Question 1

Calculate the return on sales for a business that has net income of $25,000 and sales of $60,000.

Accepted Answer

A)  42% 
B)  0.42 
C)  4.2 
D)  0.042 
E)  None of the above 
A)  42% 
B)  0.42 
C)  4.2 
D)  0.042 
E)  None of the above A

Question 2

Define debt and equity and explain the difference between them. Where does each appear on financial statements?

Accepted Answer

Equity is the amount of capital invested in a business by the entrepreneur and/or other investors, while debt is the capital borrowed from others. Both debt and equity appear on the opposite side of assets on a balance sheet.

Question 3

ROI is always calculated for ________.

Accepted Answer

A)  A specific time period, such as a month or a year 
B)  The length of a business's fiscal year 
C)  A month 
D)  Ever 
E)  None of the above 
A)  A specific time period, such as a month or a year 
B)  The length of a business's fiscal year 
C)  A month 
D)  Ever 
E)  None of the above A

Question 4

Liabilities that will be paid over a period of more than one year are ________.

Accepted Answer

A)  Long-term liabilities 
B)  Long-term assets 
C)  Equity 
D)  Current liabilities 
E)  None of the above 
A)  Long-term liabilities 
B)  Long-term assets 
C)  Equity 
D)  Current liabilities 
E)  None of the above

Question 5

To see how costs are affecting net profit, try analyzing the income statement by expressing each item on the income statement ________.

Accepted Answer

A)  As a percentage of sales 
B)  As a percentage of profit 
C)  As a percentage of costs 
D)  As a percentage of operations 
E)  As a percentage of assets 
A)  As a percentage of sales 
B)  As a percentage of profit 
C)  As a percentage of costs 
D)  As a percentage of operations 
E)  As a percentage of assets

Question 6

In the income statement, gross profit minus fixed operating costs equals ________.

Accepted Answer

A)  Pretax profit 
B)  Net profit 
C)  Gross profit 
D)  COGS 
E)  Margin 
A)  Pretax profit 
B)  Net profit 
C)  Gross profit 
D)  COGS 
E)  Margin

Question 7

The last line of an income statement shows a business's ________.

Accepted Answer

A)  Net profit or net loss 
B)  Gross profit or gross loss 
C)  Profit or loss 
D)  Taxes 
E)  Fixed costs 
A)  Net profit or net loss 
B)  Gross profit or gross loss 
C)  Profit or loss 
D)  Taxes 
E)  Fixed costs

Question 8

Owner's equity is the difference between assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 9

Contribution margin equals revenues plus COGS and other variable costs.

Accepted Answer

A) True 
 B)False

Question 10

What must balance with assets on the balance sheet?

Accepted Answer

A)  Liabilities and owner's equity 
B)  Net worth and owner's equity 
C)  Capital and owner's equity 
D)  Net profit 
E)  Available cash 
A)  Liabilities and owner's equity 
B)  Net worth and owner's equity 
C)  Capital and owner's equity 
D)  Net profit 
E)  Available cash

Question 11

Describe the parts of an income statement.

Accepted Answer

The income statement includes revenues,

Question 12

Cash itself or items that could quickly be turned into cash or will be used within 1 year are called ________.

Accepted Answer

A)  Current assets 
B)  Long-term assets 
C)  Liquid assets 
D)  Current liabilities 
E)  Stuff 
A)  Current assets 
B)  Long-term assets 
C)  Liquid assets 
D)  Current liabilities 
E)  Stuff

Question 13

Examining ________ monthly can help determine what is doing well, or poorly, in a business.

Accepted Answer

A)  Operating ratios 
B)  Income statement ratios 
C)  Financial ratios 
D)  All of the above 
E)  None of the above 
A)  Operating ratios 
B)  Income statement ratios 
C)  Financial ratios 
D)  All of the above 
E)  None of the above

Question 14

What analytic tool allows you to compare income statements from different periods, even if the dollar figures are very different?

