Question 1

Which of the following is true of financial management for a business exit?

Accepted Answer

Financial management for a business exit focuses on maximizing the value of the business for successors, whether it be through sale, merger, or passing it on to heirs. It involves decisions regarding the timing and method of exit, as well as strategies to increase the value of the business. The emphasis is not necessarily on conserving cash or obtaining increasing amounts of cash inflows.

Question 2

If the owner plans to _____ a business,he or she should be removing all surplus cash and tightening the cash-to-cash cycle to the shortest time possible.

Accepted Answer

If the owner plans to sell the business, it is important to remove all surplus cash and tighten the cash-to-cash cycle to the shortest time possible. This is because buyers often evaluate a business's value based on cash flow and potential, and excess cash can be seen as a liability. Additionally, shortening the cash-to-cash cycle can increase the business's liquidity and make it a more attractive purchase.

Question 3

The emphasis of financial management during the _____ phase is to obtain increasing amounts of cash inflows to pay for added inventory,productive assets,and employees.

Accepted Answer

The growth phase of a business involves expansion and increasing sales, which requires additional resources such as inventory, productive assets, and employees. Financial management during this phase focuses on obtaining cash inflows to cover these added expenses.

Question 4

What are the advantages of using equity capital in a business?

Accepted Answer

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Question 5

For an owner,the main financial management emphasis while transferring a business to family members must be to:

Accepted Answer

The main financial management emphasis while transferring a business to family members should be to increase the value of assets. This will ensure that the business is worth more when it is transferred to the family members, which can lead to a larger inheritance and provide stronger financial stability for the family. Increasing the cash-to-cash cycle or maximizing debt could be risky and may not provide any significant benefits. Optimizing capital structure for profits may not be a priority when transferring a business to family members.

Question 6

Describe the different forms of personal gifts.

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Question 7

What are the four broad categories of financial ratios? Give an example of each.

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Question 8

What is a credit reporting agency (CRA)?

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Question 9

What are the benefits of borrowing money for capital investment?

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Question 10

After being in business for 24 months,Paul's auto spare parts company Chromson Inc.grows to a relatively stable size.Which of the following would be Paul's primary financial management need at this stage?

Accepted Answer

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Question 11

During the start-up phase of a business,the emphasis is on:

Accepted Answer

During the start-up phase, cash is a limited resource, and therefore, it is crucial to conserve it. This means minimizing expenses, negotiating favorable payment terms with suppliers, delaying hiring, and seeking alternative financing options to sustain operations. Prioritizing cash conservation will enable the business to weather unexpected challenges and improve its chances of surviving and thriving in the long run. Options A and B are more applicable to a business during its liquidation phase or when optimizing its finances, respectively. Option C may not be feasible for most start-ups, as it requires a track record of success and established relationships with other businesses.

Question 12

Describe the goals of financial management in preparation for a business exit.

Accepted Answer

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Question 13

What are the different types of institutional gifts? Explain how a business can benefit from them.

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Question 14

What are the different sources of financing available for small businesses?

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Question 15

Tammy has just opened a donut shop called The Rabbit Hole.Given that The Rabbit Hole is in its start-up phase,which of these would be Tammy's immediate financial management need?

Accepted Answer

In the start-up phase, the immediate financial management need would be to conserve what little money the business has. This is because the business is just starting, and it would not have generated enough revenue to sustain it in the long term. Therefore, Tammy needs to focus on using the existing resources efficiently to ensure the business's survival and growth. Building owner's wealth, obtaining increasing amounts of cash inflows, and minimizing debt and increasing asset value are important goals, but they are not as urgent as conserving available capital in the start-up phase.

Question 16

Identify the Four Cs of Borrowing.

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Question 17

Jacob has started a graphic design company called Interon Graphics.As Interon Graphics moves into the growth phase,which of the following would be Jacob's dominant financial management need?

Accepted Answer

As Interon Graphics moves into the growth phase, Jacob's dominant financial management need would be obtaining increasing amounts of cash inflows. This can help the business invest in expansion, hire more employees, and purchase new equipment. Without sufficient cash inflows, the business may struggle to grow and compete with others in the industry. Therefore, increasing cash inflows would be a priority for Jacob in this phase.

Question 18

After successfully operating for five years,Tina plans to sell her computer service center.Which of the following would be Tina's main financial management need as she exits the business through sale?

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Question 19

Compare the costs and drawbacks of each of the three types of capital financing.

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Question 20

At the _____ stage of a business,the emphasis of financial management is to build owner wealth,to conserve assets,to match cash inflows to outflows,and to maximize the return on capital assets by making optimal investing decisions.

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Quiz 14: Small Business Finance: Using Equity, debt, and Gifts