7.1 Test Review

The U.S. economy is built around Private Enterprise, and specifically, Capitalism. With this economic system, the __________ is the driver that leads to risk-taking and the creation of economic value through innovation.

• profit motive

• gross profit

• capital

• inventory

The financial gain earned when the revenue generated from a business exceeds all the expenses associated with achieving that revenue, over a certain time period is:

• capital

• profit

_________________ is an estimate/projection of future revenues, expenses, net income, and capital needed to fund the company’s operations.

• Capital

• Profit

• Proforma

• Revenue

What is used to report revenues, expenses and income for a specific time period?

• Profit and Loss Statement

• Cost of Goods Sold

• Gross Profit

• Proforma

When a shoe manufacturer purchases fabric, rubber, and other raw materials, then adds all the direct labor and manufacturing costs used to produce those shoes, that is:

• Gross Profit

• Profit and Loss Statement

• Total Operating Expenses

• Cost of Goods Sold

How is Gross Profit calculated?

• Revenue minus Cost of Goods Sold

• Revenue plus Cost of Goods Sold

• Cost of Goods Sold minus Revenue

• Revenue divided by Cost of Goods Sold

Gross Profit is calculated as Revenue minus Cost of Goods Sold, not: Revenue plus Cost of Goods Sold, Inventory minus Revenue, or Inventory plus Revenue. Which of the following is the correct formula for Gross Profit?

• Revenue minus Cost of Goods Sold

• Revenue plus Cost of Goods Sold

• Inventory minus Revenue

• Inventory plus Revenue

Which term correctly completes the definition? Operating ________ are directly associated with operating a business.

• Goods

• Expenses

• Sales

• Categories

Some common on-going expense categories include Operations Expense, General and Administrative (G&A) and what else? Select TWO options.

• Formation Filings

• Registration

• Personnel

• Sales and Marketing

• Permits and Licenses

The “Personnel” expense category includes employee benefits, workers’ compensation, and what else? Select all that apply.

• payroll taxes

• wages