1. Financial information pulls together all the information presented in the other segments of the business.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-1 The Importance of Financial Information for Entrepreneurs
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.01 - LO: 11-01
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:49 PM
2. The set of assumptions on which financial projections are based have little meaning.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-1 The Importance of Financial Information for Entrepreneurs
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.01 - LO: 11-01
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:49 PM
3. It is typical for a firm to prepare an operating budget but not a cash-flow budget.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Statements
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:51 PM
4. A budget is one of the most powerful tools that an entrepreneur can use in planning business operations.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-2 Understanding the Key Financial Statements
QUESTION TYPE:
True / False
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Page 1
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
False
ENTR.KRTK.20.11.01 - LO: 11-01
Bloom's: Understand
6/14/2018 9:41 AM
8/30/2018 11:51 PM
5. The cash-flow budget provides an overview of cash inflows and outflows for the budget period.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.03 - LO: 11-03
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:52 PM
6. The first type of expense to be estimated when preparing an operating budget is cost of goods sold.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:53 PM
7. The first step in creating an operating budget is to prepare the sales forecast.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:54 PM
8. When using regression analysis, the entrepreneur may draw conclusions about the relationship between product sales
Copyright Cengage Learning. Powered by Cognero.
Page 2
and advertising expenditures.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:55 PM
9. After the operating budget has been prepared, an entrepreneur can proceed to the next phase of the budget process,
which is the cash-flow budget.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.03 - LO: 11-03
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:56 PM
10. The first step in the preparation of the cash-flow budget is the identification and timing of cash outflows.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.03 - LO: 11-03
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:57 PM
11. The typical business will have cash inflows from three sources: cash sales, cash payments received on account, and
loan proceeds.
a. True
b. False
ANSWER:
True
POINTS:
1
Copyright Cengage Learning. Powered by Cognero.
Page 3
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
A-Head: 11-3 Preparing Financial Budgets
True / False
False
ENTR.KRTK.20.11.03 - LO: 11-03
Bloom's: Remember
6/14/2018 9:41 AM
8/30/2018 11:58 PM
12. Pro forma statements show the firm's present financial position.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-4 Pro Forma Statements
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.04 - LO: 11-04
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:59 PM
13. The pro forma income statement is prepared before the pro forma balance sheet.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-4 Pro Forma Statements
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.04 - LO: 11-04
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/30/2018 11:59 PM
14. The traditional accounting equation is: Assets + Liabilities = Owners' Equity.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-4 Pro Forma Statements
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.04 - LO: 11-04
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
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Page 4
DATE MODIFIED:
8/31/2018 12:48 AM
15. Capital investments or capital expenditures are expected to last beyond one year.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:01 AM
16. Capital budgeting is used to help the entrepreneur plan for capital depreciation.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:03 AM
17. The principal objective of capital budgeting is to maximize the value of the firm.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:03 AM
18. Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price.
a. True
b. False
ANSWER:
True
POINTS:
1
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Page 5
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
A-Head: 11-6 Break-Even Analysis
True / False
False
ENTR.KRTK.20.11.06 - LO: 11-06
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:04 AM
19. Contribution margin is the difference between the selling price and the fixed cost per unit.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-6 Break-Even Analysis
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.06 - LO: 11-06
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:05 AM
20. An entrepreneur must graph at least two numbers—total sales and total expenses—when using the graphic approach
for break-even analysis.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-6 Break-Even Analysis
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.06 - LO: 11-06
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:06 AM
21. The handling questionable costs approach of break-even analysis was specifically designed for firms that have
expenses that are difficult to assign.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-6 Break-Even Analysis
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.06 - LO: 11-06
KEYWORDS:
Bloom's: Understand
Copyright Cengage Learning. Powered by Cognero.
Page 6
DATE CREATED:
DATE MODIFIED:
6/14/2018 9:41 AM
8/31/2018 12:07 AM
22. Horizontal analysis looks at financial statements and ratios over time.
a. True
b. False
ANSWER:
True
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:08 AM
23. Vertical analysis is the application of ratio analysis to the many sets of financial statements.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:09 AM
24. Sales-to-assets measures the efficiency of total assets in generating net profit: the number of dollars in net profit
produced for every $1 invested in net assets.
