Glencoe Entrepreneurship Finance Practice Exam

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• What is a financial ratio and why are ratios useful?
• A long-term commitment of a large sum of money to buy new equipment or replace old equipment is called
• Which measure compares current assets to current liabilities?
• Which metric indicates short-term liquidity and is calculated as current assets minus current liabilities?
• How is the contribution margin ratio calculated?
• Which term best describes organizations that compile information about how quickly customers pay their bills?
• Under double-entry accounting, which side increases liability, revenue, and equity accounts?
• Which concept covers the funds available to carry out daily operations and emergencies?
• How do you calculate payback period and what does it indicate?
• What describes a private offering of securities to a limited group of investors who meet suitability standards?
• What is money a business uses to support its operations in the short term called?
• What is the term for the comparison of two or more amounts on a financial statement and the evaluation of the relationship between these two amounts?
• Define debt-service coverage ratio (DSCR) and its interpretation.
• Which statement best describes the impact of a high debt-to-equity ratio?
• Which term is defined as the amount of cash that is available at any given time?
• If current assets are $40,000 and current liabilities are $25,000, what is the current ratio and what does it suggest?
• What is an income statement projection and when is it used?
• Which financial statement would you consult to determine a company’s overall financial position at a specific point in time?
• Which statement provides a view of cash inflows and outflows categorized by operating, investing, and financing activities?
• Which statement about the cost of capital as used in capital budgeting is correct?
• How do you calculate inventory turnover and why is it useful?
• What are common mistakes in startup financial planning?
• Define breakeven analysis and the formula for calculating the break-even point in units.
• How does a business plan address financing needs and funding strategy?
• What is the primary purpose of a cap table?
• The ratio of operating expenses to net sales, which is the complement to the profit margin ratio, is called the
• Which statement accurately describes the purpose of a cash flow statement?
• Which term denotes an extra amount of money saved and used only when absolutely necessary?
• How is working capital calculated?
• Define cash burn rate and its significance for startups.
• Which aspect considers the circumstances at the time of the loan request?
• Which statement best defines gross profit?
• Which of the following sources is non-dilutive and does not require repayment?
• What role does pricing strategy play in profitability for a new venture?
• Which arrangement allows a bank to lend up to a specified amount on request?
• What is a cash flow forecast and how is it used?
• Which equation expresses the relationship Assets = Liabilities + Owner's Equity?
• Analyzing total addressable market (TAM) and serviceable obtainable market (SOM) helps determine which aspects of a startup's opportunity?
• Which type of investor often provides mentorship along with equity?
• What is a loan covenant and why do lenders require them?
• How do you estimate startup sales with no track record?
• Which of the following is an example of a fixed cost?
• If fixed costs are $50,000, the price per unit is $20, and the variable cost per unit is $12, what is the break-even quantity (units)?
• Which metric compares current assets to current liabilities to assess short-term liquidity?
• Which accounting basis records income when received and expenses when paid?
• What is the term for credit one business grants to another business for the purchase of goods or services?
• What is angel investor financing?
• Which term describes positive account changes recorded on the right side of an account?
• Which statement correctly differentiates gross profit and gross margin?
• What indicates a startup's runway?
• What is sensitivity analysis and its purpose?
• Which are the three sections of a cash flow statement?
• In sensitivity analysis, what is varied to observe effects on outputs?
• Which term refers to assets that will be held for more than one year?
• What is the difference between gross profit and net profit?
• Which term refers to agencies that collect information on how promptly people and businesses pay their bills?
• What is the startup burn rate and how is it calculated?
• Which term covers cash or other assets that will be converted into cash or consumed within one year?
• A project requires an initial investment of $40,000 and yields a net profit of $6,000 over the evaluation period. What is the ROI expressed as a percentage?
• What is the purpose of a cash budget and its main components?
• Which components are included in cash flow from operations?
• What is the break-even point and how is it calculated?
• Which of the following is NOT typically a startup financing source?
• Which term refers to January 1 to December 31?
• Which statement best describes inventory turnover?
• Which financing instrument typically requires repayment with interest and does not involve giving up equity?
• Which term refers to the borrower's reputation for fair and ethical business practices?
• Define cash flow forecasting and its importance for startups.
• If total liabilities are 600 and total assets are 1200, what is the debt ratio?
• What is the purpose of the contribution margin ratio in decision-making?
• Which statement about breakeven analysis is correct?
• If revenue is 150,000 and cost of goods sold is 90,000, what is gross profit?
• Why is the time value of money critical in evaluating startup investments?
• Define gross margin and how to improve it.
• What is the main purpose of the income statement?
• Define liquidity risk and give an example relevant to an entrepreneur.
• What term describes amounts to be paid in the future for goods or services already acquired?
