Small Business Finance Final
Small Business Finance Mastery Quiz
Test your knowledge in small business finance with our comprehensive quiz! This quiz is designed to assess your understanding of essential financial concepts, ratios, and frameworks critical for managing a successful business.
- 60 challenging multiple-choice questions
- Covering a range of financial topics
- Perfect for students, educators, and business professionals
You have been asked to calculate your firm's return on assets. Which of the following financial statement(s) do you need?
Income statement and balance sheet
Income statement
Balance sheet
None of the above
Which of the following financial statements would disclose a company's short-term and long-term debt obligations
Cash Flow Statement
Balance Sheet
P & L Statement
Income Statement
If you are concerned about your company's ability to generate sales through its efficient use of assets, you should calculate this _____ ratio.
Return on investment
Return on assets
Receivables turnover
Asset turnover
Which of the following situations would not contribute to declining liquidity ratios?
The company is taking longer to pay its suppliers relative to net income figures
The company has increased liquid assets, such as cash, to satisfy short-term debt
The company has sold assets but has not paid down its debt
The company has taken on additional debt to cover operating expenses
If you are calculating your firm's quick ratio, which of the following are not considered to be a "quick asset"?
Cash
Accounts Receivable
Inventory
Stocks & Bonds
Which of the firms below will have the highest ROE?
Firm A will leverage of 2.9
Firm B with a leverage of 2.5
Firm C with a leverage of 2.0
None of the above- leverage does not affect ROE
Which of the following statements about Dupont Framework is false?
If a firm's assets are increasing and its sales are decreasing over time, then its efficiency component of Dupont is also decreasing
If a firm's sales are greater than its assets, its efficiency indicator will be >1
If a firm's equity is greater than its assets, its leverage indicator will be <1
If a firm's net income has increased relative to sales, then the profitability component of Dupont will decrease
The leverage component of the Dupont Framework can be calculated by divided a firm's____ by its_____.
Assets; liability
Net income; sales
Debt; equity
Assets; equity
The Dupont Framework breaks down a company's _________ into three components for further analysis/
Working capital
ROA
ROI
ROE
If you are concerned about how efficienty your company is generating sales with the assets it has, which Dupont Framework Indicator would you be most interested in?
Efficiency
Profitability
Leverage
Solvency
ABC generated $10 million net cash from operating activities and used $11 million net cash for investing activities last year. ABC also used $4 million for financing activities. Which of the following is true about ABC's cash flow last year?
ABC generated negative cash from its operating activities
ABC generated $1 million dollars in free cash flow
ABC had an overall net increase in cash of $5 million
ABC had a negative free cash flow
Cash flow statements are divided into the following three sections:
Investing, operating, and financing activities
Revenues, expenses, and net income
Assets, liabilities, and equity
Inflows, outflows, and accruals
ABC company is analysis cash flow data from last year. Which of the following transactions reflects a cash inflow to the ABC company?
ABC company generated 4 million dollars in contracts for the year
ABC company collected 1 million dollars in accounts receivable for the year
ABC company purchased a 2-million dollar manufacturing plant last year
ABC company decreased its accounts payable by $500,000 last year
Which of the following statements about budgeting is false?
Budgets are critical to the management planning process
Budgeting does not affect people
Budgets establish plans that can be monitored against actual performance
Budgeting enables companies to plan for meeting specific goals.
Strategic planning for the purcahse of a new piece of manufacturing equipment would be an example of:
Process prioritization
Product priorization
Operational Budgeting
Capital Budgeting
Broadly defined, how many types of customers are there?
3
2
4
5
Based on the information presented in the Module, which forecasting frequency typically produces the most accurate results?
Daily
Annually
Quarterly
Weekly
Which kind of forecast can be used in a stable industry and stable market that is not impact by seasonality?
Expected Value Analysis
Rollover Forecast
Moving Average Forecast
Weighted Moving Average Forecast
Which company departments need to be involved in developing a sales forecast?
Sales and Marketing Departments
The Sales Department
Sales, Marketing, Finance, Operations
The Marketing Department
Which of these forecasting techniques has the advantages of being easy to calculate and reacts quickly to changes in demand caused by trends or seasonality?
