a current ratio of at least:

Accepted Answer

A) 1:1. 
B) 2:1. 
C) 3:1. 
D) 4:1. 
A) 1:1. 
B) 2:1. 
C) 3:1. 
D) 4:1.

Question 15

If a company's average payable period ratio is significantly lower than the credit terms vendors offer,it may be a sign that the company is not using its cash most effectively.

Accepted Answer

A) True 
 B)False

Question 16

The ________ ratio measures the percentage of total assets financed by a small company's creditors compared to its owners.

Accepted Answer

A) debt 
B) times-interest-earned 
C) net sales to total assets 
D) total asset turnover 
A) debt 
B) times-interest-earned 
C) net sales to total assets 
D) total asset turnover

Question 17

A current ratio of 2.4:1 means that a small company has $2.40 in current liabilities for every $1 has in current assets.

Accepted Answer

A) True 
 B)False

Question 18

Liquidity ratios such as the current ratio and the quick ratio tell whether a small business will be able to meet its short-term obligations as they come due.

Accepted Answer

A) True 
 B)False

Question 19

Explain the procedure for constructing a graph that visually portrays the firm's break-even point (the point where revenues equal expenses).

Accepted Answer

• Step 1: On the horizontal axis,mark a

Question 20

A high debt ratio:

Accepted Answer

A) means that creditors provide a large percentage of the company's total financing. 
B) gives a small business more borrowing capacity. 
C) decreases the chances that creditors will lose money if the business is liquidated. 
D) represents a lower risk to potential lenders and creditors. 
A) means that creditors provide a large percentage of the company's total financing. 
B) gives a small business more borrowing capacity. 
C) decreases the chances that creditors will lose money if the business is liquidated. 
D) represents a lower risk to potential lenders and creditors.

What are the advantages and the disadvantages of using break-even analysis?

If a market survey indicates that your firm's sales would be $620,000,what net profit would you expect to earn?

Refer to the income statement and balance sheet.Prepare a ratio analysis for Bowden Brake Service.In addition,use the following industry statistics for firms like Jim's to explain and interpret what these ratios mean.

Suppose that a market survey indicates that Anthony's proposed business is likely to generate only $190,000 in sales.What net profit should Anthony expect to earn?

Analyzing financial ratios could alert a business owner to which of these problems?

A technique that allows the small business owner to perform financial analysis by understanding the relationship between two accounting elements is called:

If Jim were to reduce his fixed costs by 10 percent by reducing a middle management position,what benefit would that be to him and the company? What would his new contribution margin be?

The ________ ratio tells how many times the company's earnings cover the interest payments on the debt it is carrying.

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

A company with a low debt-to-net worth ratio has less capacity to borrow than a company with a high debt-to-net worth ratio.

________ is one indication that a small business may be undercapitalized.

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

When a company is forced into liquidation,owners are most likely to incur a loss when selling:

Financial analysts suggest that a small business should maintain a current ratio of at least:

If a company's average payable period ratio is significantly lower than the credit terms vendors offer,it may be a sign that the company is not using its cash most effectively.

The ________ ratio measures the percentage of total assets financed by a small company's creditors compared to its owners.

A current ratio of 2.4:1 means that a small company has $2.40 in current liabilities for every $1 has in current assets.

Liquidity ratios such as the current ratio and the quick ratio tell whether a small business will be able to meet its short-term obligations as they come due.

Explain the procedure for constructing a graph that visually portrays the firm's break-even point (the point where revenues equal expenses).

A high debt ratio:

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

What are the advantages and the disadvantages of using break-even analysis?

If a market survey indicates that your firm's sales would be $620,000,what net profit would you expect to earn?

Refer to the income statement and balance sheet.Prepare a ratio analysis for Bowden Brake Service.In addition,use the following industry statistics for firms like Jim's to explain and interpret what these ratios mean.

Suppose that a market survey indicates that Anthony's proposed business is likely to generate only $190,000 in sales.What net profit should Anthony expect to earn?

Analyzing financial ratios could alert a business owner to which of these problems?

A technique that allows the small business owner to perform financial analysis by understanding the relationship between two accounting elements is called:

If Jim were to reduce his fixed costs by 10 percent by reducing a middle management position,what benefit would that be to him and the company? What would his new contribution margin be?

The ________ ratio tells how many times the company's earnings cover the interest payments on the debt it is carrying.

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

A company with a low debt-to-net worth ratio has less capacity to borrow than a company with a high debt-to-net worth ratio.

________ is one indication that a small business may be undercapitalized.

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

When a company is forced into liquidation,owners are most likely to incur a loss when selling:

Financial analysts suggest that a small business should maintain a current ratio of at least:

If a company's average payable period ratio is significantly lower than the credit terms vendors offer,it may be a sign that the company is not using its cash most effectively.

The ________ ratio measures the percentage of total assets financed by a small company's creditors compared to its owners.

A current ratio of 2.4:1 means that a small company has $2.40 in current liabilities for every $1 has in current assets.

Liquidity ratios such as the current ratio and the quick ratio tell whether a small business will be able to meet its short-term obligations as they come due.

Explain the procedure for constructing a graph that visually portrays the firm's break-even point (the point where revenues equal expenses).

A high debt ratio:

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