ch 11 PT 1

Which source of information would be the most inclusive for an entrepreneur determining information to complete the financial statements? Examine RMA Annual Statement Studies
Tomas would like to know whether his new business will be profitable, how much financing he will need, and whether he will have adequate cash flows. Tomas can get this information from: pro forma financial statements.
Projecting financials may present a challenge because in a startup business, things seldom goes as planned.
Roland has already projected his company’s sales. The next step in forecasting his company’s income is to project: cost of goods sold.
Yvonne is planning a coffee shop. The cost of producing the coffee should be included in the ________ section of the pro forma financial statement. cost of goods sold
Where should Rhonda put the administrative expenses for her business when she prepares the financial forecasts? In the operating expenses section
Verlin wants to avoid a common mistake often made by new entrepreneurs. What advice would you give him? Make sure he has adequate financing.
Marcia uses other people’s money whenever possible to finance her business. She prefers to minimize and control rather than maximize and own. This practice is known as: bootstrapping.
Willar expects his new business to support him and his family. This means his asset and financing requirements will: increase.
Which action will be a concern for a prospective investor? Inadequate provision for personal expenses of the entrepreneur
Willard may be able to forecast his asset needs using the ____________ technique. percentage-of-sales
The assets-to-sales relationship tends to be relatively constant within an industry, allowing for a(n) _____ technique to be utilized in projecting asset requirements. percentage-of-sales
The greater a firm’s sales, the greater need for financing because of greater _____ requirements. asset
Fixed assets include equipment.
D&R Products forecasts that it will require $10,000 for equipment and depreciation will be over 5 years. The $10,000 will be reflected in the balance sheet as _____. gross fixed assets
A firm should finance its growth in such a way as to maintain adequate liquidity.
Alex wants to make sure he has enough liquid assets to pay his current bills. To do this, he should calculate his firm’s: current ratio.
Zeno had a great idea but no cash so he asked the bank for a loan to finance the entire operation. It seems he forgot that a bank would never provide _______ % of the firm’s financing. 100
D&R Products forecast a first year asset requirement of $143,500; therefore, the total debt requirement is dependent on the owner’s equity amount.
As her accounts payable and accrued expenses rose along with her firm’s sales, Ariel noticed that ________ occurs. spontaneous debt financing
For the typical small firm, the primary source of equity capital for financing growth is retained earnings.
As Willard’s business grows and prospers, his company’s total assets requirements will equal ___________. spontaneous debt financing plus bank loans plus owner’s investment plus retained earnings
David has a company decorating houses for the holidays. He has secured a $25,000 line of credit from his bank. For which purpose is David more likely to use this credit line? labor to install the decorations in November
Jill’s business has current assets of $50,000 and current liabilities of $25,000. Which statement is true about the company’s current ratio? The ratio is 2 and is acceptable for most industries.
Even though Miriam projected an annual positive cash flow, she may run out of cash if: her sales are seasonal.

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