BUS 115 Midterm
A share of preferred stock for Marshall Manufacturing currently sells for $120. It offers the investor a dividend rate of 8%, on a par value of $100. If the investor owns 500 shares, her total annual dividend will equal
$4,000
Day-by-Day Calendar Company's statement of cash flows showed the following activities for the year ended December 31, 2019: Cash from operating activities: $ 30,000 Cash from investing activities: − 15,000 Cash from financing activities: − 8,000 The year-end cash balance for this firm is:
$7,000.00
Which of the following is an example of a financial transaction?
A firm purchases a fire insurance policy
Reviewing the recent experience of the United States in global markets reveals that the U.S. has
A large trade deficit with China.
Brendan considers himself to be a follower of Thomas Malthus. Which of the following statements would he be most likely to make?
A society will not experience sustainable economic progress unless it accepts the need to limit population growth
The prime minister of Equalia has called for the nation's legislators to enact new legislation designed to shift the country away from socialism toward a more capitalistic system. The prime minister acknowledges that some citizens will be unhappy with the radical changes. The most likely source of dissatisfaction with a move toward capitalism is
A trend toward unequal distribution of wealth
Commercial banks, savings and loan associations, and credit unions
Accept deposits and make loans
Which of the following correctly identifies areas of authority and responsibility for a chief financial officer (CFO)?
Accounting and Finance
The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.
Acid-test
Another term for portfolio strategy is
Allocation model
According to the invisible hand concept, the best way for a society to encourage the creation of jobs and the production of the products most wanted by consumers would be to
Allow entrepreneurs personal freedom to follow their own self-interest
The use of computerized accounting systems ______________.
Allows firms to generate financial information almost instantly and whenever the organization needs it
Small businesses must seek advice from outside experts. In order to put together official documents such as leases, contracts, and partnership agreements, it is important to seek the advice of __________.
An attorney
Global trade with China is
An emerging business opportunity for several companies
Damian, a recent college graduate with a degree in accounting, is helping a newly formed construction company set up its accounting system. Although the company had purchased accounting software, Damian wants to make certain that future reports will distinguish between current liabilities and long-term liabilities. In the future, he will need to know the amount of total current liabilities in order to
Analyze whether the company has enough funds to pay the near-term bills
Brody has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves
Analyzing the firm's financial statements to evaluate the financial condition of the firm
For banks, check-processing activities
Are expensive and time consuming
The key distinction between data and information is that data
Are raw, unanalyzed facts that has been processed and summarized so that it can be used by decision makers
Game Guys, Inc., needs several million dollars to expand and follow its strategic plan. In negotiations with the investment banker, they agree to issue 50 million shares of common stock, at $25/share. If the investment banker's fee for underwriting the total sale is 5.82%, what is the discounted price that the investment bank is willing to pay Game Guys for the shares?
Around $1,200,000,000
A franchise can be formed
As a corporation, partnership or sole proprietorship
Which of the following continents is home to the largest percentage of the world's population?
Asia
Resources that a firm owns are called
Assets
Which of the following statements would Elton Mayo have most likely made soon after concluding his Hawthorne studies?
At Superior Technologies, employees who enjoy their work environment and believe they are respected are likely to be more productive employees
__________ involves the review and evaluation of the records that are used to prepare the organization's financial statements.
Auditing
The __________ style of leadership is characterized by making managerial decisions without consulting others.
Autocratic
__________ occurs when goods are traded directly for other goods.
Barter
________ measures the amount of profit earned by a company for each share of outstanding common stock.
Basic earnings per share (basic EPS)
Which of the following statements about buying a franchise is most accurate?
Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market.
Blake took a marketing class at the local community college before starting his landscape business. He decided that his time would be better utilized in this class because if he could learn to sell his services well, the revenues and profits would follow. Your assessment of his plan might include which of the following?
Blake needs to realize that the ability to understand and interpret financial statements provided by his accountant might enhance his profits
Which of the following securities are historically considered high quality and usually pay dividends?
Blue chip stocks
A _________ represents a long-term debt obligation issued by a corporation or a government.
Bond
Teeny Toys hopes to raise long-term capital by promising in writing to repay the principal provided by potential creditors in ten years. Additionally, the certificate issued by Teeny Toys promises to pay 5% interest annually for the ten-year life of the security. Teeny Toys intends to issue
Bonds
The interest paid on ________ represents a tax-deductible business expense.
Bonds
__________ refers to a variety of software applications that analyze an organization's raw data and obtain useful insights from it.
Business Intelligence
Mark, a sales rep with a large technology company, is celebrating today because he just closed a large deal, which means a sizeable commission. Even the finance department is thrilled because Mark used __________ to review the credit history of this customer to be sure the deal would be a profitable one for the company.
Business intelligence
A review of small business successes and failures indicates that the
Businesses with the potential for high profit levels tend to be difficult to start and hard to keep going
Ben recently lost his job at a major U.S. auto plant in one of the rust belt states. After looking unsuccessfully for work in a similar industry for several months, he plans to start interviewing with road and bridge repair companies. He speculates that if the government begins to contract with companies that repair highways and bridges, he may find steady work, at least in the short term. Which of the following statements best describes the strategy behind his thoughts?
By increasing government spending through road and bridge repair and construction, the government will intervene in the free-market economic system to help jump-start a weak economy
Callahan and Megan plan to invest in corporate securities. While Callahan plans to retire next year on his 65th birthday, Megan is celebrating her first job after college and her 22nd birthday. Which of the two investors would be well advised to choose a more conservative investment strategy?
Callahan
Securitas Financial Services is contemplating purchasing and installing a new, expensive computer network. This is the type of expenditure that would be included in a(n)
Capital budget
The foundation of the U.S. economic system is based on
Capitalism
As a finance manager at Outdoor Adventure Sporting Goods, Roman worries about the firm's borrowing requirements for the upcoming year. He knows the benefit of estimating the company's cash disbursements and short-term investment expectations. Facing these concerns, a(n) ________ would provide Roman with valuable information by providing a good estimation of whether the firm will need to do short-term borrowing.
Cash budget
From the 1970s to the present time, the primary role of business technology has
Changed the supporting business to providing new ways of doing business
Lorenzo and Lila own all of the Double L Corporation's stock. The stock of this corporation is not sold to the general public. Lorenzo and Lila own a(n)
Closed coorporation
Felicia is a credit department manager for Five Star Vehicles. Hugo is a new employee in her department. While he has been learning his job, Felicia has given him guidance by offering advice, encouragement, and instructions. However, she is careful to let Hugo do the actual work, even if he struggles a bit. Felicia's approach to getting Hugo up to speed indicates that she is
Coaching Hugo rather than helping him
Kyra is a middle manager for her firm and just finished comparing the results of a promotional campaign with the company's outcome expectations. The next step in the control process is
Communicate results and deviations with management and employees involved
Under the __________ system there is very little incentive to work hard or to produce quality goods or services.
Communist
A nation has a ___________ in the production of a good or service if it can produce that good or service more effectively or efficiently than it can produce other goods.
Comparative advantage
The theory of _______________ states that a nation should produce and sell goods to other countries that it produces most efficiently, and buy goods from other nations that they produce more efficiently.
Comparative advantage
Which of the following terms best describes the relationship between the New York Stock Exchange and the NASDAQ?
Competitive
__________ planning prepares alternative courses of action that may be used if the primary plans are not achieving objectives.
Contingency
The ability of the Critical Infrastructure Protection Board to achieve its mission depends crucially on
Convincing information managers in the private sector to report problems such as hacker attacks and viruses to the government
Entrepreneurs seeking financial support from bankers and potential investors should
Create a detailed business plan to help the bankers and investors understand why this business will succeed
__________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans.
Credit Unions
Although best used as a last resort, many small businesses find it convenient to use __________ as a short-term source of financing. Although this form of short-term debt comes with high interest rates, it provides a quick line of credit for many firms, including start-up companies who may not be able to secure bank loans.
Credit cards
Which of the following terms describes the set of values, beliefs, rules, language, and institutions held by a specific group of people?
Culture
When it comes to computers and information technology, government and corporate security officials are now most worried about
Cyberterrorism
___________ is the process of collecting, organizing, storing, and analyzing large sets of data to identify patterns to help make decisions.
