Question 1

Construct a break-even chart for Birmingham's.

Accepted Answer

The answer of Construct a break-even chart for Birmingham's....

Question 2

The ________ shows what assets the business owns and what claims creditors and owners have against those assets, and is built on the basic accounting equation: Assets = Liabilities + Owner's Equity.

Accepted Answer

A)  income statement 
B)  sources and uses of funds statement 
C)  balance sheet 
D)  cash budget 
A)  income statement 
B)  sources and uses of funds statement 
C)  balance sheet 
D)  cash budget

Question 3

Taking on debt destroys a business; therefore, small business owners should avoid it at all costs.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Liquidity ratios (such as the current and the quick ratios) 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 6

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?

Accepted Answer

The Balance Sheet
This statement takes a

Question 7

Which ratio would best give an owner an indication that the business is undercapitalized?

Accepted Answer

A)  Debt-to-net worth 
B)  Net sales to total assets 
C)  Average inventory turnover 
D)  Quick 
A)  Debt-to-net worth 
B)  Net sales to total assets 
C)  Average inventory turnover 
D)  Quick

Question 8

Slow accounts receivable are a real danger to a small business because they often lead to cash crises.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

The area labeled ________ represents the firm's fixed expenses, while ________ represents its variable expenses.

Accepted Answer

A)  Z; W 
B)  X; Y 
C)  Y; X 
D)  W; Z 
A)  Z; W 
B)  X; Y 
C)  Y; X 
D)  W; Z

Question 12

Gunther's Emporium expects net sales of $2,396,919 for the upcoming year, with variable expenses totaling $1,813,443 and fixed expenses of $412,190. What is Gunther's break-even point?

Accepted Answer

A)  $1,876,324 
B)  $1,693,276 
C)  $5,667,009 
D)  Insufficient information given to determine. 
A)  $1,876,324 
B)  $1,693,276 
C)  $5,667,009 
D)  Insufficient information given to determine.

Question 13

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

Accepted Answer

As a key component in a sound financial

Question 14

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

Accepted Answer

A)  Liquidity 
B)  Leverage 
C)  Operating 
D)  Profitability 
A)  Liquidity 
B)  Leverage 
C)  Operating 
D)  Profitability

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

As a company's debt-to-net worth ratio approaches 1:1, its creditors' interest in that business approaches that of the owners.

Accepted Answer

A) True 
 B)False

Question 17

Service companies spend the greatest percentage of their sales revenue on cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

Mini-Case 11-4: Calculating the Break-even Point
A small manufacturer plans to sell tents for $120 each. The variable cost for each tent is $90. Fixed costs for the process are estimated to be $36,000. How many tents must the company sell to break-even?
-Suppose that the manufacturer desires a profit of $9,000 on this product. How many units must be sold?

Accepted Answer

Price/Unit $120
Variable Cost/Unit $90
F

Construct a break-even chart for Birmingham's.

The ________ shows what assets the business owns and what claims creditors and owners have against those assets, and is built on the basic accounting equation: Assets = Liabilities + Owner's Equity.

Taking on debt destroys a business; therefore, small business owners should avoid it at all costs.

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

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

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?

Which ratio would best give an owner an indication that the business is undercapitalized?

Slow accounts receivable are a real danger to a small business because they often lead to cash crises.

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

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.

The area labeled represents the firm's fixed expenses, while represents its variable expenses.

Gunther's Emporium expects net sales of $2,396,919 for the upcoming year, with variable expenses totaling $1,813,443 and fixed expenses of $412,190. What is Gunther's break-even point?

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

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

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

As a company's debt-to-net worth ratio approaches 1:1, its creditors' interest in that business approaches that of the owners.

Service companies spend the greatest percentage of their sales revenue on cost of goods sold.

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

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

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Inside the Entrepreneurial Mind: From Ideas to Reality

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Forms of Business Ownership and Buying an Existing Business

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit 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

Construct a break-even chart for Birmingham's.

The ________ shows what assets the business owns and what claims creditors and owners have against those assets, and is built on the basic accounting equation: Assets = Liabilities + Owner's Equity.

Taking on debt destroys a business; therefore, small business owners should avoid it at all costs.

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

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

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?

Which ratio would best give an owner an indication that the business is undercapitalized?

Slow accounts receivable are a real danger to a small business because they often lead to cash crises.

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

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.

The area labeled ________ represents the firm's fixed expenses, while ________ represents its variable expenses.

Gunther's Emporium expects net sales of $2,396,919 for the upcoming year, with variable expenses totaling $1,813,443 and fixed expenses of $412,190. What is Gunther's break-even point?

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

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

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

As a company's debt-to-net worth ratio approaches 1:1, its creditors' interest in that business approaches that of the owners.

Service companies spend the greatest percentage of their sales revenue on cost of goods sold.

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

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

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Inside the Entrepreneurial Mind: From Ideas to Reality

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Forms of Business Ownership and Buying an Existing Business

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit 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

The area labeled represents the firm's fixed expenses, while represents its variable expenses.