Fashion Entrepreneurship: Retail Business Planning Chapter 11 Quiz
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Fashion Entrepreneurship: Retail Business Planning Chapter 11 Quiz

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Questions and Answers

What do financial statements help to gauge about a business?

  • The market share of the business
  • The financial condition of the business (correct)
  • The number of employees hired
  • The location of the business premises
  • Which action regarding the business does not require written permission from the publisher?

  • Photocopying the presentation
  • Calculating start-up costs (correct)
  • Developing sales projections
  • Interpreting financial statements
  • What is one of the objectives mentioned in Chapter 11 of the book?

  • Estimating start-up costs (correct)
  • Developing a product prototype
  • Creating social media campaigns
  • Designing promotional materials
  • What is a key aspect of financial planning according to the text?

    <p>Comparing financial information with industry benchmarks</p> Signup and view all the answers

    What is the primary focus of financial statements in relation to a business?

    <p>Gauging the financial health of the business</p> Signup and view all the answers

    Which task is NOT mentioned as an objective in Chapter 11 for building a financial plan?

    <p>Develop effective social media engagement strategies</p> Signup and view all the answers

    What is the primary focus of a financial plan according to the text?

    <p>Enhancing profitability</p> Signup and view all the answers

    Which document is NOT listed as one of the three basic financial documents?

    <p>Sales forecast</p> Signup and view all the answers

    Which term is NOT considered a key financial term for entrepreneurs?

    <p>Inventory</p> Signup and view all the answers

    Which financial outcome is specifically mentioned in the text as a focus of the financial plan?

    <p>Debt management</p> Signup and view all the answers

    What kind of document are pro forma financial statements?

    <p>Forecasted financial statements</p> Signup and view all the answers

    Which term refers to what remains after deducting expenses from revenue?

    <p>Net income</p> Signup and view all the answers

    What does the Cash Flow Statement reflect?

    <p>All cash flowing in and out of the business each month</p> Signup and view all the answers

    What type of capital is needed for working day-to-day operations of a fashion retail business?

    <p>Working capital</p> Signup and view all the answers

    Which financial statement provides a comparison of expenses and revenue over a certain period of time?

    <p>Income Statement</p> Signup and view all the answers

    What is included in the Financial Planning Template mentioned in the text?

    <p>Financial assumptions like start-up costs and operating expenses</p> Signup and view all the answers

    Which type of funding involves obtaining funds through credit cards and microloan programs?

    <p>Debt Financing</p> Signup and view all the answers

    What is the purpose of the Balance Sheet in financial reporting?

    <p>Snapshot of the business at a given point in time</p> Signup and view all the answers

    Which category of financial ratios focuses on how well a company can meet its short-term obligations?

    <p>Liquidity ratios</p> Signup and view all the answers

    What do profitability ratios primarily assess?

    <p>Ability to generate profits</p> Signup and view all the answers

    Which type of financial ratio evaluates the level of risk associated with a company's operations?

    <p>Risk ratios</p> Signup and view all the answers

    Efficiency ratios are primarily concerned with assessing a company's:

    <p>Resource utilization efficiency</p> Signup and view all the answers

    Which financial metric helps determine the point at which a business neither makes a profit nor incurs a loss?

    <p>Break-even point</p> Signup and view all the answers

    What do liquidity ratios primarily indicate about a company?

    <p>Ability to meet short-term obligations</p> Signup and view all the answers

    What financial statement is used to represent a company's financial position at a specific point in time?

    <p>Balance sheet</p> Signup and view all the answers

    Which ratio measures a company's ability to cover its short-term liabilities with its most liquid assets?

    <p>Liquidity ratio</p> Signup and view all the answers

    What does the debt-to-equity ratio indicate about a company?

    <p>Its leverage level</p> Signup and view all the answers

    Which term refers to the portion of revenue that exceeds total costs and expenses in a business?

    <p>Net income</p> Signup and view all the answers

    What does the return on assets (ROA) ratio measure for a company?

    <p>Efficiency in using assets to generate profits</p> Signup and view all the answers

    Which type of financing involves raising funds by selling shares of ownership in a company?

    <p>Equity financing</p> Signup and view all the answers

    Study Notes

    The Importance of Financial Planning

    • Financial statements are used to gauge the financial condition of a business and tell a story about its financial health.
    • Almost every decision made about the business has a financial impact.

    Analyzing Financial Statements

    • Financial statements are divided into four categories: liquidity, profitability, risk, and efficiency ratios.
    • These ratios help entrepreneurs understand how well their business is operating.

    Key Financial Ratios

    • Liquidity ratios measure a company's ability to pay its debts.
    • Profitability ratios measure a company's ability to generate earnings.
    • Risk ratios measure a company's ability to manage its debt.
    • Efficiency ratios measure a company's ability to use its assets and resources.

    The Break-Even Point

    • The break-even point is the point at which a business's revenue equals its total fixed and variable costs.
    • Fixed costs are costs that remain the same even if the business produces more or less.
    • Variable costs are costs that change depending on the business's production level.

    Maintaining Financial Records

    • Maintaining good financial records helps prevent catastrophes and ensures the business's financial health.

    Finding Financial Information

    • Resources for finding financial information include the National Retail Federation, magazines, and journals.
    • The North American Industry Classification System (NAICS) is also a useful resource.

    Key Financial Terms

    • Sales or revenues refer to the income generated by a business.
    • Asset refers to something a business owns or controls.
    • Cost of goods sold or cost of product/service refers to the cost of producing or purchasing a product.
    • Liability refers to a debt or obligation that a business owes.
    • Debt refers to borrowed money.
    • Net income refers to the profit earned by a business.
    • Equity refers to the ownership interest in a business.
    • Owner's equity refers to the amount of money invested in a business by its owners.
    • Stock or merchandise refers to the goods or products that a business sells.
    • Expenses refer to the costs incurred by a business.
    • Pro forma financial statements are projected financial statements that estimate a business's future performance.

    Financial Outcomes

    • The financial plan focuses on three primary outcomes: financial performance, cash flow, and profitability.

    The Financial Statements

    • The three basic financial documents are:
      • The Cash Flow Statement, which reflects all cash flowing in and out of the business each month.
      • The Income Statement, or profit and loss statement, which compares expenses and revenue over a certain period of time.
      • The Balance Sheet, which is a snapshot of the business at a given point in time.

    Financial Planning Template

    • A financial planning template includes:
      • Financial assumptions
      • Start-up costs
      • Planned sales
      • Planned markdowns
      • Six-month merchandising plan
      • Operating expenses
      • Capital expenditures
      • Market value
      • Depreciation
      • Equity and loan amortization
      • Equity injections
      • Amortizing business loans
      • Line of credit
      • Owner's draw

    Accessing Capital

    • Fashion retail businesses need three types of capital: seed capital, working capital, and growth capital.
    • There are two types of funding: debt financing and equity financing.
    • Sources of funds include:
      • Family and friends
      • Credit cards
      • Commercial banks
      • Microloan programs
      • Crowd funding
      • Angel investors
      • Venture capitalists

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    Description

    Test your knowledge on the content covered in Chapter 11 of 'Fashion Entrepreneurship: Retail Business Planning, Third Edition' by Michele M. Granger, EdD, ITAA, Tina M. Sterling, and Ann Cantrell. Explore key concepts related to building a successful fashion business.

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