Data analytics
Mini-Case Cy Burspace first began working for Epic Electronics in the mid-1970s as a business technology specialist. Today, he is the department head for the company's information systems department. Cy is well known and respected by everyone in the company, and his coworkers recently threw a party to honor his 30th year with Epic. Cy did a lot of reminiscing at the party, telling the newer employees how things were done in the "old days," and comparing them to newer methods. "I'm still amazed at how things have changed. When I first came to Epic, we had a central computer to handle everything. It took up a whole room, but all it really did was generate financial reports for management," said Cy. "Today, employees have their own personal computer, and all are hooked up to a network. All of this connectivity has led to big improvements in our operations. For example, if a production worker wants to find out how many units of a particular component we have in inventory, or wants the name and address of a particular supplier who sells us that component, he or she can get the information in the blink of an eye. In fact, we have even given our suppliers and customers access to our network so that we can share information and provide them with better service. That change has really helped us compete against the bigger firms." "Now," Cy continued, "most of the workers in my department don't even have to be at the office to be connected. We have smartphones and laptops so we can do much of our work from home or while we are on the road." A new employee asked Cy if he was ready to retire. "No way," he said. "I'm in the middle of a major project right now. We're trying to design a single entry point for people to use when logging on to the Epic network. We want to set it up so that the log-on procedure identifies different types of users and automatically gives them access to the types of resources they need. For example, customers who logged on would be allowed to place orders, check on the status of previous orders, and interact with our technical support staff, but would not have access to other, more proprietary parts of our network. We think this approach will be more convenient for everyone. And," he continued, "once I finish that project, the marketing department has asked me to work on developing better ways to store and analyze the vast amounts of data we collect. So my work is cut out for me for quite a while yet." People in marketing want Cy's help because they are convinced that many hidden patterns and unexpected relationships could be found in the mountains of data the company accumulates. They think that discovering these relationships might help them develop new marketing strategies. This suggests that Cy's next project will be concerned with
Data mining
Small businesses
Deal with similar management issues that large companies face.
Cashland's banking system recently crashed. This eventually led to companies being unable to borrow money to run their businesses and employees needed to be terminated. These circumstances cut into consumer's purchasing power, causing a severe decline in the prices of goods and services, better known as _______.
Deflation
Middle managers are responsible for
Developing tactical plans and controlling
Curtis created his own restaurant equipment company, supplying the greater Denver area, five years ago. Until now, he has never worried about instituting a formal control system. Now, after the Great Recession, he is facing more cost-conscious restaurant owners. He has decided that a formal control system is needed. The first step Curtis should take is
Devise a set of clear performance standards
__________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock, stock options, warrants, and convertible debt securities are also taken into account.
Diluted
Data mining would be most helpful to a manager that wants to
Discover unexpected relationships among the data stored by his or her organization
__________ is the accounting practice of recording each transaction in two places in the accounting journal.
Double-entry bookkeeping
The president of Car Parts Kings, Inc. just testified before Congress. He urged them to limit the flow of imported automobile parts into the country. He stated that these imports were priced lower than foreign producers were charging for them in their own countries. He believes foreign producers are
Dumping
Successful use of financial leverage requires a firm to
Earn a higher return on its investments than the interest rate it pays to acquire funds
Which of the following statements about leadership styles is most accurate?
Effective managers often use a variety of leadership styles
Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because
Electronic funds transfer is more efficient and less expensive for banks than traditional check-based payments
In a company in which an effective vision has been provided
Employees are likely to have a sense of purpose and a common set of values
As a small business owner, Jasmine can't afford to provide her employees with the high wages and benefits offered by big corporations. One way to keep her employees and create a high level of motivation would be to
Empower her employees to develop their own ideas
__________ is the term used to describe giving workers the education and tools they need to assume additional decision-making powers.
Enabling
The U.S. government's Immigration Act of 1990
Encouraged entrepreneurs to come to the U.S. through "investor visas"
A(n) ___________ serves as an entry point to a variety of resources on an organization's information network.
Enterprise portal
Paul Blocker is the offensive line coach for a university football team. He wants his players to report to fall practice in good shape. Coach has set challenging fitness standards that the linemen should have no problem achieving if they work hard during the summer. He knows his players hate running wind sprints so to encourage them to work out during the summer he announced that any player who passes the fitness test at the beginning of fall practice will be allowed to skip sprints for the first two weeks of practice. Coach Blocker's approach to motivation is consistent with
Expectancy theory
According to expectancy theory, the amount of effort employees exert on a specific task depends on their
Expectations of the outcome
The federal government created ___________ to help small and medium-sized businesses get involved in exporting.
Export Assistance Centers
_______________ are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets.
Export trading companies
____________ is the selling of products to another country.
Exporting
Arturo is a partner in a firm that specializes in producing vitamins and health food products. While the business is considered small by U.S. standards, he is attempting to persuade his partner to expand internationally. Arturo would list which of the following as an advantage of going global?
Exporting can help sell excess inventory
A risk unique to firms with direct investment in a foreign country is the potential takeover of the firm's assets by the government of that country. This takeover is called a(n)
Expropriation
Retailers attempt to sell older merchandise before more recently acquired merchandise is sold. The assumptions made by the __________ method of inventory valuation are most consistent with this approach.
FIFO (first-in, first-out)
Similar to the example of FIFO and LIFO inventory accounting methods in the text, a college store purchased sweatshirts for the upcoming fall semester. Using the following data, where a total of 100 sweatshirts were purchased by the store and placed in inventory, select the correct statement from the following choices. Inventory Purchase Date 8/1 50 sweatshirts Inventory Purchase Date 9/1 50 sweatshirts Cost Per Sweatshirt $12.00 Cost per Sweatshirt $14.00 Selling Price $28.00 Selling Price $28.00 Total Sweatshirts sold from 8/1 - 12/31 = 50 sweatshirts
FIFO would provide the most profit
A bond sold with a sinking fund provision requires the firm to allow a stockholder to exchange his/her bond for a specified number of shares of common stock.
False
A capital budget highlights the expected funds provided by owner investments
False
A comparison of the three major forms of business ownership shows that sole proprietorships are usually the most difficult type of business to establish.
False
A disadvantage of creating a foreign subsidiary is the loss of control over technology and expertise used in the production of the product.
False
A major reason for the creation of Internet2 was that private businesses wanted to establish a network that was free from government regulation.
False
A mutual fund's purpose is rapid investment growth, not to provide diversification for investors.
False
A small wine and cheese store in Milwaukee sells dozens of different types of cheese—Bulgarian, French, Danish, Greek, and a domestic from its home state of Wisconsin. The domestic cheese sells for less than $2.00 per pound, while all the international cheeses are priced at over $4.00 per pound. Clearly, there is an embargo on international food products.
False
A statement about why an organization exists and what it is trying to achieve is called the organization's directive.
False
A vision is a detailed set of specific steps that a firm must take to achieve its short-run objectives.
False
According to William Ouchi, two of the main features of the Japanese approach to management are individual decision making and rapid promotions.
False
According to generally accepted accounting principles (GAAP), a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory.
False
According to the Adapting to Change box, the SEC is determined to crack down on and punish those accused of fraud. However, so many auditors and CPAs are trained in how to search for fraud that there are too many cases to prosecute.
False
Acquiring funds through debt financing actually decreases the overall risk of the firm.
False
Advancements in computer technology put home-based businesses at a disadvantage.
False
All partners in a general partnership have limited liability for the debts of their firm.
False
Although there are many new ways to perform electronic funds transfer, legally, the only way that an employer can pay an employee is by writing a check.
False
Amir hopes to start his own business someday. He should not talk to other small business owners about his plans because they might steal his ideas.
False
As a legal contract, bonds issued by different companies carry the same level of risk
False
Banana plantations in Hawaii cannot produce nearly enough of all the bananas consumed by Americans. The fact that the U.S. grows and sells bananas gives it a comparative advantage in bananas. It is not an absolute advantage and that is why we choose to import bananas from South America, as well.
False
Banks are likely to request a firm's balance sheet when determining whether or not to loan money to the firm. However, banks would have little interest in the firm's income statement since it covers a short period of time.
False
Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.
False
Because of the complex nature of their jobs, top managers spend most of their time developing and using technical skills.
False
Both preferred stocks and bonds represent funding sources that require repayment to investors.
False
Both stocks and bonds represent temporary sources of funding for a firm. Eventually they must be repaid.
False
Briana is an office manager and consistently has to tell her employees what to do, watch over their tasks, and reprimand those who don't listen to her orders. Briana is a modern manager.
False
Business organizations always use long-term financing for (both) short-term and long-term needs, but they never use short-term financing for (both) short-term and long-term needs.
False
Cash flow statements identify three sources of cash receipts and disbursements: assets, liabilities, and owners' equity.
False
China and Russia present enormous trading opportunities. However, due to political risks in those counties, foreign direct investment is halted.
False
Colin successfully finished a challenging assignment given to him by his supervisor. This feeling of accomplishment and satisfaction Colin experienced is an example of an extrinsic reward.
False
Commercial and consumer finance companies specialize in making low-interest loans to individuals and businesses with strong credit ratings.
False
Competition among exporting nations is mild
False
Computerized accounting programs have eliminated the need to prepare a trial balance.
False
Conceptual skills refer to the ability of a manager to perform the tasks associated with a specific discipline or department.
False
Corporations that issue debenture bonds are required to provide collateral
False
Corrine has all the technological tools—a laptop, a tablet, and a smartphone that never leaves her side. The computer in home office has a broadband connection to her company's intranet. If Corrine is like most Americans who have access to all of this modern technology, she will enjoy a much shorter workweek than workers in less technologically advanced nations.
False
Countertrading is a form of exchange where firms will put certain products "on the counter" offering them to foreign customers at a cheaper price than what they would offer them to domestic customers.
