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Small Business Financials Knowledge Test

Answer each of the 20 multiple choice questions. At the bottom of the page, click on the submit button. Within a couple of seconds you will have your score as well as the answers to any questions you answered incorrectly.

1. Price minus cost divided by retail is:
gross profit
gross margin
net profit

2. Items on a balance sheet are either long term or current. The distinction between the two is:
6 months
3 months
365 days
30 days

3. Book value is:
Net worth of a business
The price of a good book
The going price of an item
Initial cost minus depreciation

4. Retained earnings is:
Unpaid payroll
Profit of a business year to date
Profit earned, but not yet taken from the business
Total profit since the business began

5. A profit & loss statement is also known as:
Financial sheet
Equity sheet
Balance sheet
Income statement

6. Fair market value is:
The same as book value
A grocery store term
A way of determining the price of an item
The price you would get if you sold the item

7. Expenses on a profit & loss statement are shown as a percentage of:
Gross income
Net income
Gross sales
Net sales

8. Assets minus liabilities is:
Always a positive dollar amount
Net income

9. Cash basis accounting means:
You pay your accountant in cash
Receivables and payables are cleared at the end of each accounting period
The majority of your revenue is cash
A business that does not accept checks

10. Which of these is not an asset:
Notes payable

11. Which of these is not a liability:
Stockholder Equity
Notes payable
Accounts payable

12. Accrual basis accounting is:
Used only by major corporations
Certain incomes and expenses reported over several accounting periods
Illegal accounting techniques
Used by businesses that do most of their business by bank cards

13. Depreciation is:
Treatable with medicine
The same as fair market value
Reducing the value of an asset over time
What happens after being in business too long

14. A cashflow chart is:
An item that has been replaced by computers
The same as a budget
Used only by big companies
A way of accurately projecting your future cash needs

15. While a budget is a great tool, it is an incomplete tool because:
It is only a guess
budgets are like diets - they never work
there is no indication that there is sufficient cash for the business
budget is only a car rental business

16. Annual gross profit dollars divided by average inventory at cost is:
Net profit
Turn rate
Gross Margin Return on Investment

17. Which item does not appear on the balance sheet?
Interest expense
Principal payment
Cash on hand

18. Gross Margin Return on Investment should be:
less than 1
1 to 1.2
1.2 to 1.5
greater than 1.5

19. Assets minus liabilities is:
Net Profit
Gross profit
Net worth

20. Which item does not appear on the profit and loss statement?
Net profit
Cash on hand

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