Question 1

An inventory turnover ratio above the industry average suggests that a business is overstocked with obsolete,stale,overpriced,or unpopular merchandise.

Accepted Answer

A) True 
 B)False

Question 2

The ________ ratio measures the owner's rate of return on the investment in the business.

Accepted Answer

A) net profit to equity 
B) net profit on sales 
C) quick profit 
D) net sales to working capital

Question 3

A high inventory turnover ratio relative to the industry average could mean that a business has too little inventory and is experiencing stockouts.

Accepted Answer

A) True 
 B)False

Question 4

A high current ratio guarantees that the small firm's assets are being used in the most profitable manner.

Accepted Answer

A) True 
 B)False

Question 5

Leverage ratios measure the financing supplied by the firm's owner against that supplied by his creditors.

Accepted Answer

A) True 
 B)False

Question 6

Generally,the higher the current ratio,the stronger the small firm's financial position.

Accepted Answer

A) True 
 B)False

Question 7

An excessively high average payable period ratio:

Accepted Answer

A) suggests that the company is making the best use of its available cash balance. 
B) indicates that the company is doing a poor job of collecting its accounts receivable. 
C) indicates the presence of a significant amount of past-due accounts payable. 
D) suggests that the company is highly liquid.

Question 8

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

Question 9

On a company's statement of cash flows,depreciation is:

Accepted Answer

A) the difference between the total sources available to the owner and the total uses of those assets. 
B) listed as a source of funds because it is a noncash expense,already deducted as a cost of doing business. 
C) the owner's total investment at the company's inception plus retained earnings. 
D) creditors' total claims against the firm's assets.

Question 10

Prepare an outline for Jim describing the components he should include in the business plan when requesting a loan.

Accepted Answer

The answer of Prepare an outline for Jim describing the...

Question 11

Liquidity ratios help a business owner evaluate a small company's performance and indicate how effectively it employs its resources.

Accepted Answer

A) True 
 B)False

Question 12

Creating projected (pro forma)financial statements would allow a business owner to answer which of the following questions?

Accepted Answer

A) What profit can my business expect to achieve? 
B) What sales level must my business reach if our targeted profit is X dollars? 
C) What fixed and variable expenses can my business expect to incur at our targeted sales level? 
D) All of the above

Question 13

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

Question 14

Assets represent what a business owns,while liabilities represent the claims creditors have against a company's assets.

Accepted Answer

A) True 
 B)False

Question 15

Why is it important for an entrepreneur,about to launch a business,to perform a break-even analysis? Describe the steps in calculating it.

Accepted Answer

The answer of Why is it important for an entrepreneur,about...

Question 16

The average inventory turnover ratio:

Accepted Answer

A) measures the number of times a company's inventory is sold out during the accounting period. 
B) tells a business owner whether she is managing the company's inventory properly. 
C) tells a business owner how fast the merchandise is moving through the business. 
D) All of the above

Question 17

Ratio analysis provides an owner with a "snapshot" of the company's financial picture at a single instant; therefore,she should track these ratios over time,looking for trends that otherwise might go undetected.

Accepted Answer

A) True 
 B)False

Question 18

The ________ represents a "snapshot" of a business,showing an estimate of its value on a given date,while the ________ is a "moving picture" of the firm's profitability over time.

Accepted Answer

A) balance sheet; income statement 
B) income statement; balance sheet 
C) statement of cash flows; income statement 
D) balance sheet; statement of cash flows

Question 19

Cost of goods sold is located on which financial statement?

Accepted Answer

A) Income statement 
B) Balance sheet 
C) Statement of cash flows 
D) All of the above

Question 20

Which of the following items would not be listed as a current asset in a company's financial reports?

Accepted Answer

A) Cash 
B) Accounts receivable 
C) Fixtures 
D) Inventory

Exam 11: Creating a Successful Financial Plan

An inventory turnover ratio above the industry average suggests that a business is overstocked with obsolete,stale,overpriced,or unpopular merchandise.

The ________ ratio measures the owner's rate of return on the investment in the business.

A high inventory turnover ratio relative to the industry average could mean that a business has too little inventory and is experiencing stockouts.

A high current ratio guarantees that the small firm's assets are being used in the most profitable manner.

Leverage ratios measure the financing supplied by the firm's owner against that supplied by his creditors.

Generally,the higher the current ratio,the stronger the small firm's financial position.

An excessively high average payable period ratio:

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

On a company's statement of cash flows,depreciation is:

Prepare an outline for Jim describing the components he should include in the business plan when requesting a loan.

Liquidity ratios help a business owner evaluate a small company's performance and indicate how effectively it employs its resources.

Creating projected (pro forma) financial statements would allow a business owner to answer which of the following questions?

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?

Assets represent what a business owns,while liabilities represent the claims creditors have against a company's assets.

Why is it important for an entrepreneur,about to launch a business,to perform a break-even analysis? Describe the steps in calculating it.

The average inventory turnover ratio:

Ratio analysis provides an owner with a "snapshot" of the company's financial picture at a single instant; therefore,she should track these ratios over time,looking for trends that otherwise might go undetected.

The represents a "snapshot" of a business,showing an estimate of its value on a given date,while the is a "moving picture" of the firm's profitability over time.

Cost of goods sold is located on which financial statement?

Which of the following items would not be listed as a current asset in a company's financial reports?