| A | B |
|---|---|
| What is the basic financial equation for businesses? | The basic financial equation is (Revenue-Expense=Profit or Loss). |
| What are the three types of budgets needed by all businesses? | The three business budgets include start-up, operating, and cash. |
| What are the four steps in preparing a budget? | The four steps include listing expenses and income; gathering accurate information from business records; creating the budget by calculating each type of income; expense, and the amount of net income/loss; and explain the budget to people who need financial information to make decisions. |
| How has the process of maintaining financial records been affected by technology? | Technology allows point-of-production and point-of-sale to enter data. Technology has made financial record keeping more efficient. |
| What is the difference between a balance sheet and an income statement? | The balance sheet shows assets, liabilities, and net worth. The income statement shows income, expenses, and net loss/net profit. |
| What are four financial performance ratios used by managers to determine the financial well-being of a business? | The four ratios are current ratio, debt to equity ratio, return on equity ratio, and net income ratio. |
| What are three steps in financial decision-making? | Three steps in financial decision-making include preparing a budget, use the budget to operate the business, and make needed adjustments. |
| What do financial statements tell others about the strength of a company. | The financial statements begin with the company’s budget. Investors, the government, shareholders, and others look at financial statements to determine the strength of a company |
| Over 50% of new businesses fail within five years. | One of the biggest reasons for failure is not enough start-up funds. Cash flow is huge for a business. |