• Which statement defines internal rate of return (IRR) as used in capital budgeting?
• Which statement correctly distinguishes debt financing from equity financing?
• If revenue is 120,000 and cost of goods sold is 70,000; operating expenses are 20,000; interest 5,000; and taxes 10,000, what is net profit?
• Which term is often used as a formal financial plan of expected income and expenses for a future period, sometimes used interchangeably with budgeting?
• A long-term financial commitment to purchase or upgrade equipment is best described by which term?
• Which term refers to the basic accounting record where transactions are first entered?
• Which statement best describes depreciation in accounting for taxes?
• What best describes value-based pricing?
• Which description best characterizes fixed costs?
• Explain amortization in the context of loans.
• What is a projected balance sheet and its use?
• Which statement about the relationship between assets, liabilities, and equity on the balance sheet is accurate?
• Which term describes money used to support a business's operations in the short term, not a loan?
• Which term describes negative account changes recorded on the left side of a T-account?
• What is a risk assessment and provide an example relevant to entrepreneurship?
• Explain the difference between net income and cash flow.
• Define working capital and why is it critical for startups.
• Which sequence correctly describes preparing a simple cash flow statement from a monthly forecast?
• Explain the difference between a sole proprietorship and a corporation for financing.
• Which term describes the cash needed to run day-to-day business operations?
• Explain the concept of liquidity and name two liquidity ratios.
• Which term describes funding a startup by using personal resources and earnings rather than external financing?
• Which statement best describes the typical components of an entrepreneurial financial plan?
• Which of the following describes depreciation's impact on cash flow?
• Define debt-to-equity ratio and its implications for a startup’s risk.
• What are fixed costs? Provide two examples.
• Explain how taxes affect profitability for small businesses.
• How do you perform a simple sensitivity analysis for price changes?
• Which is the most basic form of journal?
• What is a break-even analysis and its required inputs?
• A formal, written statement of expected income and expenses for a future period is known as a
• What is a pro forma balance sheet and its use in entrepreneurship?
• What term describes proposed or estimated financial statements based on predictions of how operations will turn out?
• Explain the purpose of a cash flow statement.
• Which financial statement would you consult to assess a company's liquidity at a specific date?
• Which term describes an accounting period that begins and ends in months other than the calendar year?
• If a monthly cash flow forecast shows cash receipts of $28,000 and cash disbursements of $33,000 with a beginning cash balance of $5,000, what is the ending cash balance?
• Which accounting basis records income when earned and expenses when incurred?
• Which term describes anything of value that is owned?
• Describe the format and key components of a balance sheet.
• Explain net present value (NPV) and why it's used in project financing.
• Which statement about fixed and variable costs is true?
• What is a core effect of taxes on after-tax profitability for small businesses?
• Which concept describes the borrower's ability to repay a loan based on income and existing obligations?
• What is an income statement's operating income?
• Which term describes the financing provided to high-growth small and medium enterprises by professional investors?
• Agencies that collect information on how promptly people and businesses pay their bills are known as
• What is the term for the sale of stock on a public stock exchange?
• Cash raised for a business in exchange for an ownership stake is called which term?
• In cash flow from operations, which adjustment is considered a non-cash expense?
• Which option is the first time a company offers its shares to the public?
• Which statement best describes variable pricing versus fixed pricing strategies?
• What is the contribution margin per unit and why is it important?
• Expenditures to acquire or upgrade long-term assets are called
• Which term refers to the amount customers owe the business?
• What is defined as current assets minus current liabilities?
• Which formula defines the debt-service coverage ratio (DSCR)?
• What is a bootstrapping strategy and give an example.
• Which term refers to individual investors or investment firms that invest venture capital professionally?
• Which statement best defines net profit?
• Which term represents the owner's claims to the assets of the business?
• Which statement best describes fixed costs in relation to production level?
• What is intellectual property and why is it important for startups?
• What is a pro forma income statement?
• How can a small business calculate break-even in dollars rather than units?
• What is the purpose of an executive summary in a business plan?
• What are the typical components of an entrepreneurial financial plan in a business plan?
• What is the money raised by taking out loans called?
• What is gross margin and how is it calculated?
• What is return on investment (ROI) and how is it calculated for a small venture?
• What is the formula for the debt ratio?
• Which set of categories is used to classify cash flows on a cash flow statement?
• Which financial statement shows the final balances of assets, liabilities, and owner's equity at the end of a period?
• If revenue is 200,000 and COGS is 120,000, what is gross margin percent?
• What is the purpose of a business plan in funding negotiations?
• Which term describes the category that includes cash and other assets expected to be used within one year?
• The number of cents left from each dollar of sales after expenses and income taxes are paid
• Define working capital and its importance for startups.
