Question

QUESTION 12

Which of the following is/are some(one) of the ways small businesses can obtain funding for their operations and purchases?

A.
Leasing instead of buying assets

B.
None of these.

C.
Having a credit card in the business's name

D.
Using retirement money in a 401(k) the entrepreneur has

E.
All of these.

QUESTION 13

When entrepreneurs fail to put their own money into their business:

A.
They find it more difficult to get funding from investors

B.
They will likely have more debt and thus higher interest obligations

C.
They will have to give up more control of the business to attract investors.

D.
A and C only

QUESTION 14

What is the purpose of a balance sheet?

A.
To show that a firm's assets are equal to its liabilities.

B.
To show the financial position of a firm at a particular point in time.

C.
To provide a moving picture over time of the profitability of the firm.

D.
To show changes in a firm's working capital over time.

QUESTION 15

What are "pro forma" statements?

A.
Financial statements that depict future results only if these results are positive.

B.
Financial statements that depict forecasts of financial results in the future.

C.
Standard PR (public relations) statements that are released by the firm on a regular basis.

D.
Financial statements that adhere to a formal style year after year.

QUESTION 16

Assume that an entrepreneur has determined that a sales level of $200,000/year is necessary to produce the desired profit level. How much revenue (approximately) must be received on a daily basis if the business is operated 6 days/week?

A.
$96

B.
$641

C.
$33,333

D.
$3,846

QUESTION 17

Why do creditors of small businesses prefer that the business have lower debt ratios?

A.
With less debt there will be less risk that the business will be unable to pay its debts either during operations or if it has to liquidate.

B.
Businesses could use borrowed money to buy other things for the business rather than pay their debts.

C.
None of these.

D.
Creditors are concerned that a "credit crunch" could occur making it harder for all to borrow funds.

QUESTION 18

Why do owners of small businesses prefer to have higher debt ratios (in general)?

A.
None of these answers

B.
Small business owners typically have closer relationships with their local banks than with other sources of funding.

C.
Small business owners are inherently risk-taking and using more debt is riskier than using less debt.

D.
Owners are running their business with less of their own money and leveraging borrowed money into profits (and not surrendering any ownership).

QUESTION 19

Which of the following illustrate the nature of the "balance" that balance sheets depict?

A.
Total Assets=Total Liabilities

B.
Total Assets=Total Liabilities+Shareholders' Equity

C.
Current Assets=Current Liabilities

D.
Debt=Equity

Answer 1

Answer to question 12)

option B is correct. company will need not to pay initially huge amount if asset is taken on loan.only periodic payment of lease rental to be made.

Answer to question 13)

option D is correct. For attracting investor more control will be given up and it will also difficult to get funding from investors.

Answer to question 14)

option B is correct. The purpose of balance sheet is present financial position of business organisation at a particular date.

Answer to question 15)

option B is correct. Pro forma financial statement is also known as projected financial statements and it shows the estimated financial results in future.

Answer to question 16)

option B is correct.(sales/no of working days)=200000/52*6=641.02

Answer to question 17)

option A is correct. Low debt ratio represents that company can easily meet its obligation either on maturity and company will not face any financial problem.

Answer to question 18)

option D is correct. when the return on investment is more than the rate of interest , the small business owner may use leveraging for converting into profit.and taking money from sources other than debt will result in surrender of voting power to capital provider.

Answer to question 19)

option B is correct. because total assets of a company is always equal to the sum of owners equity and total liabilities. all the other options given does not follow accounting equation.