Q&A Hero

Q: Which of the following is a form of personal gift? A. Tax credits B. Free use C. Grants D. Tax abatements

Q: Hugh starts his own animation company by borrowing funds from his parents. His parents tell him that he can repay them when the business is generating profits. This is an example of _____. A. accelerated cash-out B. deferral C. free work D. free use

Q: When an entrepreneur gets funding for his business from an account that his family had initially set up for his future education or a first home, it is referred to as _____. A. piggybacking B. accelerated cash-out C. free use D. overpayment

Q: _____ refers to family or friends letting you add your purchases with theirs in order to get lower prices. A. Piggybacking B. Accelerated cash-outs C. Free use D. Overpayment

Q: _____ exist for the purpose of addressing some identified social need that cannot be adequately met by market forces. A. SBAs B. Limited Liability Companies C. EDAs D. Foundations

Q: Which of the following is true of government agencies that issue grants? A. They publish RFPs that specify the conditions of a grant. B. They require each business to create a proposal using formats that best fits the business. C. They only provide funding after a long evaluation of applications which generally takes over a year to process. D. They are unstructured and prefer informal approaches from companies.

Q: The two largest governmental grant programs that are specifically intended for small business are: A. SBIR and STTR. B. SBA and SBDC. C. EDA and DBED. D. EDA and SBA.

Q: Gifts of money made to a business for a specific purpose are referred to as _____. A. equities B. debts C. tax credits D. grants

Q: Direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria are referred to as _____. A. tax abatements B. grants C. tax credits D. debts

Q: _____ is provided by state and local governments, primarily to encourage specific activities that are expected to improve the blighted areas or provide additional employment. A. Debt capital B. Venture investment C. Tax abatement D. Equity capital

Q: The most common form of institutional gift financing is in the form of _____. A. state loans B. reduced taxes C. state grants D. donated capital

Q: There are two general sources of gift financing: A. institutional and personal. B. friends and family. C. consumer and commercial banks. D. angel and venture investors.

Q: _____ refers to the value of a business that exceeds the sum of the value of all individual assets but that cannot be sold separately from the business. A. Goodwill B. Collateral C. Inventory D. Debt

Q: Something of value given or pledged as security for payment of a loan is called _____. A. chargeback B. capital equity C. collateral D. personal equity

Q: The amount that revenues exceed expenses is referred to as _____. A. profit B. cash flow C. operating margin D. debt

Q: Which of the following statements is true regarding the Fair Credit Reporting Act? A. It requires that consumers investigate and directly report any inaccuracies to the source of the inaccurate information. B. It provides CRAs with a period of one year to investigate cases of inaccurate information. C. It requires that CRAs independently confirm information. D. It requires that the CRA forward copies of all relevant information to the source of the inaccurate information.

Q: A business that collects, collates, and reports information concerning an entity's use of debt is referred to as a(n) _____. A. accelerator B. credit reporting agency C. debt reporting organization D. community development organization

Q: An organization, usually associated with universities, that supports start-up technology businesses by providing inexpensive office space, a variety of support services, and resources is called a(n) _____. A. LLC B. community development organization C. small business investment company D. incubator

Q: Private businesses that are authorized to make SBA insured loans to start-ups and small businesses are called _____. A. community development organizations B. accelerators C. small business investment companies D. LLCs

Q: An organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area is referred to as a(n) _____. A. community development organization B. accelerator C. economic cooperation organization D. limited partnership

Q: In the Small Business Administration guaranteed loan payment programs, the owners must be _____ before they qualify. A. backed by personal equity for half the loan sum B. turned down by a bank C. partnered with a successful entrepreneur D. the heads of an already successful business

Q: Which of the following describes angel investors? A. They are wealthy individuals who invest in companies in relatively early stages of development. B. They are individuals who act as brokers to help connect owners to organizations that provide funding. C. They are state-run organizations that buy stakes in companies in the early stages of development. D. They are government organizations that help small-scale companies grow.

Q: Orion Inc. was started as a small organization with five employees. After the first year's profits were made, the owners decided to invest the profits in expanding the business. This is an example of financing the business using _____. A. benchmarking B. bootstrapping C. piggybacking D. outside equity

Q: Investing in multiple investments of differing risk profiles for the purpose of reducing overall investment risk is called _____. A. digression B. deviation C. specialization D. diversification

Q: The level of probability that an investment will not produce expected gain is called _____. A. interest B. dividend C. risk D. diversification

Q: The percentage amount that the payout of an investment differs from original cost is known as: A. dividend on capital. B. gain on investment. C. risk on investment. D. interest on the principle.

Q: A charge for the use of money, usually figured as a percentage of the principal is called _____. A. interest B. dividend C. tax D. chargeback

Q: Ownership of corporations is established by _____. A. stock certificates B. share agreements C. member share certificates D. partnership share agreements

Q: A business formed by an individual who is responsible for all debts and claims against the business is called a: A. limited liability company. B. conglomerate. C. partnership. D. sole proprietorship.

Q: Which of the following is true of limited partnerships? A. All the owners have full responsibility of repaying debts. B. All the owners face the potential of having to pay business debts from their own wealth. C. None of the owners, except the general partner, is fully liable. D. None of the owners are at a risk of losing what they invested in the business.

Q: In general, all forms of business organization can be categorized based on the owners' responsibilities for the organization's liabilities, and _____. A. how the business is taxed B. how the business is financed C. the business's target market D. whether it is a manufacturing or service organization

Q: Which of the following is true of an LLC? A. LLCs are the same as partnerships. B. LLCs have a choice of being taxed as either corporations or partnerships. C. LLCs are a legal form of business that have no flexibility regarding taxes. D. LLCs are the same as S-corporations.

