Question 1

The Partnering for Success feature in Chapter 8 focuses on buying groups, and recommends that small businesses seek out buying groups to participate in. What is a "buying group" in the context of the feature?

Accepted Answer

The definition given in option A is the correct definition of a buying group in the context of the feature. It refers to a partnership between small businesses to attain volume discounts on common products and services that they buy.

Question 2

A company's merchandise, raw materials, and products waiting to be sold are called its:

Accepted Answer

The term used to describe a company's merchandise, raw materials, and products waiting to be sold is called its inventory. The other options (set aside, accumulation, reserve, stock) do not accurately describe this concept.

Question 3

The strength and vigor of a firm's overall financial posture is referred to as:

Accepted Answer

Stability refers to the strength and vigor of a firm's overall financial posture. It indicates the ability of a company to maintain its financial position over time, withstand economic fluctuations and potential risks. It encompasses all aspects of financial health, including liquidity, profitability, and efficiency, but emphasizes the sustainability and resilience of a company's financial position.

Question 4

The four main financial objectives of a firm are:

Accepted Answer

The four main financial objectives of a firm are profitability, liquidity, efficiency, and stability. Profitability refers to the ability of the company to generate profits for its owners or shareholders. Liquidity refers to the ability of the company to meet its short-term financial obligations. Efficiency refers to the ability to minimize costs and maximize output. Stability refers to the ability to maintain a consistent performance over time. These four objectives are essential for a firm to succeed in the long-term.

Question 5

________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

Accepted Answer

Forecasts are specifically used for estimating a company's future financial performance. Calculation statements and financial statements refer to past or current financial information, while statements of cash flow provide information about the inflow and outflow of cash. "Prediction statements" is not a commonly used term in finance.

Question 6

Financial management deals with two thingsraising money and:

Accepted Answer

Financial management is concerned with managing a company's finances, including budgeting, forecasting, financial analysis, and ensuring effective use of financial resources. While inventory control, production management, and supply chain management are all important aspects of running a business, they are not the primary focus of financial management. Operations management may be related to financial management but it encompasses a broader context of managing a company's overall operations.

Question 7

Match the financial term with its proper definition.

Accepted Answer

The answer of Match the financial term with its proper...

Question 8

Match the financial objective with its correct definition.

Accepted Answer

Stability is correctly defined as the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio.

Question 9

A financial statement is a(n):

Accepted Answer

A financial statement is a written report that quantitatively describes a firm's financial health. Therefore, option E is the correct answer. Option A refers to financial ratios, option B refers to a forecast, option C refers to a hybrid statement, and option D refers to a budget.

Question 10

Which of the following was not identified as one of the four main financial objectives of a firm?

Accepted Answer

The four main financial objectives of a firm are profitability, efficiency, liquidity, and stability. Timeliness is not typically listed as one of the main financial objectives.

Question 11

Samantha Diaz owns a seafood restaurant in Jacksonville, Florida. She is currently owed $15,000 by a corporation that she catered a meeting for and $2,000 on an overdue account. Samantha has $17,000 in:

Accepted Answer

The $15,000 owed by the corporation and the $2,000 on an overdue account add up to Samantha's accounts receivable, which is $17,000.

Question 12

________ is the ability to earn a profit.

Accepted Answer

Profitability refers to the ability of a business to earn a profit, which is crucial for its sustainability and growth. Liquidity, effectiveness, stability, and efficiency are also important factors for business success, but they do not necessarily guarantee profitability.

Question 13

Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on their ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's:

Accepted Answer

Southwest Airlines' ability to use its assets productively and have the lowest turnaround time in the industry is a measure of efficiency. Efficiency is the ability of a company to use its resources in the most productive way possible to generate maximum output with minimum input. In this case, Southwest is minimizing the time its airplanes are sitting on the ground, which maximizes the time they are in the air generating revenue for the company.

Question 14

In regard to budgets, which of the following statements is not true?

Accepted Answer

Budgets are an important tool for financial control as they help a company to monitor and adjust its expenses and revenue to stay within financial goals. Therefore, option B is not true as budgets are actually a good tool for financial control.

Question 15

________ depict relationships between items on a firm's financial statements.

Accepted Answer

Financial ratios depict relationships between items on a firm's financial statements. They provide insight into a company's performance and can be used for comparison with other firms or industry standards. Examples of financial ratios include the debt-to-equity ratio, current ratio, and return on investment (ROI) ratio.

Question 16

A company's ability to meet its short-term financial obligations is referred to as:

Accepted Answer

Liquidity refers to a company's ability to meet its short-term financial obligations, such as paying bills and debts that are due in the near future. This is important because if a company cannot meet its short-term obligations, it may face financial difficulties and potentially even bankruptcy.

Question 17

BLMA Models, the company profiled in the opening feature in Chapter 8, sells model trains and model train accessories. According to the feature, the biggest challenge the company has faced is:

Accepted Answer

The feature states that BLMA Models' biggest challenge has been managing cash flow. This indicates that the company has struggled with ensuring that it has enough funds to cover its expenses and invest in new products, which can be a common challenge for small businesses.

Question 18

Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Peggy is taking account of her store's:

Accepted Answer

Peggy is taking account of her merchandise and products waiting to be sold, which is the definition of inventory. Therefore, the best choice is E, inventory.

Question 19

Money owned to a company by its customers is referred to as:

Accepted Answer

Accounts receivable refers to the money owed to a company by its customers for goods or services provided on credit, while accounts payable refers to the money a company owes to its suppliers and vendors. Accounts obtainable and accounts collectable are not commonly used accounting terms. Inventory refers to the goods that a company has on hand to sell.

Question 20

________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

Accepted Answer

Budgets are itemized forecasts of a company's income, expenses, and capital needs. They are important tools for financial planning and control as they help companies set financial goals and track their progress towards achieving them. Profitability statements, financial statements, owners' equity statements, and statements of cash flows are all important financial documents, but they do not serve the specific purpose of budgeting.

Quiz 8: Assessing a New Venture's Financial Strength and Viability