SBA Financial Management & Funding Resources 4

Question 1

A startup business has no operating history. What type of financial document will lenders typically require to evaluate future repayment ability?

Accepted Answer

Pro forma financial projections

Answer

Pro forma financial projections (projected income statements, balance sheets, and cash flow statements) show lenders how a startup anticipates generating revenue and repaying the loan.

Question 2

Which term describes the point at which a business's total revenues equal its total costs, resulting in neither profit nor loss?

Accepted Answer

Break-even point

Answer

The break-even point is where total revenue equals total costs (fixed + variable), meaning the business covers all expenses but has not yet generated profit.

Question 3

Under SBA guidelines, which of the following would typically classify a business as a 'small business' for manufacturing?

Accepted Answer

Fewer than 500 employees

Answer

For most manufacturing industries, the SBA size standard is based on the number of employees, typically 500 employees or fewer, though this varies by NAICS code.

Question 4

Which document summarizes a business's assets, liabilities, and owner's equity at a specific point in time?

Accepted Answer

Balance Sheet

Answer

The Balance Sheet (Statement of Financial Position) provides a snapshot of what a business owns (assets), owes (liabilities), and the owners' stake (equity) on a specific date.

Question 5

What is 'working capital' in small business financial management?

Accepted Answer

Current assets minus current liabilities

Answer

Working capital = Current Assets − Current Liabilities, representing the liquid resources available to fund day-to-day business operations.

(SBA) Small Business Administration Certified Business Practice Test

(SBA) Small Business Administration Certified Business Practice Test

SBA Financial Management & Funding Resources 4