False
Diana is a financial manager for Eagle Eye Care, a chain of retail stores offering optical care and glasses. The majority of Diana's day likely involves efforts to locate and secure long-term financing to fund Eagle Eye Care's capital expenditures.
False
Douglas McGregor observed that all managers tend to share common assumptions about employees.
False
Due in part to government support, the majority of U.S. small businesses are involved in exporting.
False
During a period of rising prices, the FIFO technique of inventory valuation will result in a lower net income figure than would the LIFO technique.
False
Equity financing must be repaid.
False
Eric holds a bachelor's degree in accounting and additional training in tax law. He is responsible for preparing tax returns and developing tax strategies for his employer, and has done so for the past seven years. Eric is a certified government accountant.
False
FIFO is a method of inventory valuation that assumes the items most recently purchased are also the items that are sold first.
False
Finance managers need funds for capital purchases, but seldom for the day-to-day operations.
False
Financial management is more important for a large firm than it is for a small firm
False
Foreign direct investment refers to the buying of goods produced in another country.
False
Frederick Taylor believed that employees would be more productive if they were allowed to decide for themselves which methods at work to use.
False
Frederick Taylor's ideas about improving worker productivity attracted a lot of attention at the time, but had little lasting significance.
False
Free-market capitalism has made it more difficult for individuals to gain wealth.
False
Given the size and strength of the U.S. economy and the widespread use of the dollar, the Federal Reserve essentially regulates international monetary markets.
False
Having just finished a book on worker motivation, Kyle, a small business owner, looks to find a way to increase the productivity of his employees. He found the book's discussion of the Hawthorne studies particularly relevant. Based on his reading, Kyle is likely to view pay increases as the best way to improve employee motivation.
False
Henderson, Inc. owns land worth $800,000 and has $180,000 worth of cash in its bank account. In the asset section of the balance sheet, Henderson lists its land holdings prior to listing its cash since it is a higher value.
False
If a firm is advertising that it is selling franchise opportunities, the prospective franchisee can be assured that the government has performed due diligence on this company, and has deemed it a safe investment.
False
If a protective tariff is placed on an imported product, the added cost will go to the government
False
If the goal of a business is to pay lower taxes on its income during an inflationary period, it is likely to use the FIFO inventory costing method.
False
If you are willing to hold on to your growth stock long enough, at least five years or more, you will realize capital gains.
False
If you go through the exercise of preparing a business plan, only to determine that you need twice the amount of money to start the business than you have, the SBA and other expert organizations encourage you to go ahead with your plans because if you understand the market, you can use the revenues you accrue to make up the shortfall.
False
If you have managerial skills and leadership ability, you also possess the personality to be an entrepreneur.
False
In a franchise arrangement, ownership remains in the hands of the franchisor.
False
In businesses that handle a lot of perishable items (such as supermarkets) the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.
False
In capitalist countries, the government decides what to produce and how the goods and services will be produced.
False
In large companies, certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses.
False
In order for information to be useful to managers, it must satisfy only two criteria: it must be timely, and it must be easy to manipulate.
False
In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms charge.
False
In order to qualify for a microloan from the SBA, an entrepreneur must have adequate collateral and a proven track record of success.
False
In the area of electronic communications, the main focus of corporate and government security officials today is the prevention of credit card fraud.
False
In the control process, performance standards should be stated in general terms in order to give management as much flexibility as possible.
False
In the late 1980s and early 1990s, businesses began to emphasize finding ways to employ new technologies to improve existing methods of doing business.
False
In today's technological environment, the typical chief information officer (CIO) spends the majority of his or her time overcoming glitches and making sure the organization's information system is up and running.
False
Institutional investors include insurance companies, individual investors, and mutual funds.
False
Issuing new stock increases the firm's outstanding debt on their balance sheet
False
Jason, a stockbroker at Securitas Financial Services, called you the other day asking if you would like to purchase an IPO. "The hot new company, Leafy Greens, is going public, and I thought you might want to get in on it," he exclaimed. If you agree to buy shares of this company, this trade will occur on the secondary market.
False
Large multinational firms dominate the international market, leaving few opportunities for small businesses.
False
Levi owns 100 shares of stock in Epic Electronics that currently sell for $100 per share. Epic just announced a two-for-one stock split for all current stockholders. Levi now owns $20,000 worth of stock in Epic Electronics.
False
Liquidity refers to how quickly liabilities must be paid.
False
Macroeconomics looks at long-run economic problems while microeconomics examines short-run economic problems.
False
Managers are most effective when they consistently use the same leadership style with every employee assigned to their work group.
False
More than ever, the American economy operates as a distinctly separate entity from the international economy.
False
Once a business is established, it's almost impossible to change from one form of business ownership to another.
False
One advantage of licensing as a strategy to enter the global market is the sharing of trade secrets.
False
One advantage of networked computers is that they offer much greater computer security than the older mainframe systems.
False
One drawback of franchises is that they have a higher failure rate than other types of business ventures.
False
One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society.
False
One thing is for certain, the average borrower's risk-averse behavior did not contribute to the problems that spiraled out of control and caused the recent banking crisis.
False
Online businesses avoid the risk of failure faced by traditional start-up businesses.
False
Only about 10% of all businesses qualify as small businesses using the definition of the Small Business Administration.
False
Over the past decade, socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies
False
Over time, business technology has become much more sophisticated, but its basic application has remained to support the existing operations of businesses by providing key financial information.
False
Prospective entrepreneurs turned down by private lenders have little hope of getting financial help from the Small Business Administration, since the SBA's standards are even tougher than those of private lenders.
False
RFID devices collect biological data
False
Rent, salaries, insurance and depreciation are examples of the cost of goods sold.
False
Safety needs are placed at the lowest level in Maslow's hierarchy of needs.
False
Serena is a vocal critic of socialism. She often points out that governments in many socialistic countries have cut back on government services and have thusly reduced taxes. Serena believes that this trend will ultimately result in every country adopting pure capitalistic ideals. Recent evidence shows that her views are essentially correct.
False
Sergio has a great deal of faith in the abilities of his subordinates. He thinks most employees want to be productive, and will work hard if given the right incentives. He also believes that most firms do not take full advantage of the intelligence and creativity of their employees. Because of this, Sergio favors a managerial style that allows employees to be flexible and creative in how they do their jobs, and empowers them to make and implement decisions. Sergio is a Theory X manager.
False
Setting up a partnership under the terms of a written agreement is a bad idea, because written agreements tend to be too inflexible and impersonal.
False
Sophie has been a bookkeeper for a small chain of boutiques for nearly four years. Six months ago, the manager retired and a new manager was brought in. The new manager routinely asks her for information and advice about how to interpret the information she records. Sophie's experience as a bookkeeper means she is qualified to provide this type of advice.
False
Studies show that seniority is the most important criterion when selecting employees for promotion to management positions.
False
Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history.
False
The Dow Jones Industrial Average reflects the daily average price of all the stocks traded on the New York Stock Exchange.
False
The Hawthorne studies determined that intrinsic rewards are always better than extrinsic rewards.
False
The Internal Revenue Service is responsible for establishing accounting standards used by accountants working in government accounting.
False
The Internet has slowed small businesses' participation in international markets.
False
The M-1 money supply includes money in savings accounts, mutual funds, and money market accounts.
False
The SWOT analysis focuses only on the internal activities of the firm, while a PERT analysis is used to review the external environment in which the firm operates.
False
The U.S. government has done its best to create dollar bills that are easily duplicated.
False
The U.S. government just announced an increase in the interest rate paid on U.S. government bonds. This will likely cause a decrease in the interest rates paid on corporate bonds.
False
The United States enjoys a trade surplus in the global market.
False
The ability to access funds without a penalty helps to explain why certificates of deposit (CDs) have gained popularity among conservative investors and savers.
False
The ban on the sale of cuban cigars in the United States is an example of an import quota
False
The best way for U.S. firms to become more competitive is to adopt the Type J approach to management.
False
The best way for a firm to avoid serious cash flow problems is to sustain a rapid growth in sales.
False
The best way to learn about small business is to "bite the bullet" and start your own.
False
The cost of goods sold reflects the selling price of the merchandise solid over a period of time
False
The extranet is the next stage in the evolution of the Internet, consisting of a revolutionary new fiber optic technology that will enable computer users throughout the world to send and receive data up to 256 times faster than they can using the technology of the early 2010s.
False
The fact that electronic data interchange technology is so expensive that only large firms can afford to use it puts small firms at a severe disadvantage when it comes to sharing information.
False
The first step in financial planning is to develop a budget to better control costs
False
The first step in the controlling process is to monitor and record the actual results.
False
The first step in the rational decision-making model is to identify alternative solutions.
False
The focus of knowledge management is to make sure top managers have all of the information they need to run the company.
False
The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.
False
The income statement reports the difference between a firm's assets and its liabilities as of a certain date.
False
The limited liability company requires a minimum of 10 members.
