Deck 7: Financing and Accounting

Question 1

Extra expenses not counted on in the planning stage can quickly eat up cash intended for growth.

Answer 1

True

Question 2

Dan asked Mike to invest in his Sports Shop. Mike gave $10,000.00 and wants 25 percent of the profits. This is a form of equity investment.

Answer 2

True

Question 3

Non-equity ownership means there is zero money being invested in the company.

Answer 3

False

Question 4

Debt allows a new business to create more loans and equity funding in the business.

Question 5

In the case of a company failing, debt does not need to be repaid.

Question 6

A problem with having a line of credit to purchase inventory is the business tends to carry old and outdated inventory on the books. This inventory should be discounted as its value in the market has shrunk.

Question 7

Every investor has characteristics that could impact the operation of a business. For example, an investor who is very frugal may insist that the company closely monitor every expense.

Question 8

Accrual-based accounting is expenses and revenues being recorded when they apply.

Question 9

Only the smallest businesses can use the accrual-based accounting system.

Question 10

A petty cash fund operates like the owner's bank account.

Question 11

Debt is a(n) _________ investment.

A) unsecured
B) secured
C) equity
D) temporary

Question 12

_________ is(are) a form of non-equity funding.

A) Supplier credit
B) Credit cards
C) Debt
D) All of these

Question 13

_________ investment involves selling a percentage of a business to an outside party.

A) Collateral
B) Asset
C) Equity
D) Non-equity

Question 14

All of these are a source of equity investments EXCEPT:

A) venture capitalists
B) other firms
C) founders
D) business angels

Question 15

Venture capitalists are seeking a(n) _________.

A) high growth business that has the opportunity to cash out
B) IPO
C) sale to a larger company within a relatively short time
D) all of these

Question 16

John needs to lease a van for his flower company; this is called _________.

A) venture capital lease
B) equity base
C) asset lease
D) factoring

Question 17

The biggest disadvantage to leasing over time is:

A) spending more money for equipment maintenance
B) factoring
C) good only for certain number of months
D) saving money over time

Question 18

The advantage of factoring for a small business is:

A) segmenting all the company's accounts receivable
B) operating the company on minimal outlay
C) receiving money from accounts receivable immediately
D) not receiving the full amount of bill due

Question 19

Which of the following accounting systems recognizes expenses as they are paid and recognizes revenue as it is as generated?

A) inventory based
B) cash based
C) accrual based
D) subchapter based

Question 20

Which type of accounting system recognizes expenses and revenues being recorded when they apply?

A) inventory based
B) cash based
C) accrual based
D) subchapter based

Question 21

_________ is a fund that is used when an expense is too small to write a check.

A) Expense
B) Small time
C) Venture
D) Petty cash

Question 22

Which of the following is the best definition of supplier credit?

A) It is a credit that does not tie a person or business to any particular asset.
B) Suppliers often will provide credit to a small business owner to make it easier for him or her to purchase physical assets and/or actual supplies.
C) They are special funds budgeted by a business that are designed to save money to purchase supplies from a vendor.
D) None of these.

Question 23

What should a new business owner keep in mind when seeking investments from business angels?

A) evaluate the nature of their advice
B) evaluate their business experience
C) the contacts and relationships of these persons
D) all of these

Question 24

_________ accounting is a form of accounting that recognizes expenses as they are paid and recognizes revenue as it is generated.

A) Accrual-based
B) Cash-based
C) Balance sheet
D) Credit-based

Question 25

Which of the following accounts requires both a cash register and a petty cash register available to record all outflow of funds?

A) accounts payable
B) expense account
C) check register
D) payroll

Question 26

An inventory account maintains an inventory record that lists all of the following items EXCEPT:

A) unit loss
B) unit cost
C) an item number
D) description of the item

Question 27

What is the main advantage of using a just-in-time inventory system?

A) simple data measurement method
B) easy to understand
C) low maintenance costs
D) obtaining data in a timely manner

Question 28

Financing the start of a new business and establishing the accounting systems are _________ operational concerns in the start-up of a new business.

A) secondary
B) central
C) minor
D) none of these

Question 29

It is easier to establish items such as a sound system to account for the transactions of a business at the _________ of the venture.

A) beginning
B) middle
C) end
D) none of these is correct

Question 30

In the case study Friend's Home Health, the owners were concerned with what need when they realized they did not know the true cost of any individual service in their operation?

A) need for funding
B) need for an accounting system
C) need for flow of information
D) all of these

Question 31

In the case study Friend's Home Health, in order for the owners to pay for all the additional expenses related to this opportunity, the business should have _________.

A) initial funding
B) financial buffer
C) financial cushion
D) all of these

Question 32

List and describe two types of equity investors.

Question 33

A payroll check will list these items for every employee.