a. True
b. False
ANSWER:
False
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:11 AM
25. Accounts receivable turnover measures the rate at which accounts receivable are being collected on a monthly basis.
a. True
b. False
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Page 7
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
False
1
A-Head: 11-1 The Importance of Financial Information for Entrepreneurs
True / False
False
ENTR.KRTK.20.11.01 - LO: 11-01
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:12 AM
26. Financial information is important to entrepreneurs because it
a. pulls together all the information presented in other segments of the business.
b. doesn't follow any clear process about the financial operations.
c. answers all questions about the business and the entrepreneur.
d. takes away the assumptions concerning business operations.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-1 The Importance of Financial Information for Entrepreneurs
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.01 - LO: 11-01
KEYWORDS:
Bloom's: Analyze
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:50 AM
27. Which of the following statements about financial assumptions is not true?
a. They explain how the numbers are derived.
b. They should be clear and precise.
c. They are the most integral part of the financial segment.
d. They do not necessarily correlate with information from other parts of the business.
ANSWER:
d
POINTS:
1
REFERENCES:
A-Head: 11-2 Understanding the Key Financial Statements
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.01 - LO: 11-01
KEYWORDS:
Bloom's: Analyze
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:36 AM
28. One type of budget used by the entrepreneur is a(n) _____ budget.
a. operating
b. project
c. cost
d. R&D
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Page 8
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
A-Head: 11-3 Preparing Financial Budgets
Multiple Choice
False
ENTR.KRTK.20.11.02 - LO: 11-02
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:18 AM
29. A budget that is a statement of estimated income and expenses over a specified period of time is referred to as a(n)
_____ budget.
a. anticipated
b. operating
c. entrepreneurial
d. cash-flow
ANSWER:
b
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:19 AM
30. The first step in constructing an operating budget is
a. preparation of the sales forecast.
b. a cost preparation.
c. a cash-flow estimate.
d. estimating fixed costs.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:20 AM
31. In the simple linear regression analysis equation, Y = a + bx, Y represents
a. expected sales.
b. the dependent variable.
c. the slope of the line.
d. the vertical intercept.
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Page 9
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
b
1
A-Head: 11-3 Preparing Financial Budgets
Multiple Choice
False
ENTR.KRTK.20.11.03 - LO: 11-03
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:21 AM
32. A manufacturing firm needs to establish which of the following budgets?
a. profit budget
b. material purchases budget
c. cost budget
d. accounting budget
ANSWER:
b
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:23 AM
33. A cost that changes in the same direction and proportion to changes in operating activity is a
a. fixed cost.
b. proportional cost.
c. variable cost.
d. variable receipt.
ANSWER:
c
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:24 AM
34. For a manufacturing firm, the production budget represents the number of units that must be produced
a. to break even.
b. achieve the desired profit level.
c. in order to meet the sales forecast.
d. to cover R&D costs.
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Page 10
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
c
1
A-Head: 11-3 Preparing Financial Budgets
Multiple Choice
False
ENTR.KRTK.20.11.02 - LO: 11-02
Bloom's: Understand
6/14/2018 9:41 AM
8/31/2018 12:26 AM
35. In the simple linear regression analysis equation, Y = a + bx, which of the following variables represents expected
sales?
a. Y
b. a
c. b
d. x
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:28 AM
36. In the production budget for a manufacturing firm, the number of units needed in inventory is determined by
a. the sum of beginning inventory and expected sales.
b. the sum of the desired ending inventory and the number of units to be sold.
c. the sum of beginning inventory and desired ending inventory.
d. an inventory model.
ANSWER:
b
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:29 AM
37. The last step in preparing the operating budget is to estimate
a. current sales.
b. operating expenses.
c. variable costs.
d. R&D costs.
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Page 11
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
b
1
A-Head: 11-3 Preparing Financial Budgets
Multiple Choice
False
ENTR.KRTK.20.11.02 - LO: 11-02
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:30 AM
38. Which of the following is not a common characteristic of financial statements?
a. They are holistic.
b. They are realistic.
c. They are accurate.
d. They are complex.
ANSWER:
d
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.03 - LO: 11-03
KEYWORDS:
Bloom's: Analyze
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:39 AM
39. The process of preparing a pro forma balance sheet is
a. complex.
b. optional.
c. simple.
d. done first.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-4 Pro Forma Statements
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.04 - LO: 11-04
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:36 AM
40. Which of the following is not used in balance sheet ratios?
a. current liabilities
b. cash
c. current assets
d. sales
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Page 12
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
d
1
A-Head: 11-7 Ratio Analysis
Multiple Choice
False
ENTR.KRTK.20.11.07 - LO: 11-07
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:35 AM
41. When using trend line analysis, how many periods are required?
a. three
b. two
c. one
d. five
ANSWER:
d
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:38 AM
42. More established ventures will use a sales forecast model where the estimation of current sales will increase a certain
percentage over the prior period's sales. This percentage is based upon
a. newly established sales only.
b. an inventory analysis.
c. a trend line analysis.
d. past experience.