False
The main objective of financial control is to establish priorities for the purchase of plant and equipment.
False
The main reason for setting up an enterprise portal is to ensure that only employees of an organization have access to the information on its intranet.
False
The management by objectives model devised by Peter Drucker works best in a dynamic, rapidly changing business environment, where management makes short-term plans.
False
The national deficit is the difference between our nation's exports and imports.
False
The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.
False
The point of intersection between the supply and demand curves is called the stress point.
False
The position of our government is to restrict foreign entrepreneurs from operating within the U.S.
False
The principle of mercantilism encouraged nations to keep economics separate from politics.
False
The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.
False
The rate of interest charged by the Federal Reserve is called the federal funds rate
False
The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.
False
The software or hardware barrier that a business uses to prevent unauthorized users from gaining access to their intranet is known as a tripware.
False
The steps in the accounting cycle do not need to be followed in the order stated. Monthly financial statements can be prepared with a good amount of accuracy, prior to posting in the ledger or preparing the trail balance.
False
The strength of the U.S. money system rests on the silver content of the coins.
False
The two major classes of operating expenses are current expenses and long-term expenses.
False
The work of a certified management accountant is intended to enable people outside of the organization to make investment decisions.
False
There is actually a stronger relationship between finance and marketing than there is between finance and accounting.
False
Trade credit represents one of the most expensive forms of short-term financing.
False
Trade protectionism is the use of government regulations to encourage the import of goods and services.
False
When the Fed increases the reserve requirement it forces banks to increase the number of loans they make.
False
While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks.
False
While finance is a critical activity for profit-seeking organizations, by definition nonprofit organizations are not required to fulfill the finance function.
False
Winston is quick and decisive. He makes most decisions by himself, issues orders, and expects his subordinates to follow them without question. Winston's behavior is an example of the free-rein style of leadership.
False
With added competition, firms prefer not to offer the availability of credit sales to their customers.
False
The banking panic of 1907 and the resulting
Federal Reserve System
The characteristic of work that is concerned with the amount of direct and clear information employees receive about performance is called
Feedback
Which business function involves credit management/collecting funds from customers?
Finance
When the value of the U.S. dollar increases relative to other countries
Foreign goods become less expensive to U.S. consumers
At PharmaPros, the highly regarded research team relies on top management to provide its strategic direction. After that, researchers work on their own to develop new medications to satisfy customer needs and company profit objectives. Middle management at PharmaPros practice _____________.
Free-rein leadership
Mini-Case Cooper Collins is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country of Evensplitia. Cooper was discouraged by the high tax rates in Evensplitia, so he immigrated to the United States seven years ago. Soon after moving to the U.S., Cooper again tried his hand at entrepreneurship and opened Coop's Consulting. The company struggled at first, and almost went bankrupt midway through its second year. However, Cooper never lost faith, the company survived, and eventually developed a great reputation in the community. Coop's Consulting began experiencing sustained growth early in its fourth year. In fact, Cooper hired additional employees to keep up with the increasing workload. His company, which started with only Cooper and two other full-time workers, now provides jobs for 43 full-time employees as well as many part-time workers and interns. Despite these past successes, business ownership is not without complications. The company suffered its first drop in business since its very early years. Cooper is convinced that the problem is not with his company, but rather due to a downturn in the U.S. economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S. declined over the last quarter. The anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Cooper is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track. The broadcast that reported a decline in total output for the United States probably got some of its information from the government's measurement of ___________.
GDP
Which of the following is NOT included in the M-1 or M-2 definitions of the money supply?
Gold
As a response to the bank failures of the ________, a system of federal deposit insurance was established to strengthen the banking system.
Great Depression
Revenue, minus cost of goods sold =
Gross Profit
The U.S. strongly relies on GDP data. However, it is only the total value of finished goods produced by the country. Officials are looking to measure total sales volume at all stages of production. What statistic would be most useful to them?
Gross output
The amount of information managers receive each day
Has become so great that it now threatens to bury many decision makers in infoglut
Theory Y managers would
Have confidence in the ability of employees to solve problems that arise during work
Tucker is an intrapreneur for a multinational wearable electronics company. Which statement best describes Tucker's duty?
He will use the firm's existing resources to develop new products
Which of the following would be a topic emphasized in a microeconomics class?
How market conditions determine the price of a specific product
Ahmed is a department head at Southwest City Hospital. He spends most of his time training and coaching employees to perform their jobs more effectively and teaching other managers to be better leaders. Ahmed's job requires him to make full use of his
Human relations skills
Herzberg's research identified several ___________ factors that did not necessarily motivate employees if they were increased, but could cause employees to become dissatisfied if they were missing or inadequate.
Hygiene
According to equity theory, what are employees most likely to ask?
If I do a good job, will it be worth it? What is fair?
In an effort to protect domestic jobs, some countries will place a limit on the number of certain types of products that can be imported. These limits are called
Import Quotas
According to Herzberg, a sense of achievement, earned recognition, and interest in the work itself were all
Important motivators
An unfavorable balance of trade occurs when the value of
Imports exceeds the value of exports
Ariana, a talented photography student, started her own photography business. She planned to solicit jobs from large corporations, which would need headshots and other pictures for their annual reports and websites. Although filling a unique niche, Ariana needed the security that the business would thrive and that she would earn enough to support herself and her family. She also hoped she would spend less time each day calling on potential clients and more time doing the actual shoots. As her small business consultant, which of the following suggestions would you have for Ariana?
In the beginning, it's doubtful that Ariana will realize ease of entry, security, and good profits. She needs to make plans in the event that one or more of these does not materialize quickly.
A rapid increase in the money supply may lead to a(n)
Increase in the rate of inflation
Located at Monsanto's world headquarters, the Nidus Center is a unique ___________ facility. The tenants are biotechnology companies who are at various stages of product development. The agricultural giant, Monsanto, the Danforth Foundation, Washington University-St. Louis, Saint Louis University, and several venture capital firms contribute seed money for these small start-up ventures that receive approval to further develop their ideas at the Nidus Center.
Incubator
By the time of the Civil War, the U.S. banking system operated
Inefficiently with different banks issuing different types of currencies
The executive summary section of the business plan contains
Information that will capture the attention of bankers and other investors who receive many business plans every day
Edwin, a sales manager, just finished reading some sales statistics comparing his company's performance to that of competitors. The statistics summarize a mass of raw figures into a few meaningful measures that Edwin will use to determine whether he needs to change his sales strategy. The statistics in the printout are
Information, while the raw figures used to compute the statistics are data
__________ are units within an organization that receive services from other units within the organization.
Internal Customers
A(n) __________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles.
Internal auditor
Which of the following institutions monitors the monetary policies of member nations to ensure a global monetary system that works best for all nations?
International Monetary Fund
Eddie is an inventive engineering new graduate who just started working for a large company that makes medical products for both hospital and patient use. One of his primary responsibilities is to initiate and develop new products to complement the firm's current product line. Eddie's position is __________.
Intrapreneurial
Mayree is the owner of Spines Books, a small eclectic-style bookstore in a bustling college town. Mayree prides herself in selecting hard-to-find books and magazines that her clientele enjoy. Recently, Mayree is experiencing a cash flow shortage, and she is concerned that she may be purchasing too many copies of each title. Having recently completed a business class, you suggest to Mayree that she calculate the ______________ ratio for her store, and then compare it to other stores in her industry.
Inventory turnover
As a new father, Dan plans to accumulate funds over the next 18 years to help pay for his son's college education. Security markets provide Dan with
Investing opportunities
Marshall Manufacturing plans to issue $100 million of common stock. The firm will likely rely on the advice and assistance of a(n)
Investment banker
Tee Time Golf Resort plans to use famous Kauri wood from New Zealand for parts of the interior of the magnificent clubhouse at its new golf resort near Salem, OR. According to the importer, each 10-foot slab will cost Tee Time approximately $5,000. Looking at the exchange rates, Tee Time's finance director noted that $500 US dollars = $738 NZ dollars. The importer will order directly from his source in New Zealand. Tee Time's finance director has determined that
It's a good time to buy the wood
Herzberg found that factors that provided the highest level of motivation were mostly associated with
Job content
As companies restructure to create greater efficiencies in their operations, there is a greater opportunity for _____________ where management combines specialized tasks in one job, asking employees to broaden their scope of responsibilities.
Job enlargement
Until recently, Visual Electronics manufactured Blu-ray players on an assembly line with each worker performing only one simple task. Three months ago, the company began allowing individual employees to assemble entire systems, test the components, and even install the software that Visual Electronics includes with each of its players. Visual Electronics's new production method is an example of
Job enlargement
The practice of moving employees from one job to another to make work more interesting is called
Job rotation
___________ attempts to increase task efficiency by breaking down jobs into simple steps and assigning people to each of those steps.
Job simplification
During a period of rising prices, if a firm desires to report a low gross profit figure in hopes of reducing their income tax liability, the firm will use the __________ inventory valuation method.
LIFO (last-in, first-out)
___________ is the management function of creating a vision for the organization and guiding, training, coaching, and motivating employees to help achieve the goals and objectives of the organization.
