SBA Business Operations & Management Flashcards

What is a break-even analysis used for in small business management?

Answer: Determining the sales volume needed to cover all costs

A break-even analysis calculates the level of sales a business must achieve to cover all its fixed and variable costs, resulting in neither profit nor loss.

Which inventory management method assumes the most recently purchased items are sold first?

Answer: LIFO (Last In, First Out)

LIFO (Last In, First Out) is an inventory accounting method where the most recently acquired inventory is assumed to be sold first.

What is the purpose of an Employer Identification Number (EIN) for a small business?

Answer: Identify the business for federal tax purposes

An EIN (Employer Identification Number) is a federal tax ID issued by the IRS to identify a business entity for tax reporting and banking purposes.

What does accounts receivable represent on a small business balance sheet?

Answer: Money owed to the business by customers for goods or services delivered

Accounts receivable represents the amounts owed to a business by its customers for products or services that have been delivered but not yet paid for.

Which metric measures how efficiently a business converts sales into profit after all expenses?

Answer: Net profit margin

Net profit margin measures the percentage of revenue remaining after all expenses, taxes, and costs are deducted, showing overall profitability.

What is the main purpose of a company's employee handbook?

Answer: Communicate policies, expectations, and procedures to employees

An employee handbook documents company policies, workplace expectations, benefits, and procedures, serving as a reference for both employees and management.