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Aspiring entrepreneur, are you financially literate?

Select the best test choice for each question. Some test questions include more than one correct response. Likewise, a few test items have no correct responses. If you are unsure of a test answer mark the last response 'I don’t know.'

REMINDER: You are measuring your financial literacy. After completing the test, click 'submit' to receive immediate feedback.

Go to www.AnnualCreditReport.com for your yearly credit report.

1. An individual applying for a mortgage, credit card, or auto loan can apply for an annual credit report at no cost at www.annualcreditreport.com. To secure the most favorable home interest rate that the banker (lender) will offer requires a __________ minimum FICO score.
A. 850-950
B. 750-849
C. 650-749
D. 550-649
E. 450-549
F. I don't know
2. To improve your personal credit score (FICO score), which lowers the loan interest rate that a bank can legally charge when applying for an auto loan, you should __________.
A. Apply for a new credit card
B. Have at least 3-6 active accounts
C. Consolidate your credit card accounts and close at least one credit card
D. Keep credit card balances low
E. Avoid closing credit cards, especially accounts that you have had for a long period of time
F. I don't know
3. The basic accounting equation is the algebraic equation as follows:
A. Assets - Liabilities = Owner's Equity
B. Assets = Liabilities + Owner's Equity
C. Assets + Cash Flow = Net Worth
D. I don't know
4. Accounts receivable entries on a business owner's balance sheet are:
A. Money borrowed from a bank
B. The cost of purchased materials used in the business' operations
C. Debt that the owner owes to vendors
D. Money owed by customers to the business
E. I don't know
5. Working capital represents the amount of a business' current available assets after current liabilities are paid. A very favorable working capital indicates that the business owner can:
A. Expand her business
B. Take advantage of purchasing supplies at a volume discount
C. Dictates a company's ability to pay obligations
D. All of the above
E. I don't know
6. Entries on a business' balance sheet asset schedule include:
A. Inventory
B. Work In Progress
C. Loan Payments
D. Accounts Receivable
E. I don't know
7. When the bank performs a personnel analysis of an owner's financial statements prior to a loan approval, the banker will consider:
A. Inventory turnover
B. Amount of assets
C. The owner's ability to repay the loan
D. The owner's character
E. I don't know
8. Listed among a business financial statement's fixed assets are:
A. Real Estate property
B. Equipment
C. Bank loans
D. Cash
E. I don't know
9. A fiscal year is an accounting period used by a business owner for:
A. A 12 month period
B. A calendar year
C. The first year of business start-up
D. I don't know
10. Double entry accounting is a system which enters each transaction recorded as:
A. Debits and credits
B. Approved by the Internal Revenue Service (IRS)
C. Accurate business activity
D. I don't know
11. Long term liabilities are business debts due __________.
A. Upon the business receiving an invoice
B. When a mortgage is a result of purchasing real estate
C. When a mortgage is to be payable over 20 years
D. I don't know
12. The person to whom the business owner writes a check to for purchased materials is the:
A. Creditor
B. Payee
C. Debtor
D. I don't know
13. Examples of variable costs are business expenses that increase or decrease depending on sales, including:
A. Real estate mortgage
B. Utility expenses (electricity)
C. Labor
D. Equipment purchases
E. I don't know
14. FICO scores are calculated by a rating bureau from information on an individual's credit report, such as:
A. Payment history
B. Employment
C. New credit application for a credit card
D. Amount owed
E. I don't know
15. Improving an individual FICO score may take an extended period of time. Some general tips to increase a FICO score include:
A. Pay your monthly bills on time
B. Pay off your credit card with a higher interest rate before your credit card with a lower interest rate.
C. Focus on the factors that affect the FICO score negatively. (Ex- incorrect information on a credit report)
D. Transfer credit card debt to a card with a lower interest rate
E. I don't know
16. On your credit report, the two most critical factors that impact the FICO score are __________ and __________.
A. New credit
B. Payment History
C. Types of credit used
D. Amount of debt owed
E. I don't know
17. FICO scores are critical to a business owner's financial health because:
A. A good credit score can have banks competing for your business loans
B. A poor credit score may result in being turned down when applying for a business loan
C. A poor credit score may result in a higher monthly loan interest rate
D. I don't know
18. The average US household holds __ credit cards.
A. 3
B. 6
C. 7
D. 8
E. 9
F. 10
19. In 2009, banks and credit card companies made changes on an individual's credit card lending, such as:
A. Reduced credit card limits
B. Given consumers less access to credit (capital)
C. Card interest rates were increased
D. I don't know
20. The federal Reserve Board implemented credit card legislation in February 2010 that limit bank card issuers includes new rules such as:
A. No interest rate increases in the first year
B. On card holder's existing balance no increases
C. No over-the-limit fees
D. Payments over the minimum must be applied to the highest-rate unpaid balance
E. I don't know
21. The new credit card legislation does not permit credit card companies to charge a $39.00 fee if you exceed the card limit; however, bank may
A. Close your account without notice
B. Lower credit limit
C. Reject new purchases after cardholder exceeds card limit
D. I don't know
22. In 2009, consumer's credit card default was an all time high. Individual card holders defaulted on $ ____ (bad debt)
A. $550 Million
B. $1.5 Billion
C. $10 Billion
D. $80 Billion
E. I don't know