Fundamentals of Innovation and Entrepreneurship test bank Barringer ent5 tb 08 PDF

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Fundamentals of Innovation and Entrepreneurship test bank Barringer ent5 tb 08...

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 8 Assessing a New Venture's Financial Strength and Viability 1) GymFlow, the company profiled in the opening feature in Chapter 8, created a mobile app that shows how busy a gym is at any given point in time. According to the case, in regard to financial management, the cofounders of GymFlow found that ________ was one of their most difficult challenges. A) managing accounts payable B) managing accounts receivable C) projecting future income D) projecting future expenses E) completing financial statements Answer: C Diff: 1 Page Ref: 259 LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm. AACSB: Reflective Thinking 2) Financial management deals with two things-managing a company's finances and ________. A) operations management B) inventory control C) raising money D) production management E) supply chain management Answer: C Diff: 1 Page Ref: 261 LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm. AACSB: Reflective Thinking 3) Financial management deals with raising money and managing a company's finances in a way that achieves the highest rate of return. Answer: TRUE Diff: 1 Page Ref: 261 LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm. AACSB: Reflective Thinking

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4) Which of the following was not identified as one of the four main financial objectives of a firm? A) Stability B) Efficiency C) Timeliness D) Liquidity E) Profitability Answer: C Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 5) The four main financial objectives of a firm are _________. A) efficiency, effectiveness, strength, and flexibility B) power, success, efficiency, and effectiveness C) control, effectiveness, liquidity, and power D) success, strength, liquidity, and profitability E) profitability, liquidity, efficiency, and stability Answer: E Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 6) Match the financial objective with its correct definition. A) stability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio B) profitability — how productively a firm utilizes its assets C) liquidity — a company's ability to make a profit D) efficiency — a company's ability to meet its short-term obligations E) profitability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio Answer: A Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Analytical Thinking 7) ________ is a company's ability to meet its short-term financial obligations. A) Liquidity B) Profitability C) Effectiveness D) Stability E) Efficiency Answer: A Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 2 Copyright © 2016 Pearson Education, Inc.

8) A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as ________. A) efficiency B) effectiveness C) stability D) liquidity E) profitability Answer: A Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 9) Money owed to a company by its customers is referred to as ________. A) accounts obtainable B) accounts payable C) accounts receivable D) inventory E) accounts collectable Answer: C Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 10) Susan Howard owns a seafood restaurant in Naples, Florida. She is currently owed $21,000 by a corporation that she catered a series of meetings for and $3,000 on an overdue account. Amanda has $24,000 in ________. A) accounts receivable B) inventory C) accounts collectable D) accounts obtainable E) accounts payable Answer: A Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 11) A company's merchandise, raw materials, and products waiting to be sold are called its ________. A) set aside B) accumulation C) reserve D) inventory E) stock Answer: D Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 3 Copyright © 2016 Pearson Education, Inc.

12) 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 ________. A) long-term assets B) owners' equity C) accounts payable D) accounts receivable E) inventory Answer: E Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 13) Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the 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 ________. A) efficiency B) effectiveness C) stability D) liquidity E) profitability Answer: A Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Analytical Thinking 14) The strength and vigor of a firm's overall financial posture is referred to as ________. A) liquidity B) effectiveness C) stability D) profitability E) efficiency Answer: C Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 15) Efficiency is the ability to earn a profit. Answer: FALSE Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking

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16) Stability is a company's ability to meet its short-term financial obligations. Answer: FALSE Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 17) A company's accounts receivable is money owed to it by its customers. Answer: TRUE Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 18) If a firm's debt-to-equity ratio gets too high, it may have trouble meeting its obligations and securing the level of financing needed to fuel its growth. Answer: TRUE Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures. AACSB: Reflective Thinking 19) A financial statement is a(n) ________. A) set of ratios which depict relationships between a firm's financial items B) estimate of a firm's future income and expenses C) hybrid statement of cash flows D) itemized forecast of a company's income, expenses, and capital needs E) written report that quantitatively describes a firm's financial health Answer: E Diff: 2 Page Ref: 262 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking 20) ________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans. A) Calculation statements B) Forecasts C) Statements of cash flow D) Financial statements E) Prediction statements Answer: B Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking

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21) ________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control. A) Profitability statements B) Financial statements C) Owners' equity statements D) Budgets E) Statements of cash flows Answer: D Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking 22) Match the financial term with its proper definition. A) Forecasts — depict relationships between items on a firm's financial statements B) Forecasts — written reports that quantitatively describe a firm's financial health C) Budget — itemized forecasts of a company's income, expenses, and capital needs D) Financial ratios — written report that quantitatively describes a firm's financial health E) Financial statements — an estimate of a firm's future income and expenses Answer: C Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking 23) In regard to budgets, which of the following statements is not true? A) Budgets include an itemized forecast of a company's expenses. B) Budgets are a poor tool for financial control. C) Budgets are an important tool for financial planning. D) Budgets include an itemized forecast of a company's capital needs. E) Budgets include an itemized forecast of a company's income. Answer: B Diff: 3 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking

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24) 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? A) A partnership that bands small businesses together to attain volume discounts on common products and services that they buy B) A partnership that bands small businesses together to collectively make the commitment to "buy local" at every available opportunity C) A partnership that bands small businesses together to get the best prices possible from foreign importers and manufacturers D) A partnership that bands small businesses together to get the best possible terms from finance companies E) A partnership that bands small businesses together to get the best possible rates on property and liability insurance Answer: A Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking 25) ________ depict relationships between items on a firm's financial statements. A) Financial proportions B) Fiscal relations C) Fiscal projections D) Monetary balances E) Financial ratios Answer: E Diff: 2 Page Ref: 264 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking 26) Budgets are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control. Answer: TRUE Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms. AACSB: Reflective Thinking 27) ________ financial statements reflect past performance and are usually prepared on a quarterly and annual basis. A) Chronological B) Ad-hoc C) Historical D) Concurrent E) Pro forma Answer: C Diff: 2 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements. AACSB: Reflective Thinking 7 Copyright © 2016 Pearson Education, Inc.

