Bus 120 M. Lugo Test 2 (Ch 6-10 + Appendix)
_____ is one of the most important sources of short-term financing for many firms and arises when suppliers ship materials, parts, or goods to a firm without requiring payment at the time of delivery.
trade credit
In the context of managerial accounting, _____ are costs that change directly with the level of production.
variable costs
_____ are companies that invest in start-up businesses with high growth potential in exchange for a share of ownership.
venture capital firms
In the context of acquiring financial assets, which of the following is a robo advisor service that helps people set, track, stick to, and eventually achieve their financial goals?
Betterment
Which of the following is a drawback of buying an established business?
It may entail inheriting the previous owner's mistakes
Which of the following statements is true of full-services brokers?
They charge commissions based on the dollar value of the orders their clients place
Which of the following statements is true of discount brokers?
They charge flat fees of a few dollars per trade for simple transactions
In the context of external audits of financial statements, which of the following statements is true of CPA firms?
They must be independent of the companies they are auditing
In the context of interpreting financial statements, using comparative statements to identify changes in key account values over time is called _____.
horizontal analysis
Stockholders typically want to view a firm's accounting information to:
know if management has generated a strong-enough return on investment
Entrepreneurs must understand that no conventional lending source, whether private or government, will:
lend all of the start-up's funding
A _____ is a financial arrangement in which a bank agrees to provide a firm with funds up to some specified limit, as long as the borrower's financial situation does not deteriorate, and the bank has sufficient funds.
line of credit
The Consumer Financial Protection Bureau
makes it easier for consumers to compare the features and costs of various credit cards so that they can select the ones that best meet their needs.
In the context of basic financial planning tools, the budgeted income statement and budgeted balance sheet are referred to as _____.
pro-forma financial statements
When starting a business from scratch, ______.
the logistics can be challenging
In the context of the balance sheet, which of the following serves to be the rationale behind the accounting equation?
A firm must finance the purchase of their assets, and the owners and nonowners should contribute toward it.
_____ refers to the claims owners have against their firm's assets.
Stockholders' equlity
In the context of financial statements, _____ are debts that come due within a year of the date on the balance sheet.
current liabilities
A _____occurs when a firm transfers total or partial ownership of some of its operations to investors or to another company.
divestiture
Earnings per share (EPS) is calculated by:
dividing net income of a firm minus preferred dividends by the average number of shares of common stock outstanding.
From the franchisee's perspective, which of the following is an advantage offered by franchising?
easy access to funding
_____ is a characteristic that most successful entrepreneurs possess.
energy
People who risk their time, money, and other resources to start and manage a business are known as _____.
entrepreneurs
An advantage of using commercial personal finance programs such as Quicken or Moneydance is that they:
give you the ability to export data into tax preparation software, making tax filing much simpler.
A _______ is the period of time that a credit card holder has to pay outstanding balances before interest of fees are assessed.
grace period
In the context of corporate restructuring, a _____ is defined as a combination of firms in the same industry.
horizontal merger
The _____ is computed by dividing a firm's cost of goods sold by average inventory levels.
inventory turnover ratio
In the context of a budget, _____ are expenditures that a spender has little or no control over.
nondiscretionary payments
_________ are employee payroll-deducation retirement plans that offer tax benefits.
the 457 plan
Which of the following statements is true of people with an external locus of control?
they believe that the actions of others can control their fate
Which of the following is a disadvantage of a limited liability company (LLC)?
Complexity of formation
_____ are cards issued by banks that allow customers to make purchases as if the transactions involved cash.
Debit cards
The _____ is an independent agency created by Congress to maintain stability and public confidence in the nation's financial system, primarily by insuring bank deposits.
Federal Deposit Insurance Corporation
In the United States, the Securities and Exchange Commission (SEC) has delegated the responsibility for developing accounting standards to a private organization called the _____.
Financial Accounting Standards Board
Which of the following is an appealing benefit that entrepreneurs enjoy?
Flexible schedule
Which of the following statements is true of a debit card purchase?
It immediately reduces the customer's bank account balance
_____ are budgets that identify projected sales and production goals and the various costs the firm will incur to meet these goals.
Operating budgets
In the United States, the ultimate legal authority to set and enforce accounting standards lies with the _____.
Securities and exchange commission
Which of the following statements is true of limited liability companies (LLCs)?
There is no separate tax on the earnings of the companies if they choose to be treated as a partnership
Which of the following is an advantage of certificates of deposit?
They are insured by the Federal Deposit Insurance Corporation.
Which of the following statements is true of small businesses?
They have more scope to provide personal customer service than large businesses
Which of the following is a disadvantage of certificates of deposit?
They offer lower returns than most other types of investments.
