sole proprietorship

       partnership

       corporation

       joint venture

2. Sole proprietorships characteristically are: (Points : 1)

       fairly complex to create.

       subject to special legal restrictions.

       expensive to create.

       easy to discontinue.

3. A distinct disadvantage of the corporate form of ownership is: (Points : 1)

       treasury stock.

       double taxation.

       stockholder’s liability.

       all of the above.

4. The ________ codifies the body of law dealing with partnerships in the United States. (Points : 1)

       Small Business Partnership Agreement

       Uniform Partnership Act (UPA)

       Partnership Agreement

       None of the above

5. All partnerships must have: (Points : 1)

       at least three limited partners.

       no dormant partners.

       at least one general partner.

       at least one silent or money partner.

6. If a partnership is formed without an agreement, the partnership is automatically subject to the: (Points : 1)

       Certification of Incorporation laws.

       Uniform Partnership Act.

       Limited Liability Company Act.

       Revised Uniform Limited Partnership Act.

7. The key to choosing the “right” form of ownership is: (Points : 1)

       knowing the cost factor in time and money.

       understanding how each form affects both business and personal circumstances.

       having an experienced attorney and accountant to advise you in the choice.

       the fact you cannot change the form of ownership once your company is established.

8. Common ownership interest in a business, sharing profits (or losses) of a business, and the right to participate in managing the operations of the business are characteristics of a(n): (Points : 1)

       corporation.

       sole proprietorship.

       partnership.

       S-corporation.

9. Which type of ownership is not subject to federal taxation? (Points : 1)

       Sole Proprietorship

       Corporations

       Partnership

       Limited Liability Corporation

10. Acme Corporation is chartered in Delaware, but its primary area of operation is in South Carolina. In South Carolina, Acme would be considered a(n) ________ corporation. (Points : 1)

       alien

       domestic

       foreign

       local

11. Corporations can also stimulate managers’ and employees’ incentive on the job by creating an ________ (ESOP). (Points : 1)

       Entrepreneur Stock Ownership Plan

       Employee Stock Ownership Plan

       Employee Shares Ownership Plan

       Entrepreneur Shares Ownership Plan

12. An owner should choose an S-corporation form of ownership when he/she: (Points : 1)

       has an established company that is suffering losses due to double taxation.

       is starting up a company and anticipating either net losses or high profits with large dividends.

       owns a company in which net profits before any compensation to shareholders are less than $100,000 per year.

       has an existing sole proprietorship and wants to lower the tax bill through deducting fringe benefits as business expenses.

13. The ________ ratio is a measure of a company’s ability to make the interest payments on its debt. (Points : 1)

       debt-to-net worth

       times-interest-earned

       net sales-to-working capital

       net profit-to-equity

14. The rule for the balance sheet is: (Points : 1)

       Assets = Liabilities + Owner’s Equity

       Assets – Liabilities = Owner’s Equity

       Liabilities = Assets – Owner’s Equity

       All of the above

15. Depreciation is: (Points : 1)

       the difference between the total sources available to the owner and the total uses of those assets.

       listed as a source of funds because it is a noncash expense, deducted as a cost of doing business.

       the owner’s total investment at the company’s inception plus retained earnings.

       creditors’ total claims against the firm’s assets.

16. One of the most important tasks facing an entrepreneur is: (Points : 1)

       establishing a large enough reserve of capital.

       earning enough the first year to provide an adequate return on investment.

       the deferment of taxes.

       determining the funds needed for a company start-up.

17. The ________ ratio is the liquidity ratio most commonly used as a measure of short-term solvency. (Points : 1)

       working capital ratio

       quick

       debt-to-net worth

       turnover

18. Which of the following would be a sign that a company is overextended in its debt? (Points : 1)

       A low debt ratio compared to the industry average

       A debt-to-net worth ratio of 0.12 to 1

       A times-interest-earned ratio that is far below the industry average

       A high inventory turnover ratio

19. The ________ is built on the basic accounting equation: Assets = Liabilities + Owner’s Equity. (Points : 1)

       income statement

       sources and uses of funds statement

       balance sheet

       cash budget

20. The most meaningful basis for comparing operating ratios is: (Points : 1)

       other companies of similar size in the same industry.

       companies within the neighborhood.

       major corporations in the same industry.

       all publicly traded companies.