Q: A legal "artificial" entity that is formed by filing specific documents with a state government is called a _____. A. sole proprietorship B. partnership C. corporation D. general partnership

Q: _____ is money from selling part of a business to people who are not and will not be involved in the management of the business. A. Dividend B. Bond C. Equity capital D. Outside equity

Q: Any valuable asset that is donated to a business without any obligation to repay or to give any ownership interest is called a(n) _____. A. debt B. equity capital C. gift D. investment

Q: Money contributed to businesses in return for part ownership of the business is called a(n) _____. A. debt B. equity capital C. gift D. loan

Q: A(n) _____ is a legal obligation to pay money in the future. A. equity capital B. stake C. debt D. gift

Q: The number one source of financing for small businesses is from _____. A. the owners themselves B. angel investors C. government programs D. banks

Q: Which of the following is true of financing small businesses? A. There are several resources available for financing start-ups. B. Funding is only important when a business is just starting. C. A business has fixed financial goals in all stages of its development. D. The most popular source of financing for start-ups is from commercial banks.

Q: When a business enters a phase of rapid growth, one of the challenges it faces is that very few sources of money are available to support its growth.

Q: During the start-up phase of a small business the emphasis is on conserving what little cash the new business has.

Q: Borrowing money for capital investment enhances the potential for higher rates of return for the owners.

Q: A measure of the amount of debt relative to total investment is called cost of capital.

Q: The more debt that is included in the capital mix, the higher is the weighted average cost.

Q: Giving a gift has tax implications.

Q: The SBIR and the STTR programs require that every U.S. agency that makes research grants provide a minimum of 2 percent of its grant budget to small businesses, as defined by the SBA.

Q: Reduced taxes are the most common form of institutional gift financing.

Q: A company's goodwill is its best collateral.

Q: Equifax is one of the four primary CRAs in the United States.

Q: Community development organizations are private businesses that are authorized to make SBA insured loans to start-ups and small businesses.

Q: Majority of small business start-ups are funded by bootstrapping.

Q: Investing in multiple businesses increases the chances of offsetting possible losses incurred from one business.

Q: Payments of profits to the owners of corporations are called dividends.

Q: Limited liability companies' primary advantage is that owners may easily choose whether to be taxed as an entity or have tax items pass through.

Q: People who buy ownership rights but are not part of the management of the business are known as outside equity investors.

Q: Knowing one's personal worth is not important when starting a business.

Q: Money borrowed for the purpose of investment in a business is called debt capital.

Q: A legal obligation to pay money in the future is called equity capital.

Q: In the U.S., government programs are the number one source for financing small businesses.

Q: Define growth trap. Discuss the strategies that small businesses can employ for coping with cash shortages.

Q: What are the different techniques used by a business to increase cash inflow and decrease cash outflow?

Q: What are the preventive steps taken to protect a business from having its cash drained by employees?

Q: (p. 461- 467) Describe the process of creating a cash budget.

Q: What are the two reasons for differences in the bank and book balances?

Q: What is reconciling? What are the four purposes for reconciling differences in the bank and book balances?

Q: Explain the concept of company and bank cash balances. What are the two types of delays in the movement of money among depositors and banks?

Q: What are the three sources from which cash can be obtained for a business?

Q: What are the three primary purposes of money and the different forms of money?

Q: What are the three primary causes of cash flow problems faced by a small business? Explain cash flow management using the cash-to-cash cycle.

Q: The most common strategy employed by small businesses for handling money shortages is _____. A. adjusting scheduled payments B. using personal money C. selling investments D. laying off employees

Q: Which of the following is a strategy to handle cash shortfalls in small businesses? A. Purchasing investments B. Increasing payables C. Borrowing money D. Retaining employees

Q: Tammy is talented at craft but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son Davida business major. Within a few months, the sales increase exponentially which results in a shortage of cash needed to expand their business. This crisis is termed _____. A. nonsufficient funds B. growth trap C. charge back D. reconciling

Q: A crisis in which there is a shortage of cash for expanding a business after an exponential increase in sales is termed _____. A. nonsufficient funds B. reconciling C. charge back D. growth trap

Q: Josh, the owner of a software company, is facing cash flow problems. To control the cash outflow, he avoids paying the bills to his vendors. After much delay, he sends a check in payment but intentionally forgets to sign the check. To prevent the cash from going out of his business, Josh is applying the strategy of _____. A. gaming the payment process B. timing the purchases C. noncash incentives D. trade discount payments

Q: Using methods to appear to be paying bills on time, when in fact the cash outflow is being delayed or avoided is called _____. A. charge back B. growth trap C. gaming the payment process D. timing the purchase

Q: Mr. Hill, who runs a key-chain manufacturing unit, buys raw materials from his supplier during the first week of every month. The supplier's policy states that all payments need to be cleared within 50 days of buying the materials. This schedule ensures that Mr. Hill gets an extended period to make payments thus controlling when the payment is made. Which of the following strategies is Mr. Hill using to control cash outflow? A. Taking a consignment B. Offering trade discount C. Gaming the payment process D. Timing the purchase

Q: _____ is the practice of trading goods and services without the use of money. A. Barter B. Consignment C. Noncash incentive D. Float

Q: _____ refers to the practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold. A. Barter B. Consignment C. Noncash incentive D. Benchmarking

Q: Training and flexible hours are a part of the _____ strategy used to control money that is expected to leave the firm. A. noncash incentive B. trade discount C. barter system D. gaming payment

Q: Which of the following is the most common noncash incentive given to an employee? A. Stock options B. Autonomy C. Benefits packages D. Telecommuting