Exam 11: Creating a Successful Financial Plan

For the most meaningful interpretation,the small business owner should compare his firm's average collection period to:

The most common mistake entrepreneurs make when preparing pro forma (projected)financial statements for their companies is being overly pessimistic in their financial plans.

Which of the following is not a liquidity ratio?

________ ratios measure the extent to which an entrepreneur relies on debt capital rather than equity capital to finance a business.

The net profit to asset ratio measures:

________ ratios indicate how efficiently the small firm is being managed.

________ are those items of value the business owns; ________ are those things the business owes.

If Gunther's net profit target for the year is $190,000,what sales level must he achieve?

________ ratios help a business owner evaluate the company's performance and indicate how effectively the business employs its resources.

If Harry's profit target is $15,000,what level of sales must be achieved?

Explain the three basic financial reports that a small business uses in building a financial plan: the balance sheet,the income statement,and the statement of cash flows.What information is contained in each,and of what value is it to the small business owner?

The balance sheet provides owners with an estimate of the firm's worth for a specific moment in time,while the income statement presents a "moving picture" of its profitability over a period of time.

What level of sales would Birmingham's have to achieve if it wanted to make a $25,000 profit?

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

A business should provide the owner with a reasonable rate of return based upon:

Which ratio would be most helpful to a business owner to measure the profit per dollar of sales?

Line T is the ________ line,while Line S is the ________ line.

A business with a payables turnover ratio of 10.4 times a year would have an average payable period of about:

The higher the ________ ratio,the lower the degree of protection afforded creditors,and the closer creditors' interest approaches the owner's interest.

Most firms calculate their quick assets by subtracting the value of their inventory from their current asset total.