question

A startup typically experiences losses for a period of time, frequently as long as

answer

2-3 years.

question

The liquidity of a firm is

answer

often measured by a ratio of current assets to current liabilities.

question

The owners of small firms have a tendency to ____ the amount of capital their business requires.

answer

underestimate

question

A common weakness in small business financing is

answer

too much investment in fixed assets.

question

Retained profits represent

answer

internal equity.

question

If a firm's current ratio improves from 1.5 to 2.0, what has likely happened?

answer

Current liabilities have decreased

question

. If a firm's current ratio ____, its liquidity ____.

answer

increases. increases

question

Operating profit margins of expanding businesses tend to suffer in the short run because

answer

fixed operating costs increase.

question

A ____ shows the level that sales must reach before profitability is achieved.

answer

break-even case

question

Drawbacks of selling stock as a source of funds include

answer

loss of voting control of the company.

question

If a firm finances with equity rather than debt, net income will be greater because

answer

there is no interest expense.

question

Equity investors cannot demand more than

answer

what is earned.

question

One of the factors that influences the choice between debt and equity is the

answer

degree of control the owners hope to retain.

question

To retain control over his business, an entrepreneur should seek initially to secure ____ financing.

answer

debt

question

If the firm's rate of return on its assets is ____ than the cost of borrowing, then the owners' rate of return on equity will ____ as the firm uses ____ debt

answer

greater, increase, more

question

Though not as common as using personal savings, one of the more often used sources of financing is

answer

wealthy individuals.

question

One of the major sources of early financing is

answer

family members

question

A line of credit is the ____ amount of credit a bank will provide a borrower at any one time

answer

maximum

question

A ____ mortgage would likely be used to secure financing for mobile construction office.

answer

chattel

question

Term loans are generally used to finance equipment with a useful life ____ the loan's term.

answer

equal to

question

Pro forma statements required by bankers include all of the following EXCEPT

answer

personal financial statements.

question

Lenders tend to view buyouts favorably because the acquired business has all of the following EXCEPT:

answer

seller financing.

question

LIBOR is ____ the prime rate.

answer

considerably lower than

question

A balloon payment

answer

is due when a loan comes due.

question

If Bill Bailey, owner of Cherokee Communications, had violated the covenants of his loan agreement,

answer

the lender could have declared the loan due in full immediately.

question

A primary source of financing for most smaller companies is

answer

trade credit.

question

Instead of borrowing money from suppliers to purchase equipment, an increasing number of small businesses are

answer

choosing to lease the equipment.

question

The assets most commonly used for security by asset-based lending companies are

answer

accounts receivable and inventory.

question

The federal government provides funds to small businesses through

answer

the Small Business Administration.

question

Small business investment companies (SBICs)

answer

may lend funds or supply equity funds.

question

Private placement

answer

is the sale of capital stock to selected individuals.

question

Research for developing a new method of manufacturing would be a(n) ______ asset.

answer

intangible

question

The cash conversion period is the time between

answer

cash payment for inventory and collection of accounts receivable.

question

Which of the following is not a part of managing working capital?

answer

Capital budgeting

question

Which of the following is not directly involved in a firm's management of its working capital?

answer

Fixed assets

question

Which of the following is not an asset used to calculate net operating working capital?

answer

Accruals

question

Management of working capital focuses attention on

answer

cash, accounts receivable, inventory, and accounts payable.

question

Cash deposits during a month less checks written during the same period equal

answer

net cash flow.

question

Net cash flow and net profit are

answer

different.

question

Net cash flow

answer

is the difference between cash inflows and outflows.

question

Cash budgets

answer

treat income and expenses differently from the way they are treated on an income statement.

question

On occasions when a small business has idle funds, cash should be

answer

invested.

question

Excess cash should be

answer

invested.

question

Which of the following is sometimes called near cash?

answer

Accounts receivable

question

The life cycle of receivables begins with which of the following stages?

answer

A credit sale

question

Accounts receivable financing might include

answer

pledging receivables and factoring.

question

When a business sells its accounts receivable to a finance company, this is called

answer

factoring.

question

Wilbur is attempting to raise some quick cash for his business by selling its accounts receivable to a finance company, this is called

answer

factoring.

question

Inventory is called an "evil" because it

answer

ties up funds that are not actively productive.

question

The terms 3/10, net 30 offer

answer

a 3 percent discount on purchases paid for within 10 days.