• Which term is defined as documents that summarize the results of your business operation and provide a picture of its financial position?
• What is an advantage of forming a corporation for financing purposes?
• Which statement best describes the purpose of a cash flow statement?
• How do depreciation and taxes interact in financial statements?
• Which document would specify anticipated funding requirements and sources?
• What does an income statement show about a business?
• Which metric directly indicates the time required to recover the initial investment from net cash inflows?
• Expenses that change from month to month are called
• Which term describes documents that summarize the financial position and results of the business?
• Which term describes the pool of funds raised by professional venture capital firms to invest in growth-stage companies?
• Which describes a security that signifies ownership in a corporation and a claim on its assets and earnings?
• What are variable costs? Provide two examples.
• A private investor who funds start-up companies is known as what?
• Which liquidity measure excludes inventory from current assets?
• Which term describes the degree of risk assessed by evaluating a loan request before approval?
• Expenditures to acquire or upgrade long-term assets are called
• Which describes a source of equity financing for small businesses with exceptional growth potential and experienced senior management?
• Which scenario illustrates liquidity risk?
• What does a break-even analysis determine?
• What does startup cash flow track and why is it important?
• How does inventory management impact cash flow?
• Which of the following is NOT typically considered a source of startup capital?
• Which report explains how much cash your business took in and where the cash went?
• Which statement best describes the tax impact of depreciation for small businesses?
• Define capital budgeting and name one common method.
• What is an arrangement by which a bank agrees to lend a specified amount of money to an organization upon request called?
• Which term means debts of a business?
• What is the term for the investigation and analysis a prudent investor conducts before making decisions?
• Which term refers to items that will be held for more than one year?
• Which item is typically NOT part of the financial section of a business plan?
• Which instrument represents ownership in a corporation and a claim on assets and earnings?
• Which term is used for the process of offering shares to the public in a regulated market?
• What is a cash burn rate and how is it calculated for a startup?
• What is the term for Generally Accepted Accounting Principles?
• What is the break-even point in units when fixed costs are $8,000, price per unit is $50, and variable cost per unit is $30?
• Which statement is NOT a correct characteristic of debt financing?
• What is net income and how does it relate to cash flow?
• Which of the following best describes the use of an income statement projection?
• What is a business's financial ratio and why are they important?
• Which item represents the amount customers owe the business?
• What is diversification in investment for a small business and why is it relevant?
• Why is ethical financing important for startups?
• What is a venture capitalist and what kind of business typically seeks VC funding?
• How does venture capital differ from angel investments?
• Which financial report shows revenue, expenses, and net income or loss for a specific period?
• What is the key difference between secured and unsecured loans?
• What is the formula for the current ratio?
• What is the operating cycle and how does it impact cash management?
• What is the role of insurance in entrepreneurial risk management?
• Which term refers to assets pledged to a lender as security for a loan?
• How do accounts receivable and accounts payable affect cash flow?
• Which statement about cash flow forecasting is true?
• Which term means the debts of a business?
• Which statement about collateral is true?
• What is the effect of high working capital for startups?
• Costs that do not change from month to month are called
• The ratio that relates operating expenses to net sales and complements the profit margin is called
• In the budgeting process for a startup, which step normally follows forecasting revenues?
• Which metric shows the portion of net income remaining after taxes relative to sales?
• What is the difference between gross profit and gross margin?
• A cap table primarily shows ownership percentages, equity dilution, and investor stakes; which additional item is commonly included?
• What is the formula for contribution margin ratio?
• What is the internal rate of return and how is it used?
• What does a balance sheet show about a business?
• Under double-entry accounting, which side increases asset accounts and expense accounts?
• What is a balance sheet and how is it structured?
• If a project’s IRR equals the hurdle rate exactly, the usual decision is to:
• Which statement about liquidity and solvency is accurate?
• What is angel investing and how does it differ from VC?
• Distinguish fixed costs from variable costs with examples in a startup. Which pair is correctly classified?
• Which term means a block of time covered by an accounting report?
• Distinguish between debt financing and equity financing and give one pro and con of each.
• What is the relationship between the operating cycle and liquidity?
• What role does risk management play in entrepreneurial finance?
• Which term is described as a financial diary of a business?
• What is the cost of capital and why is it important for project evaluation?
• A measure of the relationship between short-term assets and current liabilities is the
• Under which basis are revenues recognized when earned and expenses when incurred?
• What is the current ratio and how is it interpreted?
• Under which basis are revenues recorded when cash is received and expenses when paid?
• Which term means recording transactions in a journal?
• Which analysis helps determine the sales level required to cover total costs?
• Which term describes operating as frugally as possible and cutting all unnecessary expenses?
• Define net present value and the decision rule.
• What is forecast accuracy and how can it be improved?