ANSWER:
c
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:40 AM
43. Which of the following works on the premise that a dollar today is worth more than a dollar in the future?
a. net present value
b. internal rate of return
c. net profit margin
d. payback period
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Page 13
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
A-Head: 11-3 Preparing Financial Budgets
Multiple Choice
False
ENTR.KRTK.20.11.03 - LO: 11-03
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:42 AM
44. The cash flow does not come from
a. goods purchased on account.
b. cash payments received on account.
c. cash sales.
d. loan proceeds.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.03 - LO: 11-03
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:43 AM
45. A fixed cost
a. changes in response to changes in activity for a given period of time.
b. does not change in response to changes in activity for a given period of time.
c. changes inversely to changes in activity for a given period of time.
d. never changes.
ANSWER:
b
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:41 AM
46. Which of the following is the first step in the preparation of the cash-flow budget?
a. identification of cash inflows
b. identification of cash outflows
c. identification and timing of cash inflows
d. identification and timing of cash outflows
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Page 14
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
c
1
A-Head: 11-3 Preparing Financial Budgets
Multiple Choice
False
ENTR.KRTK.20.11.03 - LO: 11-03
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:45 AM
47. Which of the following is needed to prepare a pro forma balance sheet?
a. the last balance sheet prepared before the budget period began
b. assets
c. liabilities
d. owners' equity
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-4 Pro Forma Statements
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.04 - LO: 11-04
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:47 AM
48. Which of the following is the traditional accounting equation that verifies the accuracy of the entrepreneur's balance
sheet?
a. Assets = Liabilities + Owners' Equity
b. Assets + Liabilities = Owners' Equity
c. Assets + Owners' Equity = Liabilities
d. Assets = Liabilities – Owners' Equity
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-2 Understanding the Key Financial Statements
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.01 - LO: 11-01
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:50 AM
49. Which of the following is not one of the most common methods used in capital budgeting?
a. payback method
b. internal rate of return method
c. net present value method
d. anticipated change in net income method
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Page 15
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
d
1
A-Head: 11-5 Capital Budgeting
Multiple Choice
False
ENTR.KRTK.20.11.05 - LO: 11-05
Bloom's: Analyze
6/14/2018 9:41 AM
8/31/2018 12:58 AM
50. How many months of the year should be illustrated in the first pro forma income statement?
a. 3
b. 8
c. 6
d. 12
ANSWER:
d
POINTS:
1
REFERENCES:
A-Head: 11-4 Pro Forma Statements
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.04 - LO: 11-04
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:53 AM
51. From an entrepreneur's standpoint, financial statement analysis is useful because it
a. is a way to anticipate conditions.
b. only displays a series of various ratios.
c. is good for predicting the future.
d. is helpful in creating the R&D budget.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:51 AM
52. When using the internal rate of return method, the future cash flows are discounted at a rate that makes the net present
value equal to
a. assets minus liabilities.
b. assets minus owners' equity.
c. assets minus (liabilities plus owners' equity).
d. zero.
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Page 16
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
d
1
A-Head: 11-5 Capital Budgeting
Multiple Choice
False
ENTR.KRTK.20.11.05 - LO: 11-05
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 12:58 AM
53. The principal objective of capital budgeting is to
a. minimize the risks of the firm.
b. maximize the value of the firm.
c. maximize the assets of the firm.
d. optimize the number of project requests.
ANSWER:
b
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 12:59 AM
54. The net present value method is a capital budgeting technique that helps to minimize some of the shortcomings of the
payback method by
a. discounting all future projects.
b. recognizing past cash flows of projects.
c. recognizing future cash flows beyond the payback period.
d. recognizing the payback dollars over again.
ANSWER:
c
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:00 AM
55. A method that discounts future cash flows at a rate that makes the net present value of the project equal to zero is
known as the
a. internal rate of return.
b. net present value.
c. payback method.
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Page 17
d. break-even point.
