Jane is considering opening her own business, now that she has retired from her regular job. Her business idea is a reminder and shopping service, in which clients submit lists of birthdays, anniversaries and other important dates. Jane sends her clients reminders for those dates, and shops for special gifts at the client's request. She plans to do all of the work herself rather than hiring and managing additional employees. Which of the following statements is true for Jane's business regarding measuring and monitoring performance?
A) Jane does not need a system to measure and monitor performance because her company is a sole proprietorship
B) Jane needs audited financial statements every year
C) Jane can track cash flows on a monthly basis
D) Jane only needs to reconcile her accounts every few years

Question

Quizplus · Accepted Answer

As Jane plans to do all the work herself, it is important for her to track her cash flows on a regular basis. Monitoring cash flows will help her understand the financial health of her business and make necessary changes to improve its performance. While audited financial statements may be required for tax purposes or if Jane plans to seek funding in the future, it is not necessary for her to have them every year. Similarly, while reconciling accounts is important, it should be done on a regular basis rather than every few years, and it is not the only aspect of monitoring performance. Furthermore, the fact that Jane's business is a sole proprietorship does not exempt her from the need to monitor performance.

Jane Is Considering Opening Her Own Business, Now That She