A+ Answers

Question 1 

 Financial management deals with two things—managing a company’s finances and:

A. operations management.

B. supply chain management.

C. raising money.

D. production management.

Question 2 

__________ are an estimate of a firm’s future income and expenses, based on its past performance, its current circumstances, and its future plans.

A. Calculation statements

B. Forecasts

C. Statements of cash flow

D. Financial statements

Question 3 

A company’s ability to productively utilize its assets relative to its revenue and its profits is referred to as:

A. efficiency.

B. effectiveness.

C. stability.

D. profitability.

Question 4 

Amanda Still owns a seafood restaurant in Clearwater, Florida. She is currently owed $19,000 by a corporation that she catered a meeting for and $2,000 on an overdue account. Amanda has $21,000 in:

A. accounts receivable.

B. inventory.

C. accounts collectable.

D. accounts payable.

Question 5 

A financial statement is a(n):

A. estimate of a firm’s future income and expenses.

B. set of ratios which depict relationships between a firm’s financial items.

C. itemized forecast of a company’s income, expenses, and capital needs.

D. written report that quantitatively describes a firm’s financial health.

Question 6 

In the context of a firm’s statement of cash flows, __________ include cash raised during the period by borrowing money or selling stock and/or cash used during the period by paying dividends, buying back outstanding stock, or buying back outstanding bonds.

A. investing activities

B. financing activities

C. operating activities

D. capital activities

Question 7 

The statement of cash flows is divided into three separate activities:

A. operating activities, capital activities, and liquidity activities.

B. stability activities, earning activities, and financing activities.

C. operating activities, investing activities, and financing activities.

D. profitability activities, stability activities, and investing activities.

Question 8 

Real estate, buildings, equipment and furniture are classified as __________ on a company’s balance sheet.

A. current assets

B. fixed assets

C. other assets

D. permanent assets

Question 9 

A firm’s profit margin, or return on sales, is computed by dividing:

A. net income by net sales.

B. gross profit by net sales.

C. net income by gross profit.

D. net income by cost of sales.

Question 10 

A firm’s __________ reflects the results of its operations over a specified period and shows whether it is making a profit or is experiencing a loss.

A. statement of cash flows

B. income statement

C. balance sheet

D. operating budget

Question 11 

A __________ is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.

A. new project team

B. startup team

C. new venture team

D. new venture panel

Question 12 

The members of heterogeneous teams are:

A. diverse in terms of their abilities and experiences.

B. similar in terms of their abilities and experiences.

C. diverse in terms of their experiences, but very similar in terms of their abilities.

D. diverse in terms of their abilities, but very similar in terms of their experiences.

Question 13 

A(n) __________ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist.

A. expertise report

B. talent summary

C. talent profile

D. skills profile

Question 14 

A board of directors is typically made up of both:

A. junior and senior directors.

B. inside and outside directors.

C. experienced and inexperienced directors.

D. novice and expert directors.

Question 15 

A board of directors has three formal responsibilities:

A. write the firm’s strategic plan, declare dividends, and conduct the annual meeting.

B. appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation.

C. appoint the officers of the firm, conduct the annual meeting, and submit the firm’s annual report to the Securities & Exchange Commission.

D. periodically update the firm’s business plan, declare dividends, and write the firm’s marketing plan.

Question 16 

According to the textbook, although a board of directors has formal governance responsibilities, its most useful role is to:

A. provide guidance and support to the firm’s managers.

B. submit papers on behalf of the firm to the SEC.

C. conduct the firm’s annual meeting.

D. represent the firm in public relations activities.

Question 17 

Which of the following is incorrect regarding the typical role of consultants in business startups?

A. international consulting firms, like Accenture and Bearing Point, are financially beyond the reach of most small firms

B. consultants fall into two categories: paid consultants and consultants who are made available for free

C. give expert advice

D. help manage the day-to-day activities of the firm

Question 18 

Amy Phillips founded a cosmetics firm several years ago. Her firm has grown rapidly and is financially successful. One thing that Amy attributes her success to is that early on she assembled a panel of experts who provided her ongoing direction and advice about her business. What Amy created is called a(n):

A. consultation panel.

B. suggestion panel.

C. advisory board.

D. idea board.

Question 19 

In the context of boards of directors, a(n) __________ is someone who is not employed by the firm.

A. outside director.

B. insdie director.

C. external director.

D. impartial director.

Question 20 

The high failure rate among new ventures is due in part to the liability of newness, which refers to the fact that new companies often falter because:

A. they are underfunded and the founders of the firms don’t move quickly enough to put together boards of directors and boards of advisors that can provide them direction and advice.

B. the founders of the firms underestimate the complexities involved with starting a new business and the firms lack a “track record” with outside buyers and sellers.

C. the people who start the firms can’t adjust quickly enough to their new roles and the firms lack a “track record” with outside buyers and sellers.

D. the people who start the firms can’t adjust quickly enough to their new roles and they are underfunded.