ESB EXAM QUESTIONS WITH CORRECT ANSWERS |LATEST UPDATE 100%
SOLVED| GRADED A+
Balance Sheet A summary of business assets (what the business owns) and liabilities (what
the business owes). Also shows owners equity.
Contains information pertaining to owners Equity, Liabilities, & Assets of a business at a specific
point in time.
How to determine equity? Equity = Assets - Liabilities
What is a liability? Obligation that a company must pay. They are necessary because they
allow a business to grow & pay for that expansion.
.
Examples would be loans, mortgages, credit card debt, interest owed, accounts payable,
products, services, payroll, etc.
What is an Asset? Property or objects that owned by the company to produce revenue
Examples of assets: Cash on hand, inventory, equipment, company vehicle
Examples of Short-Term Assets Inventory
Examples of Long-Term Assets Equipment
,Examples of Current Liabilities Bank Loan
Examples of Long-Term Liabilities Mortgage Payment
Fixed Costs Expenses that are constant regardless of consumption/production.
Examples: Property lease, Rent, Insurance, Salaried Employees
Variable Costs Expenses that fluctuate depending on production
Examples: Office Supplies, Water Bill, Utilities, Hourly employees
Startup Costs Expenses incurred before the business is running. These are the bills &
expenses you will need to cover leading up to the launch of your business.
Examples:
Logo design, website design, signage, down payment & improvements on rental property,
business cards, Permits, Licenses, & Incorporation fees
Operating Costs Ongoing expenses required to keep business running. These are separate
from materials to manufacture your product. Examples of operating costs include the following:
Examples of Operating costs:
Rent, payroll, taxes, legal services, loan payments, insurance payments, utilities, marketing
expenses
,Calculate Cash Balance Projected Cash Balance = (Initial Cash Balance + Projected Revenue) -
Projected Expenses
Monthly v. One-Time Costs These expenses should be separated when starting a new
business.
What do lenders need to do in order to get a loan Require business owners to identify the
purpose of the loan by presenting a plan that details how the funds will be used to grow or
improve operations
Equity in a company Owners, founders, partners, and shareholders automatically have
equity in a company
Employees, contractors, advisors, etc.. do not automatically have equity in a company
Debt-to-Income Ratio Maintaining a low debt-to-income ratio is important because
creditors look favorably on companies that can do this. Should a company wish to take on
future debt financing (Bank loan); they would have a greater chance of getting approved.
Debt Financing Debt financing requires borrowing money. A business owner's credit score
does affect their ability to qualify for a loan.
Equity Financing Equity financing requires selling a portion of the company (give up control
in order to obtain funding)
, Main advantage of equity financing is that there is no obligation to repay the money acquired.
Investors do not get paid if the business does not make a profit
Can be used to raise working capital
No additional financial burden on the company
Investor Helps fund a business or a specific project, usually for some kind of stake in the
company.
Small Business Administration (SBA) grants Free money given to small business owners to
help with the launching and development of their business. They do not have to be paid back.
SBA Loans Small Business Administration (SBA) is a government agency that offers loans to
businesses. All loans must be paid back with interest.The maturity terms differ depending on
the type of loan.
If you take out an SBA loan for real estate purposes, it must be paid back within 25 years.
If you take out an SBA loan to purchase equipment or inventory, it must be paid back within 10
years.
Requirements to be eligible for an SBA Loan Must be a FOR-PROFIT business
Must do business in the United States or its territories
Owners must have a responsible owner equity to investment ratio
SOLVED| GRADED A+
Balance Sheet A summary of business assets (what the business owns) and liabilities (what
the business owes). Also shows owners equity.
Contains information pertaining to owners Equity, Liabilities, & Assets of a business at a specific
point in time.
How to determine equity? Equity = Assets - Liabilities
What is a liability? Obligation that a company must pay. They are necessary because they
allow a business to grow & pay for that expansion.
.
Examples would be loans, mortgages, credit card debt, interest owed, accounts payable,
products, services, payroll, etc.
What is an Asset? Property or objects that owned by the company to produce revenue
Examples of assets: Cash on hand, inventory, equipment, company vehicle
Examples of Short-Term Assets Inventory
Examples of Long-Term Assets Equipment
,Examples of Current Liabilities Bank Loan
Examples of Long-Term Liabilities Mortgage Payment
Fixed Costs Expenses that are constant regardless of consumption/production.
Examples: Property lease, Rent, Insurance, Salaried Employees
Variable Costs Expenses that fluctuate depending on production
Examples: Office Supplies, Water Bill, Utilities, Hourly employees
Startup Costs Expenses incurred before the business is running. These are the bills &
expenses you will need to cover leading up to the launch of your business.
Examples:
Logo design, website design, signage, down payment & improvements on rental property,
business cards, Permits, Licenses, & Incorporation fees
Operating Costs Ongoing expenses required to keep business running. These are separate
from materials to manufacture your product. Examples of operating costs include the following:
Examples of Operating costs:
Rent, payroll, taxes, legal services, loan payments, insurance payments, utilities, marketing
expenses
,Calculate Cash Balance Projected Cash Balance = (Initial Cash Balance + Projected Revenue) -
Projected Expenses
Monthly v. One-Time Costs These expenses should be separated when starting a new
business.
What do lenders need to do in order to get a loan Require business owners to identify the
purpose of the loan by presenting a plan that details how the funds will be used to grow or
improve operations
Equity in a company Owners, founders, partners, and shareholders automatically have
equity in a company
Employees, contractors, advisors, etc.. do not automatically have equity in a company
Debt-to-Income Ratio Maintaining a low debt-to-income ratio is important because
creditors look favorably on companies that can do this. Should a company wish to take on
future debt financing (Bank loan); they would have a greater chance of getting approved.
Debt Financing Debt financing requires borrowing money. A business owner's credit score
does affect their ability to qualify for a loan.
Equity Financing Equity financing requires selling a portion of the company (give up control
in order to obtain funding)
, Main advantage of equity financing is that there is no obligation to repay the money acquired.
Investors do not get paid if the business does not make a profit
Can be used to raise working capital
No additional financial burden on the company
Investor Helps fund a business or a specific project, usually for some kind of stake in the
company.
Small Business Administration (SBA) grants Free money given to small business owners to
help with the launching and development of their business. They do not have to be paid back.
SBA Loans Small Business Administration (SBA) is a government agency that offers loans to
businesses. All loans must be paid back with interest.The maturity terms differ depending on
the type of loan.
If you take out an SBA loan for real estate purposes, it must be paid back within 25 years.
If you take out an SBA loan to purchase equipment or inventory, it must be paid back within 10
years.
Requirements to be eligible for an SBA Loan Must be a FOR-PROFIT business
Must do business in the United States or its territories
Owners must have a responsible owner equity to investment ratio