Leading
When starting a small business, it's important to remember
Learning from others and gaining relevant business experience improves the odds for success
The further up the managerial ladder a person moves, the __________ his or her original job skills become.
Less important
Ivan will graduate from Great State University this year. He has accumulated $39,000 in student loans during his four years at college. An accountant would classify the loans as
Liabilities
The fundamental accounting equation states: Assets = __________.
Liabilities plus owners' equity
The financial ratios that measure a firm's ability to pay its short-term debts are called
Liquidity Ratios
Which of the following activities is part of the planning function of management?
Looking at market forecasts to identify future business opportunities and challenges
A major concern voiced by U.S. critics of the North American Free Trade Agreement (NAFTA) was that it would result in
Loss of jobs in the U.S. economy
In order to level the playing field in trade between the U.S. and China, U.S. policymakers have called upon China's government to allow the yuan to float freely, as other world currencies. Through government regulation, China maintains an undervalued currency, which results in
Maintaining robust Chinese exports and a favorable balance of trade for China
How are managers today different from managers in the past?
Managers today emphasize teamwork.
One difference between managers and leaders is that
Managers work to achieve stability while leaders embrace change
Which of the following observations would be the strongest evidence that Marshall Manufacturing has adopted knowledge technology?
Marshall has installed software that searches a variety of databases online for information relevant to each employee's current assignment, and sends the information to the appropriate employee's email address
The common market arrangement that groups Brazil, Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Peru, and Suriname is called
Mercosur
____________ looks at the behavior of individual people and organizations in specific markets.
Microeconomics
Customers at any RefurbRite Repair Center see a framed statement prominently displayed near the front door. The plaque describes the company's fundamental purposes. In part, it states that "All RefurbRite Repair Centers operate under the belief that every customer deserves good quality parts, fast and dependable service, and a fair price." The words on this plaque reflect the ____________ of RefurbRite.
Mission statement
The ________ is a large national electronic stock trading market.
NASDAQ
When the government runs a continual budget deficit, it increases the
National debt
When the federal government's collection of tax revenues is less than what it spends in a given year, it results in a
National deficit
____________ means that the mutual fund company does not show a fee or commission for investing in the fund.
No load
When issuing stock to obtain long-term funding, dividend payments are
Not tax deductible
Small business employees
Often find more job satisfaction than their counterparts in big business
Which of the following is a major difference between Internet banks and traditional banks?
Online banks have lower overhead costs
Rent, depreciation, and salaries are examples of
Operating Expenses
Which of the following is involved in setting work standards and schedules needed to implement the firm's tactical objectives?
Operational Planning
A company's stock does not have to be listed on one of the major stock exchanges in order to trade. It can be traded on
Over-the-counter-market
A problem with equity judgments is that employees often ________ their own contributions to the success of a business.
Overestimate
By purchasing stock in Film Files, Mackenzie has become a(n) ________ the company.
Owner of
_______ refers to the value that stockholders or owners have in a company.
Owners' Equity
The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?
Owners' equity equals $112,000.
Which of the following techniques would a team of workers be most likely to use if they wanted to evaluate several possible solutions to a specific problem their company needs to solve?
PMI
With respect to taxes, the sole proprietorship
Pays taxes on the profits of the business, at the owner's personal tax rate.
A typical demand curve shows that
People tend to buy more of a good when its price decreases
Management by objectives was developed by
Peter Drucker
Data from RFID devices, miniature cameras, and wireless access used to understand where people or items are located is called
Physical-world observations
Seamus dropped out of school as a 16-year-old and needs to support himself, though he has few skills. He is a part-time employee at a department store earning minimum wage. Seamus wants to earn more, but hasn't been able to find a better job since he is without the right qualifications. He is having a hard time paying his rent and his mounting bills. He even started to skip breakfast to save on food costs. Seamus is having trouble meeting his
Physiological needs
The measure used to report price changes at the wholesale level is the
Producer price index (PPI)
Dividends are paid out of a corporation's
Profit, after taxes
The top managers of Pages and Pages Bookstores want to indicate to the firm's shareholders how effectively they have managed the company. Perhaps the most meaningful way to do this would be by reporting strong
Profitability ratios
A ________ tariff is designed to raise the price of imported products so that domestic goods are more competitively priced.
Protective
Most successful businesses utilize social media to communicate with customers. An important strategy for consideration is: Successfully implementing social media will
Provide a well-defined purpose for the customer
After retiring as a telecommunications executive, Bruce joined SCORE. As a SCORE counselor Bruce will
Provide consulting services to small businesses for free
Maslow classified the needs for basic items such as food, water, and shelter as
Psychological needs
Which of the following would normally involve long-term financing?
Purchase of modern equipment
Zachary is going to major in business. However, he has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. What should Zachary do?
Realize that his success in business requires an understanding of financial issues
Over the years, the government of Evensplitia has focused on implementing programs that promote equality. In the short term, though, Evensplitia's legislators are concerned about the very slow rate of growth that has plagued its national economy. In order to address this problem, the government is likely to
Reduce taxes and cut back on some social programs
According to the Not What the Doctor Ordered! box, a just-in-time inventory system allows a firm to
Reduce their investment in inventory
________ tariffs are designed to raise money for the government.
Revenue
Two basic types of tariffs are
Revenue and protective
A less-established company, or a company with a high debt to equity ratio, would be considered a riskier investment to the lender. Which of the following principles attests to this axiom?
Risk/return trade-off
Cyrus has a good job and can afford an apartment with comfortable furniture and plenty of food. But because of political unrest and street violence in his town, he is considering uprooting himself and applying for a visa to move to another country. According to Maslow, Cyrus' concern reflects a desire to satisfy his
Safety needs
______________ was the dominant strategy for improving worker productivity during the early 1900s.
Scientific management
Which of the following provides the buyer with collateral?
Secured bond
Anna has worked for the Nutty Boys Nut Butter Company for several years now and was recently recognized as one of the company's best employees. Her coworkers respect and admire her, and she feels good about herself. According to Maslow, the type of needs that are likely to motivate Anna in the future are
Self-actualization needs
A mutual fund company buys securities from corporations and governments and packages them together into a mutual fund. It then
Sells shares of this packaged investment to interested investors
A significant decrease in the money supply tends to
Send the economy into a recession
Finance managers spend the majority of their time managing
Short-term financial needs
Shopper's Choice Department Stores has fallen behind in payments to suppliers due to cash flow shortages. Some suppliers are withholding shipments to Shopper's Choice until they receive payments on overdue accounts. To meet their immediate needs, Shopper's Choice Department Stores should utilize
Short-term financing
Many small businesses rely on factoring as a source of short-term financing because
Small firms often find it difficult to qualify for bank loans
Brendan travels extensively for his company. He stays at hotels that provide him with a(n) ____________ that is imbedded with his personal information as well as a code to unlock his hotel room.
Smart card
___________ replace the typical magnetic strip on a credit or debit card with a microprocessor.
Smart cards
Recently, the government of Evensplitia announced that it is standing behind the concept of state-owned utilities, public schools, and the communications industry of the nation. Although not all industry is owned and managed by the government, these ideas would lead one to believe that the nation has a preference for a ________ state.
Socialist
According to the box, "Bad Medicine for Consumers?" the hypothetical pharmaceutical firm you work for recently increased the price of a chemotherapy drug from $300 to $3,000! What concern associated with capitalism best illustrates this ethical dilemma?
Some businesspeople may let greed guide their behavior
Antoine is considering marketing his bicycles in Brazil. If he enters the Brazilian market, he is likely to learn that
Some cultures like dealing with individuals from smaller companies rather than large companies
A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs). Why do these investments by governments with surplus cash flows worry trade experts?
Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management
Sylvia is responsible for hiring, motivating, and retaining the best employees for her organization. Sylvia is in charge of
Staffing
Historically entrepreneurs in the U.S.
Started many small firms than later became major corporations employing thousands of workers
A ___________ provides a summary of cash coming into and money going out of a firm from operations activities, financing activities, and investing activities.
Statement of cash flows
__________ planning determines the major goals of an organization and lays the foundation for obtaining and using resources to achieve those goals.
Strategic
A __________ represents a long-term partnership between two or more companies established to help each firm build competitive market advantages, without sharing the cost of risk.
Strategic alliance
The primary role of business technology during the 1970s was to
Support existing business by improving the flow of financial information
The type of planning that is concerned with developing detailed short-term actions about what is to be done, who is to do it, and how it is to be done is known as __________ planning.
Tactical
As a sales rep for an eyewear company, Gemma, frequently relies on the marketing department for information and materials. When using customer satisfaction to judge the success of their company, Gemma's managers should
Take Gemma's satisfaction into account, because customers can be internal as well as external
Although top managers most often possess these skills, they usually make less use of __________ skills than supervisory managers.
Technical
Duke plans on majoring in accounting because he is confident that an ability to read and interpret financial and accounting data is the way to get to the top in business. Duke seems to be concerned with developing his
Technical skills
Increased participation in small business exporting owes credit to __________.
