Deck 6: Analyzing Cash Flow and Other Financial Information

Question 1

Cash flow is the positive movement of money into a firm to pay the bills.

Answer 1

False

Question 2

A credit account that states "30 to 90"means the firm requires its customers to make payment in 30-90 days.

Answer 2

True

Question 3

In preventing a negative cash flow, a company must accurately forecast the actual cash flow.

Answer 3

True

Question 4

When there is a separation between managers and owners, profits are an useful measure to evaluate a manager's performance.

Question 5

James invested $800 into his gourmet hamburger restaurant; this would be considered his equity in the company.

Question 6

If James's company has a profit margin, it means there will be enough cash to pay the bills.

Question 7

An accurate overall cash position provides a small business owner with an accepted means to meet financial obligations.

Question 8

Cash is the "king" in a small business.

Question 9

Pro forma is a term describing estimates of what a firm's financial statements will look like in the future.

Question 10

A balance sheet summarizes current and fixed assets together.

Question 11

Fixed assets include machinery and office equipment.

Question 12

Current liabilities could be mortgage payables and stockholders equity.

Question 13

Long-term liabilities could be notes payable and bank notes.

Question 14

Sensitivity analysis is an examination of the best case cash flow scenario.

Question 15

According to the book, new small businesses will have either investing activities or financing activities.

Question 16

_________ is an useful metric when there are differences of opinion between managers and owners about the business's performance.

A) Contracts
B) Cash flows
C) Profits
D) Account payables
E) Account receivables

Question 17

An investment in a firm by the owner is called _________.

A) equity
B) profit
C) receivables
D) margin

Question 18

According to the book, the most dangerous situation for a new business is _________.

A) uneven growth
B) no growth
C) rapid growth
D) slow growth

Question 19

According to the book, an owner needs what percent of initial equity for a new venture?

A) 50
B) 100
C) 150
D) 200

Question 20

In new business ventures, this is the only type of activity.

A) operations
B) floating
C) manufacturing
D) marketing

Question 21

A cash flow statement is used to describe _________ percent of the activities that provide and use cash during a specified period of time.

A) 25
B) 50
C) 75
D) 100

Question 22

_________ percent of actual expenses must be accounted for in a cash flow statement.

A) 25
B) 33 1/3
C) 50
D) 100

Question 23

A cash flow statement determines the most likely case scenario, which is called:

A) gap analysis
B) deficit analysis
C) sensitivity analysis
D) forecast analysis

Question 24

_________ have a physical presence including land, buildings, office machines, or equipment.

A) Current assets
B) Fixed assets
C) Current liabilities
D) Long-term liabilities

Question 25

_________ include accounts payable, notes payable, or bank notes.

A) Current assets
B) Fixed assets
C) Current liabilities
D) Long-term liabilities

Question 26

A pro forma _________ projects the future income of an entrepreneurial firm.

A) balance sheet
B) income statement
C) current liabilities
D) cash flow

Question 27

When a company starts making money, this is called:

A) cash flow statement
B) positive cash flow
C) assets minus liabilities
D) break-even point

Question 28

_________ costs must be paid no matter how many products or services are sold.

A) Break-even
B) Current
C) Fixed
D) Variable

Question 29

_________ costs change according to how many goods are produced.

A) Break-even
B) Current
C) Fixed
D) Variable

Question 30

Which of the following financial statements is NOT a part of the financial reports that established businesses develop over a period of time?

A) cash flow statement
B) balance sheet
C) cash loss statement
D) income statement

Question 31

What are the benefits to a business owner of using deviation analysis?

A) helps to develop realistic forecasts
B) helps to know differences between actual performances and predicted performances
C) helps to know these differences in a given point of time
D) all of these

Question 32

Generating a cash flow statement starts with:

A) estimating expenses
B) estimating profits
C) predicting losses
D) predicting debts

Question 33

All of the following are categories of expenses EXCEPT:

A) insurance
B) profits
C) employee benefits
D) salaries

Question 34

List and describe the two basic assets on a balance sheet and give examples.

Question 35

Name the two liabilities and give examples of both.

Question 36

Compare and contrast fixed costs and variable costs; clearly identify the differences. Include examples of each.

Question 37

What is the meaning of the term pro forma? Why is it important to a small business owner?