# Choose an example of a type of new company you could start, and then use this company idea to answer the questions below

Choose an example of a type of new company you could start, and then use this company idea to answer the questions below. You might choose to open a hair salon, a babysitting service, a record store, or many other things. This can be the same type of company you chose in assignment 8, or it can be different.

a. Describe the type of company you chose. (1-2 sentences. 0.5 points)

b. If you needed to get funding for your company, would you prefer to get debt funding or equity funding? Explain why you would prefer this type. (2-4 sentences. 2.0 points)

c. If you needed to get funding for your company, describe at least two sources of funding that you would prefer. Explain why you would prefer these sources of funding. (2-4 sentences. 2.0 points)

d. List at least four operating costs your business might have. (1.0 points)

e. Consider the industry of your company and the current economy, and then explain how these factors might impact your company’s sales. If you do not think these factors would impact your sales, explain why they wouldn’t. (2-4 sentences. 2.0 points)

f. If you had $5,000 to start this company, which department would get the most funding? Which department would get the least funding? Which phase of the business would be the most expensive? (2-4 sentences. 2.0 points)

2. Review the Financial Statements: Income Statement from Section 9, Lesson 2 of this course. Use the information from the example income statement for Jamie’s Bead Jewelry to answer the questions below.

a. What are the two sources of revenue for the company? (0.5 points)

b. What is the company’s total revenue? (0.5 points)

c. What is the company’s net profit? (0.5 points)

d. Is the company experiencing a profit, or a loss? (0.5 points)

3. Review the Financial Statements: Balance Sheet from Section 9, Lesson 2 of this course. Use the information from the example balance sheet for Jamie’s Bead Jewelry to answer the questions below.

a. What is the value of the company’s assets? (0.5 points)

b. What is the total of the company’s liabilities? (0.5 points)

c. What is the total owner equity? (0.5 points)

4. Calculate the following financial ratios. TIP: If you don’t remember how to calculate financial ratios, review the Calculating Financial Ratio pages from Section 9, Lesson 2 of this course.

a. A company makes a net profit before tax of $12,000 and has $20,000 in total equity. Calculate the company’s return on equity as a percentage. (0.5 points)

b. A company makes a net profit before tax of $5,000 and has total assets with a value of $10,000. Calculate the company’s return on assets as a percentage. (0.5 points)

c. A company has $1,400 in liabilities and $1,500 in assets. Calculate the company’s debt ratio as a percentage. (0.5 points)

d. A company has $1,400 in liabilities and $1,500 in equity. Calculate the company’s debt to equity ratio as a percentage. (0.5 points)

e. A company’s current assets are $30,000 and current liabilities are $19,000. Calculate the company’s current ratio as a percentage. Does the company have enough assets to pay its liabilities? (1.0 points)