Accepted Answer

A)  Financial analysis 
B)  Asset analyses 
C)  Income analyses 
D)  Same-size analysis 
E)  None of the above 
A)  Financial analysis 
B)  Asset analyses 
C)  Income analyses 
D)  Same-size analysis 
E)  None of the above

Question 15

The return on sales ratio is ________.

Accepted Answer

A)  Net income/sales 
B)  Also called the operating ratio 
C)  Revenue/expenses 
D)  Debt/income 
E)  Inventory/receipts payable 
A)  Net income/sales 
B)  Also called the operating ratio 
C)  Revenue/expenses 
D)  Debt/income 
E)  Inventory/receipts payable

Question 16

In a business formula such as Return on Investment, "on" means ________.

Accepted Answer

A)  "Divided by" 
B)  "Deducted from" 
C)  "On top of" 
D)  "Instead of" 
E)  None of the above 
A)  "Divided by" 
B)  "Deducted from" 
C)  "On top of" 
D)  "Instead of" 
E)  None of the above

Question 17

To create a same size analysis, calculate each line item as a percentage of ________.

Accepted Answer

A)  Sales 
B)  Income 
C)  Costs 
D)  Units 
E)  None of the above 
A)  Sales 
B)  Income 
C)  Costs 
D)  Units 
E)  None of the above

Question 18

The double bottom line answers the question, "Are you able to make a profit and operate the business in a way that makes you feel satisfied and fulfilled?"

Accepted Answer

A) True 
 B)False

Question 19

Return on sales is the percentage created when sales are divided into gross margin.

Accepted Answer

A) True 
 B)False

Question 20

Current assets are cash itself or items that could quickly be turned into cash (liquidated), or will be used by the business within one year.

Accepted Answer

A) True 
 B)False

Exam 13: Using Financial Statements to Guide a Business

Calculate the return on sales for a business that has net income of $25,000 and sales of $60,000.

Define debt and equity and explain the difference between them. Where does each appear on financial statements?

ROI is always calculated for ________.

Liabilities that will be paid over a period of more than one year are ________.

To see how costs are affecting net profit, try analyzing the income statement by expressing each item on the income statement ________.

In the income statement, gross profit minus fixed operating costs equals ________.

The last line of an income statement shows a business's ________.

Owner's equity is the difference between assets and liabilities.

Contribution margin equals revenues plus COGS and other variable costs.

What must balance with assets on the balance sheet?

Describe the parts of an income statement.

Cash itself or items that could quickly be turned into cash or will be used within 1 year are called ________.

Examining ________ monthly can help determine what is doing well, or poorly, in a business.

What analytic tool allows you to compare income statements from different periods, even if the dollar figures are very different?

The return on sales ratio is ________.

In a business formula such as Return on Investment, "on" means ________.

To create a same size analysis, calculate each line item as a percentage of ________.

The double bottom line answers the question, "Are you able to make a profit and operate the business in a way that makes you feel satisfied and fulfilled?"

Return on sales is the percentage created when sales are divided into gross margin.

Current assets are cash itself or items that could quickly be turned into cash (liquidated), or will be used by the business within one year.

Entrepreneurs Recognize Opportunities

Franchising

Finding Opportunity in an Existing Business

The Business Plan: Road Map to Success

Creating Business From Opportunity

Exploring Your Market

Developing the Right Marketing Mix and Plan

Pricing and Credit Strategies

Integrated Marketing Communications

Marketing Globally

Smart Selling and Effective Customer Service

Understanding and Managing Start-Up, Fixed, and Variable Costs

Cash Flow and Taxes

Financing Strategy: Debt, Equity, or Both

Addressing Legal Issues and Managing Risk

Operating for Success

Location, Facilities, and Layout

Human Resources and Management

Leadership and Ethical Practices

Franchising, Licensing, and Harvesting: Cashing in Your Brand

Filters