Technological advances such as the internet and paypal for safely fulfilling orders
Gretchen works for Securitas Financial Group, but she seldom sees the inside of the offices. Instead, she does most of her work in a home office she put together in a spare bedroom. Her computer is linked to Securitas's office, so her work is distributed as quickly and efficiently as if she were at the office. Gretchen is one of the increasing number of workers who
Telecommute
Which of the following statements most accurately represents the history of U.S. banking?
The U.S. banking system has experiences a great deal of change and instability throughout its history
Maria's aunt, Juanita, is cruising in South America. Juanita told Maria she would be glad to buy her some jewelry while in one of the ports. She said she will shop in Santiago, Chile, because the ex change rate would be to her benefit. This means
The currency in the U.S. has strength against the Chilean currency
Under the floating exchange rate system, the value of a country's currency is determined by
The currency's supply and demand in the global market
When studying abroad last year, Thomas found that his U.S. dollars didn't stretch as far as he had expected. Each time he exchanged his dollars for euros, he had to give up more dollars in exchange for fewer euros. The exchange rate indicates
The euro has gained strength against the dollar
Although it is a small company, Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana. Currently, the company is a chartered C corporation, but the owners are interested in switching to be an S corporation. After consulting a lawyer, they learned that Zorn Enterprises does not qualify to be designated as an S corporation. Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?
The firm receives more than 70 percent of its income from rents and other passive sources.
When a customer purchases an item with a debit card,
The funds are automatically transferred from the customer's account to the store's account.
Communism is an economic system in which
The government makes almost all of the major economic decisions.
The findings of the Hawthorne studies led researchers to look more closely at how ____________ could lead to better productivity.
The human side of motivation
Marco has noticed that as older adults purchase tablets, they do not know much about how to use them and are frequently aggravated. He decided he could earn a nice profit by developing courses and offering one-on-one help to aid his customers in overcoming their deficiencies. Although the business struggled at first, he is experiencing a good deal of success now. Marco has many satisfied customers, and the business has grown to the point where he now employs several workers, some of whom were previous clients. Marco's experience is an example of
The invisible hand concept
Entrepreneurs looking for a business that gives them the best opportunity to get rich should consider starting a business in
The manufacturing sector
Net profit refers to
The net earnings after the deduction of all expenses, including tax expense
Quinn has landed a management position with a pioneering new small business after many years of working as a regional manager for a nationally known nonprofit. As Quinn starts her new job, she is likely to find that
The principles of management are much the same at large and small firms
Melissa, a new employee at Epic Electronics, is required to perform a variety of bookkeeping and clerical tasks at a workstation. Epic has training software on its workstations that can answer many of the questions she has about what to do on her new job, and how to do it. The software is so good that she rarely asks her supervisor for help. It even tracks the way Melissa performs certain tasks, and offers suggestions to improve her productivity. This software is an example of
The way businesses are using knowledge technology to move relevant information to the people who need it
At the Sunny Solutions Company, employees are involved in decision making and promised long-term employment. The employees follow a somewhat specialized career path and have individual responsibility for results. Sunny Solutions' approach is an example of
Theory Z management
Although accounting has several specific uses, the overall purpose of accounting can be summarized as
To provide financial information that is useful to decision makers
Which of the following best describes entrepreneurial personality traits?
Tolerant of uncertainty and highly energetic
Which of the following activities would be a part of the leading function of management?
Training and coaching workers to help them understand their job and perform it effectively
A CEO is often the president of the firm and is responsible for developing the strategic plans.
True
A U.S. government bond paying 3.25% interest annually is a lower risk than a Bathtub Brewing Company bond paying 6%.
True
A budget reflects management's expectations for revenues and allocates the use of specific resources throughout the firm.
True
A concern with the second wave of offshore outsourcing is greater job loss for service-sector working Americans
True
A financial manager makes recommendations to top executives regarding strategies for improving the financial strength of a firm.
True
A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.
True
A firm's short-term financial forecast provides a projected sales estimate
True
A franchise agreement is an arrangement where a franchisor sells the rights to a business name and the right to sell a product or service within a given territory to a franchisee.
True
A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness.
True
A mission statement outlines the fundamental purposes of an organization.
True
A no-load mutual fund charges no commission fees to buy or sell its shares.
True
A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date.
True
A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.
True
A sinking fund is a reserve account where the firm will periodically deposit funds in anticipation of repayment of a bond issue on the maturity date.
True
A statement of cash flows summarizes a company's cash receipts and cash payments over a period of time.
True
Accounting involves both the recording and the interpreting of financial events.
True
Accounting provides information about the financial condition and operating performance of a firm.
True
Adam Smith believed the self-interest of business people would lead them to create needed goods, services, and jobs
True
All federally chartered banks are members of the Federal Reserve.
True
Although companies that issue bonds are required to pay interest, companies issuing stock are not required to pay dividends.
True
As businesses began using business intelligence, managers spent less time finding information and more time using it to make decisions.
True
Banks focus on the creditworthiness of the borrower when determining whether to grant a loan
True
Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another.
True
Bartering is the exchange of goods or services for other goods or services without the exchange of money.
True
Big businesses do not serve all the needs of a market.
True
Bondholders represent creditors of a firm.
True
Bookkeeping is part of the accounting cycle, but accounting goes far beyond the activities involved in bookkeeping.
True
Brand names such as Coca-Cola and McDonald's are examples of intangible assets.
True
Business intelligence (BI) changes the traditional flow of information so that the database goes to the individual rather than the individual going to the database.
True
Changes in investor trust and confidence strongly influence stock market prices.
True
Chipper, the marketing director for Tee Time Golf Resort, is making plans for the annual tournament and is trying to determine the prize money for the top golfer. In past years, the resort successfully raised $25,000 through registration fees and sponsorship. This year, Chipper knows he could easily attract some great local talent if he made the top prize $10,000. However, Chipper also knows he cannot afford to announce a $10,000 top prize at the expense of losing out on a portion of the fees of less talented players who may decide not to register. Using expectancy theory rationale, he explains to the general manager that if they set the prize too high, several better-than-average golfers in the area will feel "out of their league" when the top players join in and therefore will be unmotivated to spend their money to participate. Chipper's analysis of the situation sounds reasonable to the general manager
True
Churches, schools, and charitable organizations all need accountants.
True
Comparative advantage theory states that a country should sell to other countries those products that it produces most efficiently and buy from other countries those products it cannot produce as efficiently.
True
Contract manufacturing is when a firm pays foreign manufacturers to produce its product. The foreign manufacturer places the domestic company's label on the products.
True
Corporate management decisions are influenced by the desire to keep stockholders happy.
True
Corporations represent 20 percent of all the businesses in the U.S. and earn over 80 percent of the total U.S. business receipts.
True
Credit unions represent nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members.
True
Deflation means prices are declining and is an indication that economic conditions are deteriorating.
True
Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time
True
Devaluation refers to a decline in the value of a nation's currency relative to other currencies.
True
Disinflation refers to a situation in which prices continue to rise, but not at the rate they were rising previously
True
Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves.
True
Enterprise portals have the ability to identify users and give them access to specific areas of an organization's intranet depending on their relationship to the organization.
True
Eric is looking for a place to deposit a $30,000 inheritance from his Great Aunt Clementine, who passed away three months ago. He is not planning to spend his money fast and frivolously. He will need part of the funds from time to time for his college education, which he promised his aunt. After speaking with several sales consultants in banking and nonbank institutions, he likes the fact that he can open a stock brokerage account and a money-market account at Securitas Investment Company (a nonbank company), and will be issued checks for paying bills. You remind him that with the recent mergers between banking and nonbank institutions, he may be able to find a company that provides both the convenience of banking services and low-risk/high-risk securities products.
True
Eve is a manager of a medium-sized insurance company. She is currently involved in redesigning her department to ensure that employees and other resources can respond more quickly and efficiently to the needs of its customers. Eve's efforts are part of the organizing function of management.
True
Everything else held constant, an international bank based in San Francisco would prefer to loan money to an efficient firm operating in Amsterdam, Holland, than an inefficient firm operating in New York.
True
Expansion into new markets (either domestic or global) is sometimes financed with long-term funds.
True
Exporting offers small businesses opportunities to reduce their dependence on domestic sales and extend product lives.
True
Extranets now allow small firms to share and process data much as large firms have been able to do using electronic data interchange.
True
Factoring refers to the process of selling accounts receivable for cash.
True
Feedback enhances worker motivation by giving employees a feeling of achievement and recognition.
True
Finance is the function in a business that acquires funds for the firm and manages those funds within the firm.
True
Financial managers are responsible for buying merchandise on credit and collecting payment from accounts receivable.
True
Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company.
True
Firewalls can be constructed using software, hardware, or a combination of both.
True
For starters, investors should consider the return on investment, the liquidity, and riskiness of an investment.
True
Franchisees must follow more rules, regulations, and procedures than if they operated independently owned businesses.