Which of the following is a threat to small businesses?
a bigger regulatory burden compared to large businesses
In the context of small businesses and the economy of a country, which of the following factors can bring down entrepreneurship rates?
a high level of employment protection
Entrepreneurs who mortgage their homes for the business and stake their reputation on the success of an unproven product demonstrate
a high tolerance of uncertainty
In the context of corporations, _____ is a corporate restructuring in which one firm buys another.
an acquisition
In the context of an independent auditor's report, _____ indicates that the auditor believes the financial statements are seriously flawed and that they may be misleading and unreliable.
an adverse opinion
_____ are individuals who finance start-up companies with high growth potential in exchange for a share of ownership.
angel investors
In the context of business ownership, the document filed with a state government to establish the existence of a new corporation is referred to as the _____.
articles of incorporation
The major responsibilities involved in financial accounting are the preparation of the:
balance sheets, income statement and the statement of cash flows
In accordance with corporate bylaws, stockholders elect a _____ and rely on it to oversee the operation of their company and protect their interests.
board of directors
In the context of investments, a _____ is a formal IOU issued by a corporation.
bonds
The _____ is a financial budget and shows how a firm's operations, investing, and financing activities are expected to affect all of the asset, liability, and owners' equity accounts
budgeted balance sheet
A _____ is a projection showing how a firm's budgeted sales and costs will affect expected net earnings.
budgeted income statement
An advantage of a general partnership is that the:
business is taxed as the personal income of its owners
Investors can earn a financial return on common stock called a(n) _____ if the market price of their stock rises relative to the price they paid for it.
capital gain
The Securities and Exchange Commission requires publicly traded corporations to provide _____.
comparative financial statements
Which of the following is a characteristic of successful entrepreneurs?
confidence
A _____ is a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners.
corporation
An individual who decides to establish a sole proprietorship must realize that he or she would be:
facing unlimited personal liability for the company's debts
A(n) _____ is a company that provides short-term financing to firms by purchasing their accounts receivables at a discount.
factor
The legal and ethical obligation of financial managers to make decisions consistent with the financial interests of their firm's owners is called their _____.
fiduciary duty
_____ is the functional area of business that is responsible for finding the best sources of funds and the best ways to use them.
finance
A _____ is a licensing arrangement under which one party allows another party to use its name, trademark, patents, copyrights, business methods, and other property in exchange for monetary payments and other considerations.
franchise
The opportunity cost that arises when a firm uses owner-supplied resources is known as a(n) _____.
implicit cost
In the context of various launching options when starting a new business, which of the following statements is a drawback associated with buying a franchise?
in has less opportunity for creativity
_____ are costs that are the result of a firm's general operations and are not tied to any specific cost object.
indirect costs
_____ are organizations that pool contributions from investors, clients, or depositors and use these funds to buy stocks and other securities.
institutional investors
_____ work within their organizations to detect problems such as waste, mismanagement, embezzlement, and employee theft.
internal auditors
The _____ considers a C corporation to be a separate legal entity and taxes its earnings accordingly.
international revenue service
_____ involves reducing consumption today in order to acquire assets that build future wealth.
investing
In the context of credit card agreements, which of the following statements best describes the annual percentage rate (APR)?
it is the percentage financing cost charged on unpaid credit card balances
A disadvantage of having a diversified financial portfolio is that:
it reduces the possibility of earning exceptionally high returns
An advantage of having a diversified financial portfolio is that:
it reduces your risk by ensuring that losses in some investments are offset by gains in others.
In the context of funding options for small businesses, which of the following statements is true of crowdfunding?
its sites are used to fund nonprofits
Which of the following is one of the largest crowdfunding sites in terms of traffic?
kickstarters.com
_____ are small segments of a market with fewer competitors than the market as a whole.
market niches
One of the drawbacks of sole proprietorships is that the owners:
may find it difficult to attract and maintain talented employees
A _____ refers to a corporate restructuring that occurs when two formerly independent business entities combine to form a new organization.
merger
The _____ is a situation where the behavior of an incompetent or an irresponsible franchisee adversely affects not only the franchise as a whole but also the success of other franchisees.
negative halo effect
According to the U.S. Small Business Administration (SBA), to officially count as a small business the:
number of employees should range from fewer than 100 to 1500
The vast majority of limited liability companies (LLCs) elect to be taxed as:
partnerships
Generally accepted accounting principles (GAAP) are a set of accounting standards that is used in the:
preparation of financial statements
The 401(k) plans are employee-contribution retirement plans that are offered to employees of _____.
private-sector businesses
_____ provide a framework for analyzing the impact of a firm's plans on the financing needs of the company.
pro forma financial statements
When a firm negotiates a loan with a bank, it signs a(n) _____, which specifies the length of the loan, the rate of interest the firm must pay, and other terms and conditions of the loan
promissory note
The _____ is computed by dividing a firm's total liabilities by its total assets.
ratio
_____ are the part of a firm's net income it reinvests.
retained earnings
_____ is calculated by dividing net income (profit) by owners' equity.
return-on-equality
Increases in a firm's assets that result from the sale of goods, provision of services, or other activities intended to earn income are referred to as _____.
revenue
In the context of investing in your career, one way to increase your marketability and your starting salary is to:
secure an internship during your college years
In the context of budget preparation, the cash budget is a financial budget document that identifies
short-term fluctuations in cash flow
In the context of statement of cash flows, cash flows from investing activities:
show the amount of cash received from the sale of fixed assets
Which of the following is a major issue that confronts financial managers as they seek to maximize the market price of stock?
social responsibility
Which of the following is an advantage of starting a business from scratch?
the entrepreneur gets to build his or her own business concept and structure
Which of the following statements is true of franchises set up across borders?
the limit of a franchisee's right over a territory is decided through a franchise agreement
In the context of a limited partnership, which of the following statements is true of general partners?
they have the right to participate fully in managing their partnership
Which of the following is a reason why many members of the European Union have low entrepreneurship rates?
they provide strong unemployment insurance to their citizenship
In the context of corporate restructuring, a _____ refers to a combination of firms that are at different stages in the production of a good or service
vertical merger
The _____ is a specified period of time for which an employee must work for an employer in order to receive the full advantage of certain retirement benefits.
vesting period