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
A-Head: 11-5 Capital Budgeting
Multiple Choice
False
ENTR.KRTK.20.11.05 - LO: 11-05
Bloom's: Understand
6/14/2018 9:41 AM
8/31/2018 1:02 AM
56. Capital budgeting is designed to show
a. how many projects, in total, should be selected.
b. which project is most profitable.
c. which of several mutually exclusive projects should be selected.
d. how to evaluate projects based on rates of return.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:03 AM
57. Despite the drawbacks of the payback method, the entrepreneur should continue to use it because
a. it is very simple to use in comparison with other methods.
b. projects with a faster payback period normally have more favorable long-term effects on earnings.
c. it provides a faster return of funds over time.
d. it is inexpensive.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Analyze
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:04 AM
58. The rate used to adjust future cash flows to determine their value in present period terms is the
a. current interest rate.
b. cost of capital.
c. rate determined by the ratio of assets to liabilities.
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Page 18
d. present value.
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
b
1
A-Head: 11-5 Capital Budgeting
Multiple Choice
False
ENTR.KRTK.20.11.05 - LO: 11-05
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 1:05 AM
59. Investments in which returns are expected to extend beyond one year are referred to as
a. capital investments.
b. stocks.
c. bonds.
d. mutual funds.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:06 AM
60. One of the easiest capital budgeting methods to understand is
a. net present value.
b. the internal rate of return.
c. the payback method.
d. the strategic analysis approach.
ANSWER:
c
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:08 AM
61. Many companies continue to use the payback method because it is
a. inexpensive to use.
b. more favorable in its short-term effects on earnings.
c. an immediate cash payment.
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Page 19
d. a longer loan program.
ANSWER:
b
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:09 AM
62. The net present value method works on the premise that a dollar today
a. is worth less than a dollar in the future.
b. is worth the same in the future.
c. is worth more than a dollar in the future.
d. cannot be measured in future dollars.
ANSWER:
c
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:11 AM
63. Loan proceeds are not directly tied to
a. sales revenue.
b. expenses.
c. meeting cash-flow problems.
d. planned expansion of a firm.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.03 - LO: 11-03
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:12 AM
64. Break-even analysis is used to assess
a. expected capital expenditures.
b. revenue.
c. expected product profitability.
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Page 20
d. future sales.
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
c
1
A-Head: 11-6 Break-Even Analysis
Multiple Choice
False
ENTR.KRTK.20.11.06 - LO: 11-06
Bloom's: Understand
6/14/2018 9:41 AM
8/31/2018 1:13 AM
65. _____ analysis looks at financial statements and ratios over time.
a. Horizontal
b. Inventory
c. Vertical
d. Specific efficiency ratio
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:14 AM
66. Which of the following is the contribution margin approach formula?
a. (SP – VC)S – FC
b. SP(FC – VC)S
c. (FC – VC)S – SP
d. FC = (SP – VC)
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-6 Break-Even Analysis
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.06 - LO: 11-06
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:17 AM
67. When using the graphic approach to break-even analysis, the entrepreneur must plot total _____ and total _____.
a. revenue; costs
b. expenses; revenue
c. costs; income
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Page 21
d. income; expenses
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
A-Head: 11-6 Break-Even Analysis
Multiple Choice
False
ENTR.KRTK.20.11.06 - LO: 11-06
Bloom's: Remember
6/14/2018 9:41 AM
8/31/2018 1:19 AM
68. Which of the following is a decision rule for handling questionable costs?
a. If expected sales are between the two break-even points, the questionable costs behavior needs to be dropped.
b. If expected sales don't exceed the higher break-even point, the product should be profitable.
c. The product should not be profitable if expected sales do not exceed the lower break-even point.
d. Decide which questionable costs to ignore.
ANSWER:
c
POINTS:
1
REFERENCES:
A-Head: 11-6 Break-Even Analysis
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.06 - LO: 11-06
KEYWORDS:
Bloom's: Analyze
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:21 AM
69. Which of the following balance sheet ratios measures solvency?
a. current
b. cash
c. quick
d. debt-to-worth
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:22 AM
70. In handling questionable costs, the cost in question is substituted first as a _____ cost and then as a _____ cost.
a. fixed; variable
b. mixed; fixed
c. variable; total
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Page 22
d. total; fixed
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
A-Head: 11-6 Break-Even Analysis
Multiple Choice
False
ENTR.KRTK.20.11.06 - LO: 11-06
Bloom's: Understand
6/14/2018 9:41 AM
8/31/2018 1:23 AM
71. Comparing financial numbers in order to make decisions is referred to as
a. ratio analysis.
b. debt reduction.
c. comparable fractions.
d. descriptive statistics.