True
Frederick Taylor believed that workers existed to make management's job easier and more efficient. He believed that workers were interested in one thing: good pay. If a business provided good pay, workers would provide the grueling labor necessary to get the job done.
True
Funds obtained from venture capitalists are considered equity financing.
True
GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.
True
Gen Xers, Millennials, and Gen Zers often expect change and may find the lack of change questionable.
True
General expenses include office salaries, rent, and insurance.
True
Getting a business plan into the hands of the right people is nearly as important as getting the right information in the plan.
True
Global economics and politics have significant influence on businesses in the United States.
True
Goals are broad, long-term accomplishments an organization wants to achieve.
True
Governments directly participate in global markets through sovereign wealth funds
True
Grant received an e-mail stating that HE COULD EARN THOUSANDS!!!! just working a few hours from home. Most likely Grant's e-mail was a work-at-home scam.
True
Harrison, a potential investor, is interested in both Barkatorium's balance sheet and income statement when evaluating whether or not to invest.
True
Herzberg's findings suggest that Green Goddess, a small lawncare chain, can help workers satisfy higher-order needs by identifying those things that motivate (inspire) them to work at their fullest potential.
True
If a company announces a stock split, the investor may receive two or more shares of the company stock, for every one share that he/she holds.
True
In order to be effective, performance standards must be specific, attainable, and measurable.
True
In the Adapting to Change box, Millennials, who distrusted and overlooked traditional financial advisors, started using robo-advisors when investing.
True
In the United States, laws prohibit the creation of most types of monopolies
True
In the early 2000s, banks took the mortgages that they owned, created mortgage-backed securities out of them, and sold them as safe investments.
True
In the long run, the market price tends to adjust toward the equilibrium point.
True
Information technology brings work to people instead of requiring people to go to work.
True
Interest rates vary with changes in the state of the economy
True
Internet2 runs more than 22,000 times faster than today's public infrastructure.
True
Investment bankers assist in the issuing and selling of new securities.
True
Issuing bonds is considered debt financing.
True
It may be difficult to utilize the management by objectives (MBO) model when employees have not agreed upon the goals set by top management.
True
Large organizations encourage intrapreneurship as a strategy to improve their profitability through new products.
True
Liquidity refers to how fast an asset can be converted to cash.
True
M-2 represents the most commonly used definition of the money supply
True
Managers in progressive organizations tend to emphasize teamwork and cooperation rather than discipline and giving orders.
True
Many franchisors have rules that prohibit franchisees from sponsoring their own websites.
True
Many micropreneurs operate home-based businesses in the service industry.
True
Marcus works for the Critical Infrastructure Protection Board. One of the major challenges he is likely to face is to get CIOs at major corporations to provide the type of information he needs to help his board achieve its mission.
True
Marshall Manufacturing has recorded its unpaid bill for supplies under a current liabilities account on the balance sheet. This payment will be due to the supplier in less than a year.
True
Matthew is leading a group of stockholders who want to take the Cash Cow Corporation private. If Matthew's group succeeds, Cash Cow's stock will no longer be available to investors on the open market.
True
Megan owns her own business and is a strong advocate of equity theory. Because of her acceptance of this theory, she is likely to assure employees that they are compensated in a way that reflects their efforts and contributions relative to those of other employees.
True
Most communist countries today are suffering from severe economic problems.
True
Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.
True
Net income before taxes is found by deducting total operating expenses from gross profit before factoring tax expense.
True
Often we hear that teenagers have unmet social needs. According to Maslow, their desire to become socially accepted will consume them, at the expense of reaching for higher goals, such as developing to their fullest potential.
True
One example of tactical planning is setting annual budgets and deciding on other details and activities necessary to meet the strategic objectives.
True
One important source of financing for most small businesses is the owner's savings. If the owner contributes money to the business from his/her personal savings, it will be recorded in the owners' equity account on the balance sheet.
True
One of the goals of the World Trade Organization (WTO) is to eliminate national subsidies on agricultural products.
True
One of the most revolutionary effects of computer networks is that they give employees the ability to do much of their work at home.
True
One problem with telecommuting is that it can cause workers to feel like they are isolated and left out of the office loop.
True
One reason that a firm would choose to merge or acquire another company would be to gain market share.
True
One very important responsibility of the finance department in both large and small businesses involves acquiring needed funds to operate the business.
True
Only those with a membership on a stock exchange can buy and sell securities on that stock exchange.
True
Pension funds are monies put aside by corporations, nonprofit organizations, or unions to fund the financial needs of their employees, upon retirement.
True
Peter Drucker made an important distinction when he stated that managers do not motivate employees, but employees motivate themselves.
True
Planning involves setting the organizational vision, goals, and objectives.
True
Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.
True
Prestigious economics professor, Tom Ruland, recently urged government policy makers to cut taxes and increase government spending in order to pull the economy out of a downturn. The policy measures called for by the professor are examples of fiscal policy.
True
Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources.
True
Retained earnings represent a source of equity financing.
True
Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered, and/or from other revenue sources.
True
Sean received an ad for bundled television, phone, and Internet service that cost substantially more than he is currently paying. At the same time, he received a notice from his utility company that summer rates would be increasing. His textbooks are costing twice as much as they did last year, and yesterday, gas cost 30 cents more per gallon than it did last week. He can't help but marvel at how prices are rising when so many people have lost their jobs and are cutting back on expenditures. He is certain that this situation is an example of stagflation.
True
Securities markets help companies raise long-term debt and equity financing.
True
Sierra is a manager at a nationwide retail chain. Each morning she determines the order in which store projects are performed; she sets work schedules for employees and standards that must be met. These activities suggest that Sierra is involved in operational planning.
True
Small Business Investment Companies (SBICs) are privately owned companies licensed by the Small Business Administration to lend money to small businesses.
True
Small businesses can provide more personalized service than a large corporation to overseas customers.
True
Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system.
True
Sole proprietors sometimes have trouble competing with large firms for expert talent. Large firms can usually pay better and offer fringe benefits that are unaffordable to the sole proprietor.
True
States may levy special taxes on corporations that are not imposed on other businesses.
True
Success in running a business depends on knowing your customers, managing your employees, and keeping efficient records.
True
Taxpayers and special interest groups often have interest in the information generated by government accounting.
True
Tee Time Golf Resorts currently has an intranet, and is considering making use of an extranet. One of the main reasons Tee Time may want an extranet is to allow a select group of outside customers to have access to information on its intranet.
True
Telewhiz, Inc., just contracted with a firm in the Philippines to provide customer service for its smartphone customers. Although there were cheaper labor markets that Telewhiz could have tapped, customers have reported that they understand English-speaking Filipino people better than English-speaking people in other countries. As an outsourcing option, it is a good compromise.
True
The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all.
True
The CPI measures the pace of inflation or deflation
True
The Critical Infrastructure Protection Board was established after the terrorist attacks of September 11, 2001, as part of the Office of Homeland Security.
True
The Federal Reserve is the bankers' bank
True
The LIFO method of inventory valuation assumes the newest items in inventory are sold first.
True
The SBA may guarantee loans made by a financial institution and repay them if the borrowers stop making payments.
True
The Sarbanes-Oxley Act prohibits accounting firms from providing certain nonauditing work (such as consulting services) to companies they audit.
True
The Securities and Exchange Commission (SEC) requires that all prospective investors receive a copy of a firm's prospectus prior to investing.
True
The Spotlight on Small Business box is testimonial to the fact that entrepreneurs are problem solvers.
True
The accounting cycle usually involves the work of both the bookkeeper and the accountant.
True
The autocratic style of leadership can be very effective in emergency situations
True
The basic principle of equity theory is that employees try to maintain fairness between their efforts and their compensation compared to others in similar positions.
True
The business opportunities with the greatest growth potential tend to be in the high technology industries.
True
The concept engagement is used to describe the level of passion and motivation that a person has about their work.
True
The concept of the time value money is based on the interest-earning power of money.
True
The cost of capital is the rate of return a firm must earn in order to meet the demands of its lenders and expectations of its equity holders.
True
The equipment a firm owns and the money it has in its bank account are considered assets.
True
The government of Ativa has made great progress in its efforts to control its rapid inflation. Although prices are still on the rise, the rate of increase has slowed considerably. This suggests that Ativa is experiencing disinflation.
True
The job of reviewing and evaluating the information used to prepare a company's financial statements is referred to as auditing.
True
The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.
True
The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services.
True
The most widely used source of short-term funding is trade credit.
True
The nation of Forlornistan is reporting a decline in GDP for the fourth consecutive year, with no relief in sight. With unemployment at record levels and businesses failing faster than at any time in the past century, Forlornistan is likely experiencing a depression.
True
The over-the-counter market utilizes an electronic securities trading system.
True
The practices of several participants (for-profit companies, government regulators, and customers) came together to create the crisis that caused the collapse of several banks, financial services companies, and corporations.
True
The president of the United States appoints the members of the Federal Reserve's board of governors.
True
The stock of companies that fail to meet a stock exchange's minimum requirements can be delisted.
