Final Exam ReviewChapters 6 - 13

EBD-301Accounting and Finance For Entrepreneurs

Chapter 6BASICS OF BUSINESS TAXATION

• How does the IRS distinguish between a hobby and a business?• What is a qualified joint venture? How do the couple file

their returns?• How are the profits of an S-corporation taxed? A C-

corporation?• How are LLC’s treated by the IRS when they have 1

member? 2 members?

Chapter 7Forms of Business and Personal

Liability• Which form has the greatest personal liability? The

least?• What does it mean to when the court of law pierces the

corporate veil?• Must a business be run on a full time basis? Are there

special considerations?• Do partners share the same level of liability?

Chapter 8Time Value of Money

• How to calculate a simple future value.• How to calculate a simple present value.• How to calculate the future value (accumulation) of a

savings plan; i.e., an IRA investment. How to annuitize the accumulation.• How to calculate the present value of a series of future

payments to be received.• How to calculate a loan payment.

Chapter 9Analysis, Forecasting, Control, BEP

Analysis• 3 major reasons why businesses fail.• Objectives of Market Analysis. Why is market

segmentation important?• Objectives for Financial Planning• Importance of Cash Budget• Rationales for Breakeven Point Analysis

Chapter 10Business Valuation

• 5 Problem areas in valuing a small business• 3 Methods for Valuing a small or new business• Value of Assets• Estimating Earnings Potential• Discounted Cash Flow (using the weighted average cost of

capital

• Simple Rule of Thumb Method: Earnings Multiplier based on an Expected Rate of Return (EROR)

CHAPTER 11FINANCING CHANGES IN S-T ASSET INVESTMENTS

• Reasons for borrowing• Sources of Short-Term Financing• Spontaneous• Planned

• Consideration Factors• Importance of Cash Conversion Cycle• Forms of Trade Credit (financing inventory)

Chapter 12FINANCIAL ANALYSIS OF BUSINESS OPERATIONS

• Objectives of FA: Key areas of owner interest• Five Major Ratio Categories and Objectives• Liquidity (CR, QR)• Asset management (DSO, ITO)• Debt Management (DR, TIE)• Profitability (GPM, OPM, NPM)• Investment Performance (ROA, ROE)

• DuPont System: Objective, Focal Points• NPM, TATO, EM• ROE = ROA * EM

Chapter 13Managing Bankruptcy and

Insolvency Issues• 4 Important Chapters• Ch. 5: Rule of Absolute Priority – Satisfaction of Claims• Ch. 7: Liquidation• Ch. 13: Individuals• Ch. 11: Businesses

• Definitions of Business Failure / Causes• Conditions for Out-of-Court Remedies