Question 1

Bill's business has sales of $100,000,inventory of $20,000,cost of goods sold of $31,000,and general and administrative expenses of $45,000.Bill's gross profit is $69,000.

Accepted Answer

Gross profit is calculated by subtracting the cost of goods sold from sales. 
Gross Profit = Sales - Cost of Goods Sold 
Gross Profit = $100,000 - $31,000 = $69,000 
Therefore, Bill's gross profit is $69,000 as given in the question.

Question 2

Sally is worried about her backlog report.This is a report on orders that have been delivered but not yet paid by the customers.

Accepted Answer

A backlog report typically refers to orders that have been placed but not yet fulfilled or delivered, not to orders that have been delivered but not yet paid for.

Question 3

Compare and contrast the balance sheet and the cash flow statement.

Accepted Answer

The answer of Compare and contrast the balance sheet and...

Question 4

Ana is interested in developing her credit policy.She wants to make a policy for which of the following?

Accepted Answer

Developing a credit policy involves setting guidelines on how and when payments for products and services sold will be collected. This ensures that the business receives its due payments in a timely manner, which helps in maintaining a positive cash flow and avoiding bad debts. The other options mentioned (A, B, C) are important aspects of business strategy, but they do not directly relate to developing a credit policy.

Question 5

Sandy's balance sheet is partially completed.However,she has total assets of $120,000 and total shareholders' equity of $15,000.Her liabilities should total $105,000.

Accepted Answer

Total assets minus total liabilities equal total shareholders' equity. Therefore, if Sandy's total assets are $120,000 and her total shareholders' equity is $15,000, her liabilities must total $105,000 ($120,000 - $15,000 = $105,000).

Question 6

Describe DSO.

Accepted Answer

The answer of Describe DSO....

Question 7

Goodwill is the price paid for an asset in excess of its book value.

Accepted Answer

Goodwill is the amount paid for an asset over its book value, representing intangible assets such as reputation, brand recognition, and intellectual property.

Question 8

Presenting carefully thought-out financial projections to investors is an exercise in lowering perceived risk in both you as an entrepreneur and your idea.

Accepted Answer

Financial projections demonstrate that you have a clear understanding of your business model and have thoroughly considered the potential revenue streams and expenses. This helps investors see that you have thought carefully about the feasibility and profitability of your idea, which can lower the perceived risk of their investment.

Question 9

The pro forma financial statement should include at least three scenarios of your financial forecast,each containing an income statement,balance sheet,and ______.

Accepted Answer

The pro forma financial statement should include an income statement, balance sheet, and cash flow statement. The cash flow statement is important for showing the movement of cash in and out of the company. Including different scenarios in the financial forecast helps to plan for different outcomes and prepare for potential challenges. The other options listed (sales statement, capital stock, and accrued expenses) may be important financial components but do not necessarily need to be included in the pro forma financial statement.

Question 10

Norah is interested in developing her payables policy.She wants to make a policy for which of the following?

Accepted Answer

Developing a payables policy involves determining the process and timing in which obligations to pay for goods and services received by the business will be paid. Option B relates to procurement policies, option C relates to pricing policies, and option D relates to accounts receivable policies.

Question 11

Sandy's balance sheet shows assets of $120,000,liabilities of $100,000,and shareholders' equity of $25,000.Her balance sheet is in balance.

Accepted Answer

The total assets ($120,000) should equal the total of liabilities ($100,000) and shareholders' equity ($25,000), which adds up to $125,000. Therefore, the balance sheet is not in balance.

Question 12

Norah is interested in developing her purchasing policy.She wants to make a policy for which of the following?

Accepted Answer

Developing a purchasing policy mainly focuses on determining the price and timing of raw materials and other goods and services necessary to build, sell, and support products. The other options (B, C, and D) are related to pricing strategies, compensation policies, and invoicing procedures, respectively, which are not the primary focus of a purchasing policy.

Question 13

Jax went to his accountant and learned about the cash conversion cycle,defined as ______.

Accepted Answer

The cash conversion cycle is defined as DOI (days inventory outstanding) + DSO (days sales outstanding) − DPO (days payable outstanding). It measures the length of time it takes a company to convert its investments in inventory and accounts receivable into cash, while taking into account the time it takes to pay its accounts payable.

Question 14

Naseem is interested in developing her pricing policy.She wants to make a policy for which of the following?

Accepted Answer

Developing a pricing policy involves determining how pricing will be determined for products and services. The other options all relate to different aspects of the business, such as procurement (A), human resources (C), and accounts receivable (D), but do not directly relate to pricing policy.

Question 15

Arabella went to her accountant and learned about DOI,defined as ______.

Accepted Answer

DOI stands for Days of Inventory, which measures the average number of days it takes to sell the entire inventory of a company.

Question 16

Currents assets are cash and other assets such as inventory,accounts payable,and prepaid expenses that can be converted into cash within a year.

Accepted Answer

Current assets include cash and other assets such as inventory, accounts receivable, and prepaid expenses that are expected to be converted into cash, sold, or consumed within a year. Accounts payable is not a current asset; it is a current liability.

Question 17

Katie is interested in developing her compensation policy.She wants to make a policy for which of the following?

Accepted Answer

Developing a compensation policy involves determining the level of compensation and benefits for each type of position in the business. Options A, B, and D are related to pricing and billing, which are not directly relevant to compensation policy.

Question 18

Bill's business has sales of $100,000,inventory of $20,000,cost of goods sold of $31,000,and general and administrative expenses of $45,000.Bill's gross profit is $80,000.

Accepted Answer

Gross profit involves subtracting the cost of goods sold from the sales revenue, not the total expenses. Therefore, Bill's gross profit would be $69,000 ($100,000 - $31,000).

Question 19

Shari is working on a report and describes it to you as reporting what the company owes,what it owns,and her shareholder stake at the last day of the prior month.She's working on an income statement.

Accepted Answer

Shari is actually working on a balance sheet, which reports a company's assets, liabilities, and owner's equity at a specific point in time. An income statement reports a company's revenue, expenses, and profit or loss over a specific period of time.

Question 20

Bill's business has sales of $100,000,inventory of $20,000,cost of goods sold of $31,000,and general and administrative expenses of $45,000.Bill's operating profit is $4,000.

Accepted Answer

Operating profit is calculated by subtracting total expenses (including cost of goods sold and general and administrative expenses) from sales. In this case, Bill's operating profit would be $100,000 - ($31,000 + $45,000) = $24,000. Therefore, the statement is false.

Quiz 17: Financial Statements and Projections for Startups