True
The success of data mining depends on access to data.
True
The total value of a country's output of final goods and services in a given year is known as the gross domestic product (GDP)
True
Theory Y managers assume that most people are capable of using a relatively high degree of imagination and creativity to solve problems.
True
There is no single leadership style that works best in all situations
True
Thomas Malthus believed that overpopulation was a major cause of poverty.
True
Tomas purchased on margin 100 shares of stock in the Marshall Manufacturing for $50 per share yesterday. Today, the price of the shares dropped by $20 per share. Tomas expects his broker to issue a margin call.
True
Top managers at Today's Finds department store found their employees do not really share a common sense of purpose nor do they have a common set of values. This suggests that top management has not provided a clear vision for the firm.
True
Two of your friends are horse fanatics. They inherited several acres of land that they turned into a retirement sanctuary for racehorses. Serenity Stables was originally incorporated as a limited liability company. The members are reevaluating this form of ownership. Unlike an S corporation, they now pay self-employment taxes on all company profits—not just on the salaries they pay themselves.
True
Websites often send cookies to a user's computer that are saved on the computer's hard drive.
True
When acquiring funds through the sale of a bond, the business incurs a legal obligation to pay regular interest payments.
True
When ransomware software infects a computer, scammers hold data hostage until you pay the hacker to get it back.
True
When studying the differences in generations, it is fair to say that many ideas that each group shares result from common experiences during the first 10 years of life.
True
When the Federal Reserve pursues policies that increase interest rates, the amount of foreign funds flowing into the United States also increases.
True
When the U.S. was still a colony of Great Britain, land banks were created to lend money to farmers.
True
With respect to free trade, many American citizens prefer "fair trade, not free trade"
True
You get a lower grade in a course than your friend did even though you studied more during the semester and attended class more often. As a result, equity theory predicts that you might convince yourself that "Grades aren't all that important. After all, lots of people who succeed in the real world didn't make good grades in school."
True
Your college career is coming to an end and you're trying to decide on the last two business electives to take. You are leaning toward international marketing and international financing because you recall reading that Forrester Research estimates millions of jobs will move to global markets in the next 10 years.
True
Your online shopping trail provides information that indicates your personal preferences
True
The Spotlight on Small Business box "Student Startups" features students who
Turned a passion into a business opportunity
_________ is the term William Ouchi used to refer to the management approach typically used by firms in the United States.
Type A
The board of governors of the Federal Reserve System determines
U.S. monetary policy
Tee Time Golf Resort found that Jordan Spieth wants to put his name on golf course designs. However, for any course to be acceptable, it will cost at least $20 million to build. The plan is to purchase real estate for four new golf resorts. Proceeding with their venture, the owners have calculated that they will need approximately $100 million. But putting together an IPO is another matter. After meeting with their investment banker, they believe that investors will be willing to pay $22/share for the IPO. As the ___________ for this issue, the investment bank requires 3% of the revenues generated by the sale. Tee Time will need to issue _______ shares in order to have the $100 million they need to proceed with their plan.
Underwriter, 6.25 million shares
According to the principles of scientific management, the best way to improve productivity is to
Use time-motion studies to find the best method of doing each job, then teach those methods to employees
A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a
Venture capitalist
An American company recently won a huge contract with a company in Indonesia, by gifting the Indonesian government officials with American cars and an assurance of monetary gifts. Clearly, this procedure
Violates the Foreign Corrupt Practices Act
A(n) ____________ is a private data network that creates secure connections over regular Internet lines.
Virtual private network
A computer ________ is a piece of programming code that is inserted into other programming to cause an unexpected and often-undesirable event for the victim.
Virus
A(n) _________ occurs when one company buys the property and obligations of another company.
acquisition
The purpose of a trial balance is to
affirm whether the figures in the account ledgers are correct and balanced.
The accounting scandals of the early 2000s led many people to question the legitimacy of
allowing an accounting firm to do both consulting and auditing work for the same company.
he use of computerized accounting systems ______________.
allows firms to generate financial information almost instantly and whenever the organization needs it.
An evaluation of franchising would conclude that this type of arrangement
appeals to people who want to own a business, but are not comfortable starting a company from scratch.
The three important financial statements prepared by accountants are
balance sheet, income statement, and statement of cash flows.
As a first step in the accounting cycle, _________ involves the recording of business transactions.
bookkeeping
A comparison of bookkeeping and accounting indicates that
bookkeeping involves recording financial information, while accounting is concerned with classifying, summarizing, and interpreting this information.
One reason limited liability companies have become so popular is that they
can be taxed either as a corporation or as a partnership, so owners can choose the tax treatment that is most advantageous for their situation.
Bailey is concerned because during the past four months her company has experienced difficulty in paying its bills on time. She knows if this continues, the firm will have difficulties in accomplishing its goals. What is Bailey concerned with?
cash flow
A ___________ is an organization that is owned and controlled by the people who use it—producers, consumers, and workers with similar needs pool their resources for mutual gain.
coorporative
The form of business ownership that usually requires the most detailed record keeping is the
corporation
Generally, a high ___________ ratio could lead investors and creditors to view the company as being very risky.
debt to owners' equity
Commercial banks primarily serve two types of customers
depositors and borrowers
A conglomerate merger will
diversify business operations and investments.
A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project.
false
Attributes such as trust and integrity are not something you should get overly concerned about when selecting partners. This is a business decision, not a friendly game of golf.
false
Few people today start their own business.
false
Rafael is a limited partner in an online clothing company. As a limited partner, Rafael can be involved with the company for a maximum of five years.
false
The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits.
false
The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government.
false
Mac and Charlie own a car repair shop that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Mac and Charlie operate as a
general partnership
Lucy is preparing to invest in a new online franchise, Notable Moments. The franchisor provides the exclusive software and training for designing invitations and cards for special occasions such as weddings, graduations, and birth announcements. In return, the franchisee is required to pay a monthly fee to the franchisor. Lucy will use the Notable Moments software to create her own special designs that she will ultimately feature on her website. Order turnaround time must be fast. She can only take on as many clients as she can make good on delivery. An advantage of Lucy's online franchise is that she
has an unlimited territory.
When two companies in the same industry agree to become one firm, the result is called a
horizontal merger.
Kooky Cookies Corporation purchased the Crazy Cookie Company. Although this was initially an acquisition, the merging of these two businesses was a __________ merger. Kooky Cookies went on to purchase several baking product companies. Joining forces with some of its suppliers would represent a __________ merger.
horizontal; vertical
Declan plans to open up three Pizza Pals franchises in the greater Phoenix area. He tells you that he plans to negotiate with the franchisor to get rid of the giant Preston the Pizza that sits on the roof of all Pizza Pal restaurants. Declan is likely to learn that
it is nonnegotiable due to company rules.
An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n)
leveraged buyout
When companies owe money to creditors, suppliers, and others, these outstanding amounts are recorded on the balance sheet as __________.
liabilities
One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a
limited liability partnership.
Mini-Case Cooper Collins is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country of Evensplitia. Cooper was discouraged by the high tax rates in Evensplitia, so he immigrated to the United States seven years ago. Soon after moving to the U.S., Cooper again tried his hand at entrepreneurship and opened Coop's Consulting. The company struggled at first, and almost went bankrupt midway through its second year. However, Cooper never lost faith, the company survived, and eventually developed a great reputation in the community. Coop's Consulting began experiencing sustained growth early in its fourth year. In fact, Cooper hired additional employees to keep up with the increasing workload. His company, which started with only Cooper and two other full-time workers, now provides jobs for 43 full-time employees as well as many part-time workers and interns. Despite these past successes, business ownership is not without complications. The company suffered its first drop in business since its very early years. Cooper is convinced that the problem is not with his company, but rather due to a downturn in the U.S. economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S. declined over the last quarter. The anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Cooper is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track. Cooper recently saw a report online that the Fed will try to help get the U.S. economy back on track. If the Fed takes action, Cooper would likely see
lower interest rates
The LIFO method of inventory valuation bases the cost of goods sold on the cost of
most recent merchandise purchased by the firm.
The income generated by S corporations
passes through to its owners, and each is taxed individually for this income.
An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a
sole proprietorship.
One result of taking a firm private is
the firm's stock is no longer available for purchase on the open market.
Any debts or damages incurred by a firm organized as a sole proprietorship are
the responsibility of the owner.
Audrey works in the accounting department of Colorado Manufacturing. Today she will use the firm's ledger to summarize information that was posted over the most recent time period. Her goal is to determine if the accounts are balanced as required by the double-entry method of bookkeeping. To be sure they are correct, Audrey will prepare a(n)
trial balance.
According to the Uniform Partnership Act, the three key elements of any general partnership are (1) common ownership, (2) shared profits and losses, and (3) the right to participate in managing the operations of the business.
true
It is usually easy to start and end a sole proprietorship.
true
The financial advantage to the parent company (the franchisor) in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful.
true
The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.
true
Today's computerized accounting programs are
very helpful for small-business owners who lack strong accounting support within their companies.
