Small Business Management Exam
3 UPDATED QUESTIONS AND
CORRECT ANSWERS
Seed Capital (Start-up Investment) - CORRECT ANSWER The one-time expense required to
open a business.
Prototype - CORRECT ANSWER A model or pattern showing how a product would look and
operate.
Payback Period - CORRECT ANSWER ETA to earn sufficient funds to cover start-up
investment
(Start-up investment / net cash flow per month)
Variable Costs - CORRECT ANSWER Expenses that change directly with changes in
production or sales volume.
Fixed Costs - CORRECT ANSWER Expenses that must be paid regardless of the volume of
sales generated.
Contribution Margin - CORRECT ANSWER gross profit per unit
(Selling price - total variable costs)
Inventory Costs - CORRECT ANSWER Expenses associated with materials and direct labor
for production until the product sells.
Fixed Operating Costs - CORRECT ANSWER Expenses that do not vary with changes in
production or sales volume.
Depreciation - CORRECT ANSWER The percentage of value subtracted from an asset to show
its declining value.
, Net Profit - CORRECT ANSWER The revenue left over after subtracting fixed costs, variable
costs, and taxes.
Audit - CORRECT ANSWER A review of records to show integrity and compliance with
standards and laws.
Cash Accounting Method - CORRECT ANSWER entries are made only when cash is received
or paid.
Accrual Method - CORRECT ANSWER transactions are recorded when they occur, regardless
of payment date.
Income Statement - CORRECT ANSWER difference between revenue and expenses, net profit
(+) or net loss (-)
Double Bottom Line - CORRECT ANSWER Making a profit to stay in business while also
achieving a social mission.
Balance Sheet Equation - CORRECT ANSWER Assets = Liabilities + Owner's Equity.
Asset - CORRECT ANSWER Items owned by a business that have monetary value.
Liabilities - CORRECT ANSWER Debts owed by a company to outside parties.
Net Worth (Owner's Equity) - CORRECT ANSWER Total assets - total liabilities
corporations = outstanding stock
Fiscal Year - CORRECT ANSWER Any 12-month financial reporting period, which may not
align with the calendar year.
Current Assets - CORRECT ANSWER Cash or assets that can be converted to cash within one
year.
3 UPDATED QUESTIONS AND
CORRECT ANSWERS
Seed Capital (Start-up Investment) - CORRECT ANSWER The one-time expense required to
open a business.
Prototype - CORRECT ANSWER A model or pattern showing how a product would look and
operate.
Payback Period - CORRECT ANSWER ETA to earn sufficient funds to cover start-up
investment
(Start-up investment / net cash flow per month)
Variable Costs - CORRECT ANSWER Expenses that change directly with changes in
production or sales volume.
Fixed Costs - CORRECT ANSWER Expenses that must be paid regardless of the volume of
sales generated.
Contribution Margin - CORRECT ANSWER gross profit per unit
(Selling price - total variable costs)
Inventory Costs - CORRECT ANSWER Expenses associated with materials and direct labor
for production until the product sells.
Fixed Operating Costs - CORRECT ANSWER Expenses that do not vary with changes in
production or sales volume.
Depreciation - CORRECT ANSWER The percentage of value subtracted from an asset to show
its declining value.
, Net Profit - CORRECT ANSWER The revenue left over after subtracting fixed costs, variable
costs, and taxes.
Audit - CORRECT ANSWER A review of records to show integrity and compliance with
standards and laws.
Cash Accounting Method - CORRECT ANSWER entries are made only when cash is received
or paid.
Accrual Method - CORRECT ANSWER transactions are recorded when they occur, regardless
of payment date.
Income Statement - CORRECT ANSWER difference between revenue and expenses, net profit
(+) or net loss (-)
Double Bottom Line - CORRECT ANSWER Making a profit to stay in business while also
achieving a social mission.
Balance Sheet Equation - CORRECT ANSWER Assets = Liabilities + Owner's Equity.
Asset - CORRECT ANSWER Items owned by a business that have monetary value.
Liabilities - CORRECT ANSWER Debts owed by a company to outside parties.
Net Worth (Owner's Equity) - CORRECT ANSWER Total assets - total liabilities
corporations = outstanding stock
Fiscal Year - CORRECT ANSWER Any 12-month financial reporting period, which may not
align with the calendar year.
Current Assets - CORRECT ANSWER Cash or assets that can be converted to cash within one
year.
