Ortega ch 7 - Chapter 7: Preparing and Understanding...

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Unformatted text preview: Chapter 7: Preparing and Understanding Financial Statements 1. A ____ is simply the strategies and tactics a business uses to ensure that, at least at some point, its revenues will be greater than its costs, resulting in profit. a. Gambit b. Business model c. Action plan d. Financial plan ANS: B A business model is simply the strategies and tactics a business uses to ensure that, at least at some point, its revenues will be greater than its costs, resulting in profit. 2. To determine the funds needed to launch and sustain the venture as it grows, is one of the important goals of ____. a. Auditing b. Accounting c. Business model d. Financial planning ANS: D One of the most important goals of financial planning for a new venture is to determine the funds needed to launch and sustain the venture as it grows. 3. The entrepreneur must obtain sufficient seed capital to sustain the venture to the point at which its revenues ____. a. Meet the expenses b. Are just enough to pay all bills c. Exceed its expenses d. Start trickling it ANS: C The entrepreneur must obtain sufficient seed capital to sustain the venture to the point at which its revenues exceed its expenses (it becomes profitable). 4. In the start-up stage, before the venture is operating and generating actual revenues and costs for entry into an accounting system, the entrepreneur must estimate them. This estimate is achieved through ____. a. Cash flow statements b. Bank statements c. Pro forma financial statements d. The balance sheet ANS: C In the start-up stage, before the venture is operating and generating actual revenues and costs for entry into an accounting system, the entrepreneur must estimate them. This estimate is achieved through pro forma financial statements. 5. Three primary financial statements that businesses use to forecast and record operating results are ____. a. Profit and loss statement, cash flow statement, and balance sheet b. Accounts receivable, accounts payable, and inventory control systems c. Profit and loss statement, accounts receivable, and substatements d. Substatements, cash flow statement, and balance sheet ANS: A Three primary financial statements that businesses use to forecast and record operating results: the profit and loss statement, the cash flow statement, and the balance sheet. 6. In a business plan, entrepreneurs are typically required to provide pro forma statements that estimate operating activity for at least ____....
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Ortega ch 7 - Chapter 7: Preparing and Understanding...

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