Weighted Moving Average
Exponential Smoothing
Expected Value Analysis
Moving Average Forecast
If you are analyzing the discounts you are offering customers and evaluating how those discounts are impacting your ability to collect the sales price for your products, you are focusing on your business'___________ capability of value-based pricing
Pricing economics
Pricing psychology
Price management
Superior customer insights
If you are evaluating the effect that a change in price will have upon customer demand for your product, which of the following value-based pricing capabilities are you considering?
Price Management
Pricing Economics
Pricing Psychology
Superior Customer Insights
To accomplish your goal of gaining substantial market share in a new market with your unique product, you decide to set your prices as low as possible with hopes that you can raise them once you have a substantial customer-base. This strategy is referred to as ________
Market penetration
Value-based pricing
Competitive pricing
Cost based pricing
Your furniture business sells couches. You price those couches to account for the cost you paid for the couches plus a standard markup you have established. You are using a____________ strategy.
Competitive Pricing
Value-based pricing
Market penetration
Cost-based pricing
Based upon your analysis of a competing service provider's fees and a survey about potential customers' perception of pricing, you decide to offer a good-better-best three-tiered pricing structure in addition to offering repeat customers 10% off their second purchase and a 15% off their third purchase. You have adopted all of the following pricing strategies expect:
Competitive pricing
Discount pricing
Psychological pricing
Cost-based pricing
You have noticed increasing shipping and handling fees with one of your suppliers. Your number of orders with this supplier per year has also increased. The shipping fees would be considered as _________
Order costs
Set-up costs
Carrying costs
Holding costs
Which of the following is not one of the function of inventory?
To decouple the firm from fluctuations in demand
To hedge against inflation
To take advantage of quantity discounts
To combine or couple parts of the production process
All of the following are disadvantages of having too much inventory except:
Difficulty in storage and control
Reduced holding costs
Increased risk of product obsolescence
Reduced availability of cash
Recently, you recognized the need for help and hired two new employees to count and sort inventory in your warehouse facility. This is an example of __________costs.
Human capital
Service level
Management
Facility
You have received a shipment of product components but they have not yet been processed in your facility. These goods would be an example of_________
Maintenance/repair/operating (MRO)
Finished goods
Work-in-process
Raw material
________________________ is a ratio of what I get divided by how much is costs me.
Cost
Service
Value
Price
Qualitative Forecasting relies on________________
Historical numerical data
Usage statistics
Shipping rates
Opinions
Which is not considered part of inventory costs?
Cost to hold the inventory
Cost of consuming the inventory
Cost to order the inventory
Cost to purchase the inventory
In operations management, a facility that produces only one kind of a very specialize product or service is called a _________ factory.
Diverse
Unique
Lean
Focused
Which of the following layout systems does a hospital need to utilize its operation
Flexible-flow layout system
Steady flow layout system
Hybrid layout system
Line-flow layout system
Debt financing means_____ while equity financing involves______
You are borrowing money non-traditionally; you borrowing money traditionally
You must give up part of your ownership in the company; you giving your controlling interest in the company
You lose shares of your company; you gaining back shares of your company
You are borrowing money that must be repaid with interest; you selling shares of your business in exchange for money
You are considering taking on an equity partner in your company. Which of the following scenarios is most likely an advantage of an equity partnership?
Your equity partner has core competencies complimentary to your skill set.
Your partner is a family member that you sometimes do not get along with.
Your equity partner's expectations for ROI may fluctuate
Your partner wants a majority ownership and controlling interest in the company
Why should you fund projects internally with cash from profits, as opposed to debt or equity financing, when possible?
You can retain all of your assets
You can avoid costs of debts such as interest and risk of default
You can maintain decision-making and ownership of your company.
All of the above
If you borrowed $150,000 to invest in a new business storefront at an 8% interest rate and pay approximately 35% in federal/state taxes, what is your post-tax cost of debt?%
$4,200
$12,000
$7,800
9,600
Which of the following statements about factoring is true?