question

Assuming that cash is available, payment for an account payable with terms of 3/10, net 30 should be made on day

answer

10.

question

Failure to take cash discounts from suppliers

answer

typically makes a big difference to a firm's financial well-being, since a business pays a high rate for use of a supplier's money.

question

Which of the following questions do all types of capital budgeting techniques try to answer?

answer

Do the future benefits from the investment exceed the cost of making the investment?

question

Long-term investments are the focus of

answer

capital budgeting.

question

The main purpose of capital budgeting is to help managers make decisions about

answer

long-term investments.

question

Capital budgeting is important to the owner of a small business because

answer

correct investment decisions add value to the firm.

question

The measurement techniques mentioned in the textbook include all of the following except

answer

the current accounts approach.

question

Discounted cash flow techniques answer which of the following questions?

answer

How does the present value of future benefits from the investment compare to the investment outlay?

question

The question "How many dollars in average profits are generated per dollar of average investment?" is answered using

answer

accounting return on investment.

question

The question "How does the present value of future benefits from the investment compare to the initial investment outlay?" is answered using

answer

discounted cash flow analysis.

question

An understanding of the present value of a future dollar is important when one is using

answer

discounted cash flow techniques.

question

Discounted cash flow techniques of analysis include

answer

net present value and internal rate of return methods.

question

If the net present value of a proposed investment is negative,

answer

the firm should not make the investment, since the present value of the future cash flows is less than the cost of the investment.

question

Under the NPV method, the rate of return required to satisfy the firm's investors is

answer

the cost of capital.

question

Financial statements are not likely to be used by

answer

trade intermediaries.

question

Most small firms need to have financial statements generated at least

answer

annually.

question

Most small firms generate a balance sheet at least

answer

annually.

question

Any accounting system should accomplish all but which one of the following objectives?

answer

Reveal employer compliance with OSHA

question

Regardless of their level of sophistication, available accounting systems

answer

often do not reveal employee fraud, theft, waste, and record-keeping errors.

question

An analysis of which of the following records reveals the degree of effectiveness of a firm's credit and collection policies?

answer

Accounts receivable records

question

A change in a firm's credit and collection policies will likely affect which of the following records?

answer

Accounts receivable records

question

Which of the following records shows what the firm owes, facilitates the taking of cash discounts, and allows payments to be made when due?

answer

Accounts payable records

question

An analysis of which of the following records is important in maintaining good customer relations?

answer

Accounts receivable records

question

The major distinction between the cash method and the accrual method of accounting is that the

answer

point at which a firm reports revenue and expenses is different.

question

Compared to the single-entry system, an advantage of the double-entry bookkeeping system is that

answer

it doesn't have to be self-balancing.

question

A firm's liquidity can be measured by its

answer

current ratio.

question

A current ratio is calculated by dividing

answer

current assets by current liabilities.

question

To determine a firm's ability to convert accounts receivable into cash on a timely basis, you divide

answer

accounts receivable by daily credit sales.

question

The firm's operating profit margin is computed as a ratio of operating profits to

answer

sales.

question

The ____ is a function of how efficiently management is using the firm's assets to generate sales.

answer

total asset turnover

question

The ____ indicates the extent to which plant and equipment are being utilized

answer

fixed asset turnover ratio

question

The ____ is used to evaluate a firm's financial leverage.

answer

debt ratio

question

____ ratios are concerned with how much financing risk is associated with a firm.

answer

debt

question

The use of debt can

answer

increase a firm's return on equity.

question

Higher turnover ratios for accounts receivable and inventories have implications for

answer

increased firm liquidity and profitability.

question

The turnover ratios for accounts receivable and inventories

answer

should both be included in the financial analysis of a firm.

question

Financial ratios

answer

allow financial comparisons to be made with other firms and industry standards.

question

A business that has a large sum of money relative to debt owed

answer

is considered highly liquid.

question

The current ratio is used to measure

answer

liquidity turnover.

question

The ability of a firm to convert accounts receivable into cash is measured by

answer

accounts receivable turnover.

question

Total assets is divided into ________ to calculate return on assets

answer

operating income

question

Most customer service problems are identified by

answer

customer complaints.

question

Information taken from warranty cards would be stored in which category of a customer profile?

answer

Customer contacts

question

A customer's use of a discount coupon would most likely be recorded in which category of her customer profile?

answer

Responses to marketing stimuli

question

All of the following are stages of consumer decision making except

answer

perceptual categorization.

