WorksheetsLesson 2.2 The Cost of Doing Business Review
Total questions: 21
Worksheet time: 11mins
A farmer purchases a grain storage bin for $12,000. It has an estimated salvage value of $2,000 and a useful life of 10 years. What is the annual depreciation expense using the straight-line method?
$800
$1,000
$1,200
$1,400
Why do businesses calculate depreciation?
To determine the market value of their assets each year
To reduce taxable income by spreading out the cost of an asset over time
To prepare for purchasing new equipment
To track cash flow more accurately
Which of the following is considered a noncash expense in a business?
Purchasing livestock
Paying employee wages
Depreciation on farm equipment
Buying fertilizer
The salvage value of an asset refers to:
The amount an asset is worth when it is fully depreciated
The amount a business pays for repairs over its useful life
The total value lost from depreciation
The cost of replacing an asset with a new one
A student borrows $10,000 for 6 months at an annual interest rate of 4%. What is the total interest expense?
$200
$250
$300
$400
What does the term loan principal refer to?
The total amount borrowed before interest
The amount a borrower repays monthly
The interest charged on a loan
The final amount owed after interest is applied
If a business loan has a higher interest rate, what happens to the total cost of borrowing?
It decreases because payments are spread out
It stays the same as long as the loan term remains unchanged
It increases because more interest is charged over time
It depends on the type of asset being financed
A dairy business has $50,000 in revenue and $35,000 in expenses (including labor costs). What is the net income?
$10,000
$15,000
$20,000
$25,000
A positive net income means:
The business is making a profit
The business has no outstanding debts
The business does not need to track expenses
The business has no financial risks
A farm has $8,000 in net income and $40,000 in total assets. What is its return on assets (ROA)?
5%
10%
15%
20%
What does a higher Return on Assets (ROA) indicate about a business?
It is effectively using its assets to generate profits
It has fewer total assets than competitors
It has higher depreciation costs
It needs to increase its asset base
A chicken farmer has $600 in total expenses. They sell eggs for $3.00 per dozen. How many dozen eggs must they sell to break even?
200 dozen
150 dozen
175 dozen
225 dozen
If a farmer produces 250 dozen eggs and has $750 in total costs, what should their minimum price per dozen be to break even?
$2.50 per dozen
$3.00 per dozen
$3.50 per dozen
$4.00 per dozen
Why should a business owner track their time investment?
To determine if their effort is generating fair returns
To increase expenses and lower net income
To avoid depreciation costs
To calculate employee salaries
A business owner can determine the value of their time investment by:
Estimating the hourly wage they would earn elsewhere
Ignoring time spent on unpaid tasks
Only tracking time spent selling products
Counting inventory and supplies
Which of the following is a fixed cost in a farm business?
Feed costs that change with herd size
Monthly barn rental fees
Utility bills that fluctuate seasonally
Labor wages based on hours worked
A cash flow statement helps business owners:
Determine profit from total assets
Track incoming and outgoing money to ensure bills can be paid
Avoid paying taxes on business earnings
Measure depreciation of equipment
What is the main purpose of an income statement?
To track a business’s expenses and revenue over time
To list all physical assets owned by a business
To calculate depreciation on equipment
To record business loan payments
How can creating a budget benefit a business?
It eliminates all financial risks
It helps track expenses and allocate money efficiently
It guarantees profit at the end of the year
It determines the exact selling price of products
Which of the following would be a warning sign that a business is struggling financially?
A consistently positive cash flow
High net income and low debt
Struggling to cover expenses due to low revenue
Increasing investment in new equipment
Define:
Depreciation