ANSWER:
a
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Remember
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:25 AM
72. Ratio analysis can be applied from which of the following directions?
a. vertical only
b. vertical and horizontal
c. horizontal only
d. external and internal
ANSWER:
b
POINTS:
1
REFERENCES:
A-Head: 11-7 Ratio Analysis
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.07 - LO: 11-07
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:26 AM
73. An inventory turnover ratio of 9.81 means that the average dollar volume of inventory is used up almost _____ time(s)
during the fiscal year
a. 10
b. 100
c. 1
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Page 23
d. 1.2
ANSWER:
POINTS:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
A-Head: 11-7 Ratio Analysis
Multiple Choice
False
ENTR.KRTK.20.11.07 - LO: 11-07
Bloom's: Apply
6/14/2018 9:41 AM
8/31/2018 1:28 AM
74. What is included in an operating budget, and how is this helpful?
ANSWER:
The operating budget includes a sales forecast. A forecast can be acquired from a linear
regression analysis or a trend line analysis. This is a good place to start because a manager
must look at past months' sales figures. It usually gives an idea of what to expect in the
upcoming year. This type of budget also includes an estimation of expenses. A layout of the
groundwork helps the manager to get a clear picture of the costs involved in keeping up the
business. The layout will also help estimate the number of sales needed each month.
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:29 AM
75. Explain what a cash-flow budget tells a manager/owner.
ANSWER:
A cash-flow budget is an accurate statement of estimated cash receipts and expenditures
during a specific time period. It indicates where a cash-flow problem may occur. Cash comes
from essentially three forms in a business: cash sales, cash payments, and loan proceeds.
POINTS:
1
REFERENCES:
A-Head: 11-3 Preparing Financial Budgets
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.02 - LO: 11-02
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:30 AM
76. Name and describe the final step in preparing the operating budget.
ANSWER:
The final step in the budget process is the preparation of pro forma statements, which are
projections of a firm's financial position during a future period (pro forma income statement)
or on a future date (pro forma balance sheet). In the normal accounting cycle, the income
statement is prepared first, followed by the balance sheet. Similarly, in the preparation of pro
forma statements, the pro forma income statement is followed by the pro forma balance
sheet.
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Page 24
In the process of preparing the operating budget, the firm already will have prepared the pro
forma income statements for each month in the budget period. Each month presents the
anticipated income and expense for that particular period, which is what the monthly pro
forma income statements do. To prepare an annual pro forma income statement, the firm
combines all months of the year.
The process for preparing a pro forma balance sheet is more complex: The last balance sheet
prepared before the budget period began, the operating budget, and the cash-flow budget are
needed to prepare it. Starting with the beginning balance sheet balances, the projected
changes as depicted on the budgets are added to create the projected balance sheet totals.
POINTS:
1
REFERENCES:
A-Head: 11-4 Pro Forma Statements
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.04 - LO: 11-04
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:32 AM
77. List the common methods used in capital budgeting, and define the main objective of the capital budget.
ANSWER:
A capital budget is used to help plan for investments and expenditures. It also helps to decide
which investment or purchase to make. Three methods help make this decision, and they
include: payback method, net present value method, and internal rate of return
method. Capital budgeting is used to maximize the worth of the firm.
POINTS:
1
REFERENCES:
A-Head: 11-5 Capital Budgeting
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.05 - LO: 11-05
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:34 AM
78. Define break-even analysis, and identify some useful methods for finding the break-even point.
ANSWER:
Break-even analysis is the point in production when the firm has no losses or gains. A firm
makes or sells enough of its product to break even. Some popular applications include
graphing total costs and total revenues. The point at which these two lines cross is the breakeven point. Another is the contribution margin approach or the unknown-cost approach. Each
method uses the selling price, variable cost, fixed costs, and the unknown cost (number of
units to sell).
POINTS:
1
REFERENCES:
A-Head: 11-6 Break-Even Analysis
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES: ENTR.KRTK.20.11.06 - LO: 11-06
KEYWORDS:
Bloom's: Understand
DATE CREATED:
6/14/2018 9:41 AM
DATE MODIFIED:
8/31/2018 1:35 AM
Copyright Cengage Learning. Powered by Cognero.
Page 25
Copyright Cengage Learning. Powered by Cognero.
Page 26