28) ________ financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future. A) Chronological B) Pro forma C) Ad-hoc D) Concurrent E) Historical Answer: B Diff: 2 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements. AACSB: Reflective Thinking 29) Which of the following statements about pro forma financial statements is incorrect? A) Pro forma financial statements are projections for future periods based on forecasts. B) Pro forma financial statements are typically completed for two to three years into the future. C) Pro forma financial statements are required by the SEC. D) Most companies consider their pro forma financial statements to be confidential and reveal them to outsiders only on a "need to know basis." E) Pro forma financial statements are strictly planning tools. Answer: C Diff: 3 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements. AACSB: Reflective Thinking 30) Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis. Answer: TRUE Diff: 1 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements. AACSB: Reflective Thinking 31) Pro forma financial statements are projections for future periods based on forecasts and are typically completed for 2 to 3 years into the future. Answer: TRUE Diff: 2 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements. AACSB: Reflective Thinking

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32) Describe the difference between historical and pro forma financial statements. Answer: Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis. Pro forma financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future. Pro forma financial statements are strictly planning tools, while historical financial statements reflect actual information. Diff: 1 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements. AACSB: Reflective Thinking 33) Which of the following selections correctly matches the financial statement with its description? A) Income statement — tells how much a firm is making or losing B) Income statement — depicts the structure of a firm's assets and liabilities C) Balance sheet — shows where a firm's cash is coming from D) Balance sheet — tells how much a firm is making or losing E) Statement of cash flows — depicts the structure of a firm's assets and liabilities Answer: A Diff: 3 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking 34) A firm's ________ reflects the results of its operations over a specified period and shows whether it is making a profit or is experiencing a loss. A) statement of cash flows B) income statement C) forecast D) balance sheet E) operating budget Answer: B Diff: 2 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking 35) Which financial statement records all of a firm's revenues and expenses for a given period and shows whether the firm is making a profit or experiencing a loss? A) Balance sheet B) Owner's equity statement C) Statement of cash flows D) Forecast E) Income statement Answer: E Diff: 2 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking

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36) On a firm's income statement, net sales consists of ________. A) operating expenses minus cost of sales B) total sales minus allowances for returned goods and discounts C) cost of sales minus allowances for returned goods and discounts D) cost of sales minus operating expenses E) total sales minus operating expenses Answer: B Diff: 2 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking 37) According to the textbook, the three numbers that receive the most attention when evaluating an income statement are ________. A) depreciation, interest income, and income tax expense B) cost of sales, gross profit, and operating expenses C) net sales, cost of sales, and operating expenses D) gross profit, net sales, and incomes tax expense E) gross profit, other income, and net income Answer: C Diff: 3 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking 38) A firm's profit margin, or return on sales, is computed by dividing ________. A) net income by net sales B) gross profit by net sales C) net income by gross profit D) net income by cost of sales E) operating income by gross profit Answer: A Diff: 3 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Analytical Thinking 39) A(n) ________ is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time. A) income statement B) statement of cash flows C) effectiveness statement D) balance sheet E) efficiency statement Answer: D Diff: 2 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking

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40) Which of the following statement is incorrect regarding how balance sheets are prepared? A) The left-hand side of a balance sheet shows a firm's assets. B) The assets on a balance sheet are shown in order of liquidity. C) Assets are recorded at fair market value rather than cost. D) The right-hand side of a balance sheet shows a firm's liabilities and its owners' equity. E) Intellectual property receives value in some cases and in some cases it does not. Answer: C Diff: 2 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking 41) Real estate, buildings, equipment and furniture are classified as ________ assets on a company's balance sheet. A) intermediate term B) fixed C) other D) permanent E) current Answer: B Diff: 2 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking 42) The Savvy Entrepreneurial Firm feature in Chapter 8 focuses on a scenario involving the selection of a new CEO for New Venture Fitness Drinks. The lesson learned from the feature was ________. A) compare a firm's financial ratios against its primary competitors and industry norms to fairly assess how well a firm is performing financially B) income statements are more effective in assessing how well a firm is performing financially than are balance sheets and statements of cash flow C) the most powerful instrument for understanding how well a firm is performing financially is the statement of cash flows D) ratio analysis is ineffective E) look at multiple years of an income statement rather than a single year to fairly assess how well a firm is performing financially Answer: E Diff: 3 Page Ref: 268 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Analytical Thinking

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43) Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ assets on a firm's balance sheet. A) other B) intermediate term C) temporary D) current E) fixed Answer: D Diff: 2 Page Ref: 268 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Analytical Thinking 44) Which of the following is an example of a long-term liability? A) Accounts payable B) Real estate mortgage C) Accrued expenses D) Current portion of real estate mortgage E) Owners' equity Answer: B Diff: 2 Page Ref: 269 LO: 8.5: Describe the different historical financial statements and their purposes. AACSB: Reflective Thinking 45) When evaluating a balance sheet, the two primary questions are ________. A) whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable B) whether a firm is profitable and whether a firm is financially sound C) whether a firm's cost of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends D) whether a firm has sufficient short-term assets to cover its short-term debts and wheth...