Operations and Financial Management

The basic financial equation is

• Sales - Inventory costs = Profit

• Revenue - Expenses = Owner's Equity

• Assets - Liabilities = profit

• Revenue - Expenses = Profit or Loss

Which of the following are the costs of operating a business?

• Financial ratio

• Expenses

• Revenues

• Profit

If a company is VERY profitable then that must mean that

• Revenues were higher than expenses during that time.

• Expenses and revenues were about the same.

• Expenses were larger than revenues

• Bozo the clown was working overtime.

The following is a 3 to 6 month snapshot of the company's revenues and expenses:

• Balance Sheet

• Financial ratios

• Income Statement

• Inventory list

The following items appear on a balance sheet EXCEPT:

• Assets

• Owner's equity

• Revenues

• Liabilities

Which explanation below explains WHY owner's equity is on the same side of the balance sheet as liabilities?

• Most owners are just a liability, not really much help to anyone.

• If the company were to sell to another company then that owner would have to be paid the amount equal to their equity in the company.

• There is no explanation...this is not true

• Owner's equity is not listed on the same side as liabilities.

Which of the following equations is true?

• Expenses - Revenues = Profit

• Assets - Liabilities = Revenue

• Revenues - Expenses = Net Income

• Profit - Expenses = Assets

Financial ratios (like a debt to income ratio) are used for what purpose?

• To see if Bozo has spent too much money.

• To be an indicator of how well the company is performing financially.

• To verify inventory levels for the company

• Decide if Bozo should be fired or not

Which budget is an estimate of the actual money received and paid out for a specific period?

• Start-up Budget

• Cash Budget

• Clown budget

• Vacation budget

The following items are listed on an income statement:

• Assets, liabilities, owner's equity

• Revenue, Expenses and Net Income

• Revenue, owner's equity, expenses

• Expenses, Assets, Liabilities