Deck 11: Financial Preparation for Entrepreneurial Ventures

Question 1

A fixed cost

A)changes in response to changes in activity for a given period of time.
B)does not change in response to changes in activity for a given period of time.
C)changes inversely to changes in activity for a given period of time.
D)does none of the above.

Answer 1

B

Question 2

Which of the following are forms of pro forma statements?

A)income statements
B)balance sheets
C)costs of goods sold
D)a and b

Answer 2

D

Question 3

A key concept in developing an expense budget is that of

A)fixed costs.
B)labor costs.
C)taxes.
D)rent.

Answer 3

A

Question 4

Contribution margin is the difference between the selling price and the fixed cost per unit.

Question 5

A budget is one of the most powerful tools that an entrepreneur can use in planning business operations.

Question 6

Financial information pulls together all the information presented in the other segments of the business.

Question 7

The traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet is

A)assets = liabilities + owners' equity.
B)assets + liabilities = owner's equity.
C)assets + owner's equity = liabilities.
D)assets = liabilities - owner's equity.

Question 8

The principal objective of capital budgeting is to maximize the value of the firm.

Question 9

Pro forma statements show the firm's present financial position.

Question 10

The principle objective of capital budgeting is to

A)minimize the risks of the firm.
B)maximize the value of the firm.
C)maximize the assets of the firm.
D)optimize the number of project requests.

Question 11

The cash-flow budget provides an overview of cash inflows and outflows for the budget period.

Question 12

The cash flow budget describes

A)cash inflows/cash outflows.
B)cash outflows/accounts receivables.
C)interest income/interest expense.
D)profits/costs.

Question 13

When using the internal rate of return method,the future cash flows are discounted at a rate that makes the net present value equal to

A)assets minus liabilities.
B)assets minus owner's equity.
C)assets minus (liabilities plus owner's equity).
D)zero.

Question 14

The traditional accounting equation is: assets + liabilities = owner's equity.

Question 15

Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price.

Question 16

The first step in the preparation of the cash flow budget is the identification and timing of cash outflows.

Question 17

A budget that is a statement of estimated income and expenses over a specified period of time is referred to as an

A)anticipated budget.
B)operating budget.
C)entrepreneurial budget.
D)expected results budget.

Question 18

Financial information is important to entrepreneurs because:

A)it pulls together all the information presented in other segments of the business.
B)it quantifies all the assumptions concerning business operations.
C)it answers all questions about the business and the entrepreneur.
D)a and b are both correct.

Question 19

A variable cost

A)changes in the same direction and in inverse proportion to changes in operating activity.
B)changes in the opposite direction and in direct proportion to changes in operating activity.
C)changes in the same direction and in direct proportion to changes in operation activity.
D)is synonymous with labor costs

Question 20

The set of assumptions on which financial projections are based have little meaning.

Question 21

The concept of the net present value method works on the premise that

A)a dollar today is worth less than a dollar in the future.
B)a dollar today is worth the same in the future.
C)a dollar today is worth more than a dollar in the future.
D)a dollar today cannot be measured in future dollars.

Question 22

Break-even analysis is a technique commonly used to assess the

A)rate of return on investment.
B)expected product profitability.
C)net present value.
D)total costs.

Question 23

Contribution margin is the difference between

A)selling price and fixed cost per unit.
B)purchase price and variable cost per unit.
C)selling price and variable cost per unit.
D)purchase price and fixed cost per unit.

Question 24

List the elements of a capital budget and define its main objective.

Question 25

Explain what a cash flow budget tells a manager/owner.

Question 26

Comparing financial numbers in order to make decisions is referred to as:

A)ratio analysis.
B)debt reduction.
C)comparable fractions.
D)descriptive statistics.

Question 27

Capital budgeting is designed to show

A)how many projects, in total, should be selected.
B)which project is most profitable.
C)which of several mutually exclusive projects should be selected
D)how to evaluate projects based on rates of return.

Question 28

Define break-even analysis and identify some useful methods for finding the break-even point.

Question 29

What is included in an operating budget and how is this helpful?

Question 30

Explain pro forma statements.