45) Established businesses are willing to make ________ investments in other start-up firms.
A) collateral
B) asset
C) non-equity
D) equity
46) ________ is a fund that is organized as a limited partnership.
A) Asset capital
B) Venture capital
C) Business angel
D) Equity
47) In the context of equity funding, identify a characteristic of venture capital funds.
A) They invest in large and established businesses that have slow and steady growth rates.
B) They raise capital for small businesses by sourcing small investments from multiple
individuals.
C) They seek to make small investments in numerous small-sized businesses and start-ups to
improve the possibility of consistent returns.
D) They tend to invest in high-growth business that can cash out by being bought out by a larger
company within a set period of time.
48) ________ are high-net-worth individuals who invest in business not as a business, but as an
individual.
A) Venture capitalists
B) Business angels
C) Supplier capitalists
D) Equity investors
49) Sonor Designs is a small business that makes greeting cards. Because of the small scale of the
firm’s operations, it cannot afford to purchase the expensive printers it needs to make greeting
cards. Instead, it rents the printers from another organization. In the context of business financing,
Sonor Designs renting essential business equipment from another company is an example of
A) asset leasing.
B) crowdfunding.
C) factoring.
D) microfinancing.
50) In the context of financing tools available to new businesses, identify a major disadvantage to
asset leasing.
A) Any assets that are leased must be paid for upfront, making the proposition of leasing nearly as
expensive as purchasing new equipment outright.
B) A new business might spend more money on leasing equipment over time than if it had bought
the equipment outright.
C) Equipment leasing agreements make it difficult for a small business to upgrade to newer
machines when their leased machines become obsolete.
D) Major asset leasing companies are unwilling to risk leasing equipment to new businesses.
51) In the context of financial tools, a business can quickly generate cash in the short run by selling
accounts receivable at a discount to another company. This is a technique known as ________.
A) crowd funding
B) asset leasing
C) factoring
D) leasing
52) Funding for any new business starts with a(n) ________.
A) bank
B) investment banker
C) founder(s)
D) equity fund
53) ________ can be described as a form of non-equity funding where one organization finances
another organization’s purchasing of physical assets and supplies.
A) Angel investments
B) Supplier credit
C) Asset leasing
D) Factoring
54) What is the difference between venture capital funds and business angels?
A) Venture capital companies make only small investments, whereas business angels make both
small and big investments.
B) Venture capital companies usually invest in small businesses, whereas business angels usually
invest in big businesses.
C) Venture capital companies usually invest in large businesses, whereas business angels usually
invest in small businesses.
D) Venture capital companies have a philanthropic attitude, whereas business angels have a
profit-minded attitude.
55) ________ are high-net-worth individuals who invest in businesses not as a business, but on an
individual basis.
A) Business angels
B) Venture capitalists
C) Investment bankers
D) Peer–to-peer lenders
56) Carla is a high-net-worth individual who was once an entrepreneur. She now financially
invests in small start-ups and businesses. Though Carla funds their initial operations and advises
them on the best way to develop their operations, she rarely interferes with their day–to-day
operations. In the context of the various forms of equity funding, Carla is most likely
A) an investment banker.
B) an asset lender.
C) a business angel.
D) a venture capitalist.
57) What are the advantages of leasing equipment for a new business?
A) Beginning operations with a minimum cash outlay
B) No hassles of an aging asset
C) Ability of the business to trade up as newer, higher-quality machines become available
D) All of these
58) In the context of proper accounting techniques, the system that recognizes expenses when they
are paid for and recognizes revenue as it is generated is known as ________.
A) accrual-based accounting
B) cash-based accounting
C) expenditure-based accounting
D) payable liabilities-based accounting
59) In the context of proper accounting systems, which of the following best describes
accrual-based accounting?
A) It categorizes material assets that can quickly be converted to cash as a source of revenue.
B) It recognizes expenses as they are paid and recognizes revenue as it is generated.
C) It treats accounts payable, fixed assets, and current assets as expenses until they are fully paid
out.
D) It records expenses and revenues when they actually occur, regardless of when the cash is
received.
60) A(n) ________ is a listing of each type of activity (expense) and each asset within the
company.
A) systems account
B) accrual account
C) chart of accounts
D) inventory account
61) In the context of good accounting practices, the organizational fund used for expenses too
small to write a check for is known as
A) a petty cash fund.
B) an expense account.
C) accounts payable.
D) venture capital.
62) A ________ statement is a financial statement that summarizes the revenue, costs, and
expenses incurred during a specific period of time.
A) balance
B) profit and loss
C) liabilities owed
D) pro forma
63) A company seeks to have inventory present only shortly before it is used. This method of
inventory control is called
A) just-in-time inventory.
B) accrual inventory.
C) balanced inventory.
D) monitoring inventory.
64) In the context of proper accounting practices, identify a major difference between cash-based
and accrual-based accounting systems.
A) Cash-based systems must be used by large businesses, whereas accrual-based systems must
only be used by the smallest businesses.
B) Cash-based systems recognize revenue as it is generated, whereas accrual-based systems record
revenue only when it occurs.
C) Cash-based systems are generally used with periodic inventory counting systems, whereas
accrual-based systems are used primarily with perpetual inventory counting systems.
D) Cash-based systems are mostly used by publicly held corporations, whereas accrual-based
systems are mostly used by privately held corporations.
65) Which one of the following is a key report that a new business owner should be prepared to
generate?
A) An expense account
B) A check register
C) A chart of accounts
D) All of these
66) In the context of good accounting practices, ________ allow entrepreneurs to perform a
monthly tracking of how much they spend and ultimately form an annual record of all
business-related costs.
A) accounts payable
B) expense accounts
C) petty cash registers
D) inventory accounts
67) The catalog of items maintained by a business, which lists the description, quantity, item
number, unit cost, and total cost of each item the business carries, is known as a(n) ________.
A) payroll record
B) expense account
C) inventory account
D) check register
68) Which of the following items does a payroll record list?
A) Taxes
B) Gross pay
C) Base pay
D) All of these
69) In the context of managing data flows, the ________ of inventory control seeks to minimize
excess capital investment in inventory.
A) accrual-based method
B) perpetual method
C) safety-stock method
D) just-in-time method
70) Of the key accounting reports that a new businessperson should be prepared to generate, which
of the following tracks the work times of hourly employees and attendance for salaried
employees?
A) A payroll record
B) An accounts payable record
C) A chart of accounts
D) An expense account
71) One of the accounting records maintained by Visors Inc. lists the number of regular work
hours worked by its employees, the overtime hours worked by various employees, and the firm’s
overtime pay rate. This record also tracks salary checks issued to each employee. This record is
most likely a(n) ________.
A) expense account
B) payroll record
C) inventory account
D) accounts payable record
72) In the context of inventory accounts, the difference between what is sold by a business and
what was brought into it is known as ________.
A) equity
B) supplier credit
C) shrinkage
D) factoring
73) Funding in any business must come first from the ________.
74) ________ is a generic term that describes any type of non-equity funding to a business.
75) ________ are contractual agreements where a firm receives money that must be repaid over a
specified period of time at a set interest rate.
76) ________ are special funds, neither equity nor debt, that do not require repayment.
77) The difference between what is sold and what was brought into the system is called ________.
78) What are the three common forms of debt for a small business?
79) What is the operational impact of equity investments?
80) In the context of equity funding, define and briefly describe a venture capital fund.
81) In the context of equity funding, who are business angels? Briefly describe them.
82) List and describe the two accounting systems available for a small business.