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Comprehensive Study Guide for Midterm Exam in Business Fundamentals

This study guide covers key concepts from the midterm exam for the course on business fundamentals. It addresses essential startup requirements such as the purpose of business plans, organizational structures, and sources of startup capital. It explores the importance of accurate record-keeping, differentiating between bookkeeping and accounting, and the significance of financial statements. Additional chapters analyze market fundamentals, breakeven points, working capital management, and cash management strategies. Ideal for preparing for essay questions and accounting entries.

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Comprehensive Study Guide for Midterm Exam in Business Fundamentals

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  1. FIN 292 (EBD302) Midterm Exam [Homework] Study Guide

  2. Chapter 1: startup requirements • The Business Plan is widely considered to have two uses: [Discuss] • An organizational plan for the potential entrepreneurs • An information document for potential investors • Every new business has 2 important hurdles. What are they? • How does the sole proprietorship differ from a limited liability company in terms of personal liability? • What are 3 sources of startup capital? What are the pros and cons of each? • What is a pro forma financial statement? Why do we prepare them?

  3. Chapter 2: basics of record keeping • Why should business owners keep accurate records? • How do we define bookkeeping? How does it differ from accounting? • How does the general journal differ from a specialized lecture? • What is the Chart of Accounts? • Why is double entry accounting more accurate than the single entry method? • How does Cash Basis Accounting differ from Accrual Basis Accounting?

  4. Chapter 3: Integrating Accounting, Finance, Marketing and Economics • Why are the concepts of supply and demand important to the business owner? • Why is right-sizing an important concept? • How do businesses differ in their production functions? • What does it mean to be capital intensive business? • What does the Statement of Cash Flows tell us about the business? • Why are economic profits important?

  5. Chapter 4: Breakeven Point Analysis and Operating Leverage • Why is it important for the owner(s) to know their breakeven point in sales? • How do we the breakeven point in sales? • What is contribution margin and why is it important? • What is operating leverage? • How is the degree of operating leverage affected by the business’s production function? • How does the degree of operating leverage affect breakeven point?

  6. Chapter 5: Working Capital Management • How does a financial manager define working capital? How does it differ from the Accountants definition? • What are capital management objectives with respect to Cash, Accounts Receivable, and Inventory? • What do we mean by Liquidity when referring to working capital? • What is the Cash Conversion Cycle and why is it important business owner? • What does the current ratio tell us about the level of liquidity for a business?

  7. Chapter 6: Cash Management • What are the 2 basic rules for cash management? • What are some of the techniques a business will use to speedup payments from customers that are geographically distant? • Why should business owners prepare cash budgets? • What is meant by the following terms? • Inventory Conversion Period • Receivables Collection Period • Payables Deferral Period

  8. Midterm • 5 Essay Questions • 5 Accounting Entries: Debit - Credit • Revenues • Expenses • Current Assets, Current Liabilities

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