Entrepreneurship Exam 2 – Flashcards

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question
It is recommended that new business owners estimate cash disbursements as best they can and then add on another ________.
answer
10-25%
question
CD Connection sells popular CDs at three price levels: $11, $14, and $17. This illustrates which of the following pricing techniques?
answer
Price Lining
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You are to prepare a projected income statement for a proposed business venture. Your desired net income (profit) is $28,000 and you have the following published statistics: Costs of goods sold = 56.9 percent of net sales Operating expenses = 37.1 percent of net sales Gross profit margin = 43.1 percent of net sales This information indicates the net sales on your pro forma "P & L" (income statement) would be:
answer
$466,667
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Suppose you own cupcake shop in Denton. You have annual sales of $250,000, and operating expenses of $50,000. You also know from reviewing the RMA statement studies that operating expenses are 40% of annual sales. What would you earn in profit before taxes?
answer
$100,000
question
________ ratios tell whether or not the small company will be able to meet its short-term obligations
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Liquidity
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Which of the following statements concerning a company's target market is false? a. Marketing experts contend that the greatest marketing mistake small companies make is failing to clearly define the target market to be served. b. A "shotgun approach" to marketing-trying to appeal to everyone rather than to only a small market segment-is the most effective way to compete with large companies and their bigger marketing budgets. c. Small companies are usually better suited to pinpointing target markets that their larger rivals overlook or consider too small to be attractive. d. Most successful small businesses have well-defined portraits of the customers they are trying to attract.
answer
A. Marketing experts contend that the greatest marketing mistake small companies make is failing to clearly define the target market to be served.
question
On March 10, a business owner receives an invoice from a supplier for $416.27 with "net 30" credit terms marked on it. On April 7, the owner writes the supplier a check for $416.27 and mails it. When would this cash disbursement show up on the company's cash flows?
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April 10
question
The average inventory turnover ratio:
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- measures the number of times a company's inventory is sold out during the accounting period. - tells a business owner whether she is managing the company's inventory properly. - tells a business owner how fast the merchandise is moving through the business.
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Macy's buys white, pinpoint oxford blouses at $14 each and sells them at $30 each. Macy's percentage (of cost) markup is:
answer
114.3% ((salesprice - cost)/Cost) * 100
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You are in the process of creating your financial statements. Suppose you buy a new piece of equipment, for which you pay a $2000 down-payment and finance the remaining $5000 on a 5-year note. What will happen to the balance sheet?
answer
. Cash will decrease, but noncurrent assets will increase. Liabilities will increase, and owner equity will increase.
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Which of the following associations is correct? Balance sheet - cost of goods sold Income statement - owner's equity Current assets - inventory Long-term liabilities - accounts payable
answer
Current Assets - Inventory
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A recent survey reports that ________ percent of customers say that they will return to a business after a negative customer service experience if the company offers an apology, a discount, or proof that its customer service will improve.
answer
52%(not sure)
question
The Sound Shop buys a popular programmable telephone from a supplier for $12.19. If the desired markup of retail price on the telephone is 35 percent, the retail price should be:
answer
16.46
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Suppose you are given the following information. You expect to have $50,000 in cash, $25,000 in supplies, and a building worth $100,000. You owe $75,000 towards the building on a long term note. You also have one customer that owes you $2000 for some work you did last week. What is the value for owner equity (i.e., your stake in the firm)?
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$102,000
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Which of the following is not one of the objectives a guerrilla marketing plan should accomplish?
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- Determine how the company will be able to serve all customers.
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Ultimately, the "right" price for a product or service depends on one factor
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the value that it provides for a customer
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The break-even point
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occurs where a company's total revenue equals its total expenses. is the point at which a company neither earns a profit nor incurs a loss. tells a business owner the minimum level of activity needed to keep her company in operation.
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Michelle Becker's target income in her business for the upcoming year is $78,500. The company's gross profit margin averages 32.6 percent of sales, and its total operating expenses run 24.7 percent of sales. To achieve her target income, sales of Michelle's company should be:
answer
$993,671
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The statement of cash flows
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shows changes in working capital by listing sources and uses of funds
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Target market
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the group of customers whom the company aims its activities
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Characteristics of a Great Product
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1. Deep - features and functions that meet a range of customers' needs. 2. Indulgent - Makes customers feel special when they purchase it; a reward 3. Complete - Provides and excellent total customer experience from packaging to technical support 4. Elegant - Is intuitive to use; works the way a user expects it to - without a fight 5. Emotive - Connects with customers in such a what that they are compelled to tell others about it
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Income statement
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Provides view over time of how revenues compare to expenses to give net profit or loss
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Balance Sheet
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Provides snapshot of the business's worth on a given day
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Statement of Cash flows
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Shows change in a company's working capital over a period of time - in/out
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Most important base estimate of your business plan?
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Revenue
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Differentiate between cash and profit. Can a business earn profit but fail due to cash flow? Provide an example of such a situation, if this situation can in fact occur.
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Cash is the money flowing in and out of the business, as well as assets on hand. Profit is what's left after the cost have been subtracted from the total sales of the business. Basically profit is the actual money earned.
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