Financial Literacy Club
learnwithflc.org
Unit test
Understanding Businesses
Score: / 10
Circle the best answer for each question. Each question is worth 1 point.
A shop sells 400 T-shirts a month at $15 each. Its costs are $4,500 a month.
1. What's its monthly profit?
- A. $6,000
- B. $4,500
- C. $1,500
- D. $10,500
Revenue is $1,000,000 and net income is $50,000.
2. What's the net margin?
- A. 50%
- B. 20%
- C. 0.5%
- D. 5%
A company has $2 million in assets and $1.2 million in liabilities.
3. What's its equity?
- A. $800,000
- B. $3.2 million
- C. $1.2 million
- D. $2 million
A fast-growing company reports record profits but can't pay its suppliers on time.
4. What's the most likely cause?
- A. Its customers pay slowly, so profit hasn't turned into cash yet.
- B. Profit and cash are always equal.
- C. It has too little revenue.
- D. It has too many assets.
5. An income statement shows a company's performance over a period, while a balance sheet shows its position on one date.
True/False
A ride-sharing app keeps a percentage of each ride fare paid by riders to drivers.
6. Which business model is it?
- A. Razor and blades
- B. Subscription
- C. Marketplace
- D. Licensing
A new social network is better designed than the leader but can't attract users because everyone's friends are already on the leader.
7. What competitive advantage protects the leader?
- A. A patent
- B. Network effects
- C. Low prices
- D. Inventory
A company's market cap is $900 million and its net income is $30 million.
8. What's its P/E ratio, and what might it suggest?
- A. 3 — investors expect it to shrink
- B. 270 — it's bankrupt
- C. 30 — investors expect meaningful growth
- D. 0.03 — it's a bargain
Current assets are $450,000 and current liabilities are $150,000.
9. What's the current ratio?
- A. 0.33
- B. 3.0
- C. $300,000
- D. 1.5
10. A company that depends on one customer for most of its sales has concentration risk.
True/False