Question 1

All provinces in Canada are required to participate in the harmonized sales tax (HST) program.

Accepted Answer

Not all provinces in Canada participate in the HST program; some provinces have their own provincial sales tax (PST) system or use the federal goods and services tax (GST) alone.

Question 2

_______ is a crowdfunding site where you put together a project and look for funding. If the project succeeds in reaching its funding goal, all backers' credit cards are charged. If the project falls short, no one is charged.

Accepted Answer

Kickstarter operates on an all-or-nothing funding model where projects must reach their funding goals for the creators to receive any money, and backers are only charged if the project succeeds.

Question 3

Collateral is a secondary source for repayment of the loan if your cash flow from the business in insufficient to fulfill the obligation

Accepted Answer

Collateral serves as a secondary source of repayment for a loan if the borrower's cash flow becomes insufficient to cover the loan obligations, offering the lender security by allowing them to seize the collateral if the loan is not repaid.

Question 4

By registering for an HST or GST account on income before it reaches $30,000 your business is able to claim for the HST/GST refund that you have paid on your purchases.

Accepted Answer

Registering for an HST or GST account before reaching the $30,000 threshold allows a business to claim Input Tax Credits (ITCs) for the GST/HST paid on business-related purchases and expenses, potentially leading to a refund.

Question 5

As of Sept 1, 2016, the HST rate in Ontario is:

Accepted Answer

The Harmonized Sales Tax (HST) rate in Ontario as of September 1, 2016, was 13%. This combines the federal portion of 5% and the provincial portion of 8%.

Question 6

The problem with using debt to finance business activities is that it can be difficult to service and a burden on your cash flows.

Accepted Answer

Debt requires regular interest payments and eventual repayment of the principal, which can strain a business's cash flow, especially if the business is not generating sufficient revenue.

Question 7

Capital is the cash and other liquid assets you personally have or are prepared to invest in the business; it is undoubtedly the most critical of the five factors.

Accepted Answer

Capital refers to all resources and assets, not just cash and liquid assets, that can be used to start and grow a business. It includes physical assets like machinery and equipment, as well as financial resources. While important, it's not necessarily more critical than other factors such as labor, entrepreneurship, natural resources, and technology, which all play vital roles in the success of a business.

Question 8

In Canada, it is not mandatory for a small business to open an HST or GST account until their revenues reach:

Accepted Answer

In Canada, a small business is not required to register for an HST (Harmonized Sales Tax) or GST (Goods and Services Tax) account until their annual gross revenues reach $30,000. This is known as the small supplier threshold.

Question 9

_______ is an organization run almost entirely by students whose purpose is to get students to build startups.

Accepted Answer

The Founder Project is specifically designed to encourage and support students in building startups, distinguishing it from platforms like Indiegogo and Kickstarter, which are crowdfunding websites, and Idea Cafe, which is more broadly focused on small business advice and resources.

Question 10

Bank loans, both operating and term loans, are demand loans so that regardless of the term, the bank can and will demand they be paid back if it feels the company is getting into trouble.

Accepted Answer

Bank loans, both operating and term loans, are demand loans, meaning the bank can demand repayment at any time, regardless of the loan term.

Question 11

Providers of equity capital do not expect to receive interest payments but rather hope to share in the future profits of the business.

Accepted Answer

Equity capital providers invest money in a business in exchange for ownership shares or equity, and they earn returns through dividends and capital gains, not fixed interest payments.

Question 12

The supplies of real property (e.g., land, buildings, and interests in such property) are exempt from GST in Canada.

Accepted Answer

The answer of The supplies of real property (e.g., land,...

Question 13

Equity funding is money supplied by a financial institution in exchange for periodic interest payments and a promise to repay the principal at a specified maturity date.

Accepted Answer

Equity funding involves obtaining capital through the sale of shares in the business, giving investors ownership interests rather than requiring periodic interest payments and repayment of principal like debt financing.

Question 14

Describe the advantages of using debt to raise money for capital expenditures.

Accepted Answer

The answer of Describe the advantages of using debt to...

Question 15

Only information on major credit cards is reported to the credit bureau.

Accepted Answer

Information on various types of credit accounts, including credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans, is reported to credit bureaus, not just major credit cards.

Question 16

The interest that a company pays to its bondholders is tax deductible.

Accepted Answer

The interest paid on bonds by a company is considered a business expense and is therefore deductible from its taxable income, reducing the amount of tax the company owes.

Question 17

The most common source of equity financing for startup businesses is from venture capitalists.

Accepted Answer

The most common source of equity financing for startup businesses is from personal savings, friends, and family, rather than from venture capitalists. Venture capital is a significant source but not the most common, especially in the early stages of a startup.

Question 18

It is estimated that between 75 and 85 percent of new startups use some form of bootstrapping to help finance themselves.

Accepted Answer

Bootstrapping refers to the process of starting a company with personal finances or the revenue it generates rather than seeking external investment. This approach is common among startups, with a significant percentage using it to finance their operations in the early stages due to the difficulty of securing external funding.

Question 19

High-risk ventures are more likely to secure debt financing than equity financing.

Accepted Answer

High-risk ventures often struggle to secure debt financing because lenders are cautious about the ability to repay the loan. They are more likely to secure equity financing, where investors take on more risk for the potential of higher returns.

Question 20

Many Canadians believe that Ontarians pay the highest HST rates in Canada, however, which of the following provinces actually pays more than those living in the province of Ontario?

Accepted Answer

Nova Scotia has a higher HST rate than Ontario, with Nova Scotia charging 15% compared to Ontario's 13%.

Quiz 7: Financing Your Business and Accounting Practices