Chapter 14 Basic Financial Planning Answer Key
Multiple Choice Questions
1.
_____ is a series of prescribed steps to be taken by a small business owner to ensure that
a profit will be made.
2.
Which of the following statements is true of profit planning?
3.
Which of the following statements is true of benchmarking?
4.
The assets, liabilities, and equity accounts of a business, which are interrelated and
interact with each other, represent:
5.
_____ show a firm’s financial position and reflect any changes in that position.
6.
The _____ describes the relative proportions of a firm’s assets, liabilities, and owners’
equity.
7.
A _____ is a statement of a firm’s assets, liabilities, and owners’ equity at a given time.
8.
Which of the following is an example of a current asset?
9.
Which of the following is an example of a current liability?
10.
Which of the following is an example of a long-term liability?
11.
_____ are current assets resulting from selling a product on credit.
12.
The land, cash, accounts receivable, inventory, equipment, building and other things of
value that a company owns are considered its _____.
13.
_____ are expected to turn over—that is, to change from one form to another—within a
year.
14.
_____ are the financial obligations of a business created by borrowing.
15.
_____ are obligations to pay for goods and services purchased and are usually due within
30 or 60 days, depending on the credit terms.
16.
_____ is referred to as the proprietors’ share of (or net worth in) a business, after the
liabilities are subtracted from the assets.
17.
Acute Business Corp., a small business firm, has $500,000 in assets and $300,000 in
liabilities. What is the value of the owners’ equity in the accounting books of Acute
Business Corp.?
18.
Gemini Inc. earned a net income of $250,000 in the year 2000. What is the revenue that
Gemini Inc. earned in the year 2000 if its expenses for that year amounted to $50,000?
19.
What will the net income of a company be if its revenue is $600,000 and its expenses are
calculated to be $200,000?
20.
A(n) _____ periodically shows revenues, expenses, and profits from a firm’s operations.
21.
Cost of goods sold is:
22.
_____ is the difference between revenue earned and expenses incurred.
23.
A well-managed small business is most likely to:
24.
Which of the following refers to a profit planning step of a small business?
25.
In the context of small businesses, _____ is the first step in the process of profit planning.
26.
____ is the specific amount of profit one expects to achieve in a business.
27.
Which of the following statements is true of a sales forecast?
28.
In the context of small businesses, which of the following is an alternative for improving
profits?
29.
The concept of _____ sets cost targets for all phases of design, development, and
production of a product for each accounting period in a small business.
30.
Which of the following statements is true of the breakeven point?
True / False Questions
31.
Small business managers must learn to identify and must prepare for all income and costs
if they are to make a profit.
32.
Profit planning is simple for new entrepreneurs who have given up well-paying jobs in
order to go out on their own.
33.
To make a profit, the prices of a small business must only cover direct costs.