21. Evaluates the firm’s overall performance and show how effectively it is putting its resources to work. This is called: (Points : 1)

       operating ratios.

       debt to equity ratio.

       accounts receivable turnover ratio.

       all of the above.

22. ________ ratios measure the financing supplied by business owners and that supplied by the firm’s creditors. (Points : 1)

       Leverage

       Profitability

       Liquidity

       Operating

23. ________ ratios tell whether or not the small company will be able to meet its maturing obligations as they come due. (Points : 1)

       Leverage

       Profitability

       Liquidity

       Operating

24. ________ measure how efficiently the firm is operating and offer information about its bottom line. (Points : 1)

       Operating ratios

       Profitability ratios

       Balance Sheet ratios

       All of the above

25. The heart of the cash budget is the ________ forecast. (Points : 1)

       cash receipts

       cash disbursements

       sales

       receivables

26. A cash budget is only as accurate as the ________ forecast from which it is derived. (Points : 1)

       profit

       receivables

       income

       sales

27. The “big three” of cash management include: (Points : 1)

       accounts receivable, overhead, and inventory.

       accounts payable, accounts receivable, and taxes.

       accounts receivable, accounts payable, and inventory.

       accounts receivable, prices, and expenses.

28. ________ is simply a “cash map” which shows the amount and the timing of cash receipts and cash disbursements over time. (Points : 1)

       The income statement

       A balance sheet

       A cash budget

       The pro forma

29. An important source of credit information that collects information on small businesses that other reporting services ignore is: (Points : 1)

       National Association of Credit Management.

       TRW.

       Dun & Bradstreet.

       National Association of Small Business Owners.

30. The first step to building a workable credit policy is: (Points : 1)

       screening customers carefully before granting them credit.

       establishing a firm credit policy in writing.

       developing a policy for pursuing past-due accounts.

       creating a thorough credit application.

31. The cash budget is based on the ________ method of accounting. (Points : 1)

       cash

       financial

       accrual

       hybrid

32. The statement, “collection of accounts receivable lags behind sales,” means that: (Points : 1)

       the collection of funds in the accounts receivable is always late.

       customers always are late in paying their bills.

       the customers who purchased goods on credit may not pay until a month or more later.

       None of the above

33. ________ measures a company’s liquidity and its ability to pay its bills and other financial obligations on time by tracking the flow of cash into and out of the business over a period of time. (Points : 1)

       Forecasting

       Cash Flow

       Cash on hand

       None of the above

34. When creating the cash budget, keep in mind that: (Points : 1)

       it should be a monthly plan, projected out for 3 years.

       the more variable the sales pattern, the shorter the planning horizon should be.

       it should be quarterly estimates for a period of 1 year.

       it is a verbal or mental “document” in order to permit maximum flexibility.

35. Lockbox refers to: (Points : 1)

       customers send payments to a post office box the bank maintains.

       customers send payments to company’s mail box that has a lock.

       customers send payments to collection company’s mail box.

       None of the above

36. When investing surplus cash, the small business owner’s key objectives should be: (Points : 1)

       high yields.

       current income.

       liquidity and safety.

       long-term yield.

37. At the end of a(n) ________, a business may exercise an option to purchase the equipment, usually for a nominal sum. (Points : 1)

       capital lease

       operating lease

       open-ended lease to return

       None of the above

38. A key to effective innovation by the entrepreneur is: (Points : 1)

       dedicating at least 20% of pre-tax revenues to R & D.

       always looking for new product and service ideas.

       hiring managers with a track record for innovation.

       None of these

39. The right price for a product depends on which factors? (Points : 1)

       A small company cost structure

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