question

According to consumer information-processing theory, ____ is the final stage through which consumers progress.

answer

post-purchase evaluation

question

Individual processes that ultimately give meaning to stimuli that confront consumers are known as

answer

perceptions.

question

An enduring opinion that is based on a combination of knowledge, feeling, and behavioral tendency is referred to as

answer

an attitude.

question

Buying an expensive set of underwear is most likely an attempt to satisfy which category of need?

answer

social

question

Attending a wedding is most likely an attempt to satisfy which category of need?

answer

spiritual

question

Working out at the gym is most likely an attempt to satisfy which category of need?

answer

physiological

question

Sustainable competitive advantage is

answer

a value-creating industry position that is likely to endure over time.

question

A firm's competitive advantage will never

answer

last forever.

question

The competitive advantage life cycle has three stages, including the ____ stage.

answer

decline

question

Marketing strategies for goods and services vary because of differences in all of the following characteristics except

answer

consumer appeal.

question

The collection of product lines within a firm's ownership and control is referred to as the

answer

product mix.

question

All of the following are stages in a formal product development process except

answer

product conceptualization.

question

The initial stage in a formal product development process is the ____ stage.

answer

idea accumulation

question

The ____ stage of the product development process entails planning for branding, packaging, and other supporting efforts such as pricing and promotion.

answer

total product development

question

All of the following are appropriate vehicles for testing a product in the product development process except

answer

purchase simulations.

question

A small firm can try to increase sales of an existing product by all of the following except

answer

emphasizing diversification.

question

A verbal or symbolic means of identifying a product is referred to as a

answer

brand.

question

An entrepreneur opened a small business producing high-quality paper products. She decided to place a multicolored pine tree on all product boxes and on the sign outside the facilities, to symbolize the business. This symbol is an example of

answer

a trademark.

question

The name Xerox is a

answer

brand.

question

The seller's measure of what he or she is willing to receive in exchange for transferring ownership or use of a product or service is known as

answer

price.

question

The total sales revenue of a small business is a direct reflection of

answer

sales volume and price.

question

Will's business will not be successful unless it charges a price for its products that covers its

answer

total fixed cost.

question

Costs incurred by a firm in actually producing a product (e.g., materials, machinery, etc.) are considered to be a part of

answer

cost of goods sold.

question

A pricing tactic whereby a firm sets a high price to convey an image of high quality or uniqueness is known as

answer

prestige pricing.

question

A comprehensive break-even analysis entails

answer

examining revenue-cost relationships and establishing sales forecasts.

question

Within the framework of a break-even analysis, an examination of ____ is conducted to determine the quantity at which the product, with an assumed price, will generate enough revenue to start earning a profit.

answer

costs and revenue

question

Markup pricing may be expressed in terms of a percentage of either the ____ or the cost.

answer

selling price

question

Credit granted by retailers to final consumers who purchase for personal or family use is referred to as

answer

consumer credit.

question

Credit cards are usually based on ____ account system

answer

a revolving

question

Which of the following is true with respect to installment accounts?

answer

A down payment is normally required.

question

Which of the following is true with respect to revolving charge accounts?

answer

Charged purchases may not exceed the credit limit.

question

Which of the following is not part of the communication process?

answer

Perception

question

A promotional mix is influenced by the following three major factors:

answer

Geography of the market, the size of the promotional budget, and product characteristics.

question

A widely dispersed market favors which of the promotional methods?

answer

Advertising

question

Which of the following is one of the basic promotional methods?

answer

Advertising

question

The major problem with the ____ method of determining promotional expenditures is the tendency to spend more when sales are increasing and less when they are declining.

answer

percentage of sales

question

Which of the following does not describe a method of determining promotional expenditures?

answer

Matching industry forecasts

question

A widely used piecemeal approach to determining the level of promotional expenditures is

answer

what the market will bear.

question

The preferred method of determining promotional expenditures is

answer

what it will take to do the job.

question

____ is a promotion delivered in a one-on-one environment.

answer

Personal selling

question

Personal selling is widely used in

answer

retail, wholesale, and service establishments.

question

Which of the following is not a technique for prospecting?

answer

Agency-initiated contacts

question

The two major steps in preparing for a sales presentation are

answer

prospecting and practicing.

question

Media publications, public records, and directories are sources of

answer

marketer-initiated contacts.

question

Telephone calls and mail surveys are examples of

answer

marketer-initiated contacts.

question

Customer objections can be categorized as relating to

answer

product and price.

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