Question 1

If Gunther's net profit target for the year is $190,000,what sales level must he achieve?

Accepted Answer

A)  $2,473,796
B)  $1,876,324
C)  $5,667,009
D)  None of the aboveE) C) and D)
F) A) and D)

Question 2

________ ratios help a business owner evaluate the company's performance and indicate how effectively the business employs its resources.

Accepted Answer

A)  Liquidity
B)  Leverage
C)  Operating
D)  ProfitabilityE) None of the above
F) B) and C)

Question 3

Line T is the ________ line,while Line S is the ________ line.

Accepted Answer

A)  total revenue; total expense
B)  total expense; total revenue
C)  fixed cost; variable cost
D)  variable cost; fixed costE) All of the above
F) B) and D)

Question 4

The times-interest-earned ratio tells how many times the company's earnings cover the interest payments on the debt it is carrying.

Accepted Answer

A) True 
 B)False

Question 5

A business should provide the owner with a reasonable rate of return based upon:

Accepted Answer

A)  the time and money invested in the business.
B)  industry averages.
C)  the capital borrowed from the bank.
D)  an acceptable annual salary.E) All of the above
F) B) and C)

Question 6

Which of the following is not a liquidity ratio?

Accepted Answer

A)  Current ratio
B)  Total asset turnover ratio
C)  Quick ratio
D)  None of the aboveE) A) and B)
F) B) and C)

Question 7

________ ratios indicate how efficiently the small firm is being managed.

Accepted Answer

A)  Liquidity
B)  Profitability
C)  Leverage
D)  OperatingE) All of the above
F) A) and B)

Question 8

________ are those items of value the business owns; ________ are those things the business owes.

Accepted Answer

A)  Assets; liabilities
B)  Liabilities; assets
C)  Ratios; equities
D)  Equities; liabilitiesE) A) and B)
F) A) and C)

Question 9

The net profit to asset ratio measures:

Accepted Answer

A)  the owner's rate of return on investment.
B)  how much profit a company generates for each dollar of assets that it owns.
C)  a company's profit per dollar of sales.
D)  a company's ability to generate sales in relation to its asset base.E) All of the above
F) None of the above

Question 10

Which ratio would be most helpful to a business owner to measure the profit per dollar of sales?

Accepted Answer

A)  Net sales to total assets
B)  Net sales to working capital
C)  Net profit on sales
D)  Net profit to equityE) A) and C)
F) C) and D)

Question 11

For the most meaningful interpretation,the small business owner should compare his firm's average collection period to:

Accepted Answer

A)  other businesses in the same geographic area.
B)  a direct competitor.
C)  the universal standard of 25 days.
D)  the average for the industry and the firm's credit terms.E) A) and D)
F) A) and C)

Question 12

Most firms calculate their quick assets by subtracting the value of their inventory from their current asset total.

Accepted Answer

A) True 
 B)False

Question 13

The most common mistake entrepreneurs make when preparing pro forma (projected)financial statements for their companies is being overly pessimistic in their financial plans.

Accepted Answer

A) True 
 B)False

Question 14

What level of sales would Birmingham's have to achieve if it wanted to make a $25,000 profit?

Accepted Answer

Sales needed to gene...

Question 15

The balance sheet provides owners with an estimate of the firm's worth for a specific moment in time,while the income statement presents a "moving picture" of its profitability over a period of time.

Accepted Answer

A) True 
 B)False

Question 16

If Harry's profit target is $15,000,what level of sales must be achieved?

Accepted Answer

Sales required to ea...

Question 17

A business with a payables turnover ratio of 10.4 times a year would have an average payable period of about:

Accepted Answer

A)  3 days.
B)  30 days.
C)  35 days.
D)  62 days.E) A) and B)
F) None of the above

Question 18

The higher the ________ ratio,the lower the degree of protection afforded creditors,and the closer creditors' interest approaches the owner's interest.

Accepted Answer

A)  debt-to-net worth
B)  quick
C)  asset turnover
D)  currentE) A) and B)
F) None of the above

Question 19

Explain the three basic financial reports that a small business uses in building a financial plan: the balance sheet,the income statement,and the statement of cash flows.What information is contained in each,and of what value is it to the small business owner?

Accepted Answer

The balance sheet: This statement takes ...

Question 20

________ ratios measure the extent to which an entrepreneur relies on debt capital rather than equity capital to finance a business.

Accepted Answer

A)  Liquidity
B)  Leverage
C)  Operating
D)  ProfitabilityE) A) and D)
F) C) and D)

Exam 11: Creating a Successful Financial Plan

________ ratios help a business owner evaluate the company's performance and indicate how effectively the business employs its resources.

Correct AnswerverifiedShow Answer

If Harry's profit target is $15,000,what level of sales must be achieved?

Correct AnswerverifiedSales required to ea...View AnswerShow Answer

A business with a payables turnover ratio of 10.4 times a year would have an average payable period of about:

Correct AnswerverifiedShow Answer

What level of sales would Birmingham's have to achieve if it wanted to make a $25,000 profit?

Correct AnswerverifiedSales needed to gene...View AnswerShow Answer

Most firms calculate their quick assets by subtracting the value of their inventory from their current asset total.

Correct AnswerverifiedShow Answer

Which of the following is not a liquidity ratio?

Correct AnswerverifiedShow Answer

A business should provide the owner with a reasonable rate of return based upon:

Correct AnswerverifiedShow Answer

The net profit to asset ratio measures:

Correct AnswerverifiedShow Answer

The times-interest-earned ratio tells how many times the company's earnings cover the interest payments on the debt it is carrying.

Correct AnswerverifiedShow Answer

Which ratio would be most helpful to a business owner to measure the profit per dollar of sales?

Correct AnswerverifiedShow Answer

Line T is the ________ line,while Line S is the ________ line.

Correct AnswerverifiedShow Answer

The most common mistake entrepreneurs make when preparing pro forma (projected)financial statements for their companies is being overly pessimistic in their financial plans.

Correct AnswerverifiedShow Answer

________ ratios indicate how efficiently the small firm is being managed.

Correct AnswerverifiedShow Answer

The higher the ________ ratio,the lower the degree of protection afforded creditors,and the closer creditors' interest approaches the owner's interest.

Correct AnswerverifiedShow Answer

________ are those items of value the business owns; ________ are those things the business owes.

Correct AnswerverifiedShow Answer

If Gunther's net profit target for the year is $190,000,what sales level must he achieve?

Correct AnswerverifiedShow Answer

Explain the three basic financial reports that a small business uses in building a financial plan: the balance sheet,the income statement,and the statement of cash flows.What information is contained in each,and of what value is it to the small business owner?

Correct AnswerverifiedThe balance sheet: This statement takes ...View AnswerShow Answer

The balance sheet provides owners with an estimate of the firm's worth for a specific moment in time,while the income statement presents a "moving picture" of its profitability over a period of time.

Correct AnswerverifiedShow Answer

For the most meaningful interpretation,the small business owner should compare his firm's average collection period to:

Correct AnswerverifiedShow Answer

________ ratios measure the extent to which an entrepreneur relies on debt capital rather than equity capital to finance a business.

Correct AnswerverifiedShow Answer

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Sales required to ea...
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Sales needed to gene...
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Line T is the line,while Line S is the line.

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are those items of value the business owns; are those things the business owes.

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The balance sheet: This statement takes ...
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