Question 1

The most common way that entrepreneurs accomplish more with less is called

Accepted Answer

A)   bootstrapping
B)   downsizing
C)   debt financing
D)   credit card financing A

Question 2

The greater a firm's sales, the greater need for financing because of greater _____ requirements.

Accepted Answer

A)   asset
B)   employee
C)   marketing
D)   operational A

Question 3

What are the two sources of equity ownership in a business?

Accepted Answer

1. Investments the owners make in the business.
2. Retained earnings, or the profits that are retained within the company rather than being distributed to the owners.

Question 4

There must be a corresponding dollar of financing for every dollar of assets. Stated another way, debt plus assets must equal total equity.

Accepted Answer

A) True 
 B)False

Question 5

For every dollar of assets there must be a corresponding dollar of

Accepted Answer

A)   liquidity
B)   liabilities
C)   financing
D)   debt

Question 6

Accounts payable and accrued expenses rise as a firm's sales increase. This phenomenon is known as

Accepted Answer

A)   spontaneous debt financing
B)   trade credit financing
C)   escalating debt
D)   asset-based financing

Question 7

The cost of goods sold can be either fixed or variable.

Accepted Answer

A) True 
 B)False

Question 8

D&R Products forecast first year asset requirements of $143,000; therefore, the total debt requirement must be

Accepted Answer

A)   $143,000
B)   a set percentage of sales
C)   equal to the current ratio
D)   unknown; not enough information

Question 9

List the factors that drive net profits in the order that they should appear on the income statement.

Accepted Answer

The answer of List the factors that drive net profits...

Question 10

Pro forma financial statements mean that the financial statements are prepared in the proper format.

Accepted Answer

A) True 
 B)False

Question 11

In a real world situation an entrepreneur should project the profits to two years into the future.

Accepted Answer

A) True 
 B)False

Question 12

A firm's sales are the primary force driving future asset needs.

Accepted Answer

A) True 
 B)False

Question 13

David Allen plans to invest $110,000 of his personal savings to provide the needed startup equity for D&R Products, Inc. He will receive _____ for his investment.

Accepted Answer

A)   a note receivable
B)   a corporate charter
C)   common stock
D)   an equity certificate

Question 14

To the greatest extent possible the entrepreneur should use other people's resources, a common way entrepreneurs accomplish more with less. This is called bootstrapping.

Accepted Answer

A) True 
 B)False

Question 15

Financial forecasts are required by lenders who want to know how they will be paid back, but not by investors, because they are receiving equity for their investment.

Accepted Answer

A) True 
 B)False

Question 16

Cecilia Levine purchased badly needed equipment from a customer who deducted an amount from his invoices to cover the cost of the equipment. This strategy on the part of Levine illustrates a growth strategy called

Accepted Answer

A)   boondoggling
B)   bootstrapping
C)   bartering
D)   trade credit

Question 17

The assets-to-sales relationship tends to be relatively constant within an industry, allowing for a(n) _____ technique to be utilized in projecting asset requirements.

Accepted Answer

A)   percentage-of-sales
B)   bootstrap forecasting
C)   asset turnover ratio
D)   discounted sales

Question 18

Entrepreneurs tend to be conservative and usually underestimate what they can actually achieve when it comes to future sales.

Accepted Answer

A) True 
 B)False

Question 19

Projections of a venture's profits, its asset and financing requirements and its cash flows are essential in determining whether a venture is economically viable.

Accepted Answer

A) True 
 B)False

Question 20

Although the asset-to-sales ratio varies over time and with individual businesses, it tends to be relatively constant within an industry. This allows the startup to use the method of estimating asset requirements called the percentage-of-sales technique.

Accepted Answer

A) True 
 B)False

Exam 11: Forecasting Financial Requirements

The most common way that entrepreneurs accomplish more with less is called

The greater a firm's sales, the greater need for financing because of greater _____ requirements.

What are the two sources of equity ownership in a business?

There must be a corresponding dollar of financing for every dollar of assets. Stated another way, debt plus assets must equal total equity.

For every dollar of assets there must be a corresponding dollar of

Accounts payable and accrued expenses rise as a firm's sales increase. This phenomenon is known as

The cost of goods sold can be either fixed or variable.

D&R Products forecast first year asset requirements of $143,000; therefore, the total debt requirement must be

List the factors that drive net profits in the order that they should appear on the income statement.

Pro forma financial statements mean that the financial statements are prepared in the proper format.

In a real world situation an entrepreneur should project the profits to two years into the future.

A firm's sales are the primary force driving future asset needs.

David Allen plans to invest $110,000 of his personal savings to provide the needed startup equity for D&R Products, Inc. He will receive _____ for his investment.

To the greatest extent possible the entrepreneur should use other people's resources, a common way entrepreneurs accomplish more with less. This is called bootstrapping.

Financial forecasts are required by lenders who want to know how they will be paid back, but not by investors, because they are receiving equity for their investment.

Cecilia Levine purchased badly needed equipment from a customer who deducted an amount from his invoices to cover the cost of the equipment. This strategy on the part of Levine illustrates a growth strategy called

The assets-to-sales relationship tends to be relatively constant within an industry, allowing for a(n) _____ technique to be utilized in projecting asset requirements.

Entrepreneurs tend to be conservative and usually underestimate what they can actually achieve when it comes to future sales.

Projections of a venture's profits, its asset and financing requirements and its cash flows are essential in determining whether a venture is economically viable.

Although the asset-to-sales ratio varies over time and with individual businesses, it tends to be relatively constant within an industry. This allows the startup to use the method of estimating asset requirements called the percentage-of-sales technique.