Factors are most concerned about creditworthiness of the business owner
Factoring is common in industries with low receivables turnover
Factoring is for only large corporations
Factoring is a loan
If you are valuing a piece of equipment by considering its replacement cost today less any depreciation you are utilizing the asset valuation technique referred to as ________.
Income approach
Cost approach
Market approach
Discounted cash flow approach
Multiplying a company's price-to-book ratio by a company's book value per share is an application of _____ to value a buisness.
Income mutiples
Earnings multiples
Equity multiples
Sales multiples
Which of the following statements about business valuations is not true?
Commonly available businesses are priced with a higher mutiple
A company's adjusted net income considers owner's salary and cash benefits
Deal structure is a vital component of the valuation process
Mutiples reflects market behavior including demand and perceived risk
Since many small- to medium-sized businesses are not actively publicly traded, it is challenging to utilize the _________to value those businesses and their shares.
Market approach
Income approach
Cost approach
Discounted cash flow approach
Which of the following must be considered when using the discounted cash flow method to value a business?
Amount of cash flows
Amount, timing, and risk of cash flows
Risk of cash flows
Timing of cash flows
Which of the following can be considered a category of concern for off-balance sheet items?
Policy risk
Interest rate risk
Personal asset of the owner
Economic independence
Which of the following statements about off-balance sheet items is not true?
The director of the company can be held liable by other stakeholders for losses and negligent behavior
Interest Rate Risk is directly aligned with the top management compensation
Lenders will not provide funding to new or struggling companies without the owner(s) signing personal guarantees
Operating leases need to be included in the monthly/annual budget and cash flow statements
Typical types of insurance for small businesses include
Manager's compensation
Death and disability of all employees
Business interruption
Asset gain
Which of the following factors can create a economic dependence for a business?
Expansion on mutiple markers
Multiple sources of revenue
One customer represents the majority of the company's revenue
A rapid increase in new customers
What should a business do to decrease the foreign exchange risk?
Do not get involved in business with foreign companies
Be sure that the exchange rate at the date the contract is signed is favorable for the company
Diversify the currencies you are using to do business
Accept only US dollars
Which of the following is the least effective effort in collecting overdue receivables
Send paper statements to customers
Send overdue accounts to collections and cancel customer credit immediately
Meet with customer to discuss overdue accounts
Contact the customer via phone or email
If you offer credit to your customers, which of the following is least likely to occur as a result of you offering that credit?
Your sales will likely decrease
You could incur costs related to managing the receivables
Some of your customers may not pay
You may experience cash flow issues if customers pay late.
You have purchased inventory from a supplier on credit. Their term are 2% 10 net 30. If you wanted to delay your accounts payable payments which terms below would be the best to negotiate with your supplier?
2% 10 net 40
3% 10 net 20
3% 10 net 30
2% 10 net 45
When considering the sales cycle's impact on cash flows in a manufacturing business offering credit, which of the following statements is false?
Cash inflows occur when receivables are collected
Cash is spent on the process of concerting raw materials into finished goods
The purchase of raw materials represents a cash outflow
Selling the product and collecting the cash for credit sales occur simultaneously
If your business is currently experiencing cash flow issues, which of the following would you avoid?
Delaying current accounts payable
Increasing inventory
Reducing operating expenses
Reducing collection times for receivables
Opportunity cost is _________
The cost an individual, investor or business is charged for doing business
The benefits an individual, investor or business misses out on when choosing one alternative over another
All answers are correct
A component of variable costs
Which of the techniques listed below can be used to evaluate an investment
Net future value
Discounted cash flow
Compounded cash flow
Internal rate of success
The internal rate of return method shows
The profitability of investments without taking into account the time value of money
The time value of money
The profitability of investments and takes into account the time value of money
The increase in future average income
What type of insurance covers costs or damages as a result of any directors or officers in your organization being involved in a lawsuit?
Worker's compensation
Disability insurance
Directors and officers insurance
Business interruption insurance
General liability insurance covers damages to a person or to property caused by
A general decline in the economic conditions
Normal business operations
Natural disasters
A third party
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