Business 101 Final

Function of securities markets

-They assist businesses in finding long-term funding to finance capital needs -They provide private investors a place to buy and sell securities that can help them build their financial future

Which of the following is a reason why internal audits are important to a firm?

-They ensure financial statements are more reliable -They enable management to make better decisions. -They ensure all transactions are in accordance with GAAP.

Sinking funds are attractive to both issuing firms and investors for the following reasons:

-They provide for an orderly retirement of a bond issue -They reduce the risk the bond will not be repaid -They support the market price of the bond because they reduce the risk the bond will not be repaid

Reasons to use a Gantt chart

-To identify projects in process -To determine stages of a project -To trace a production process

Ways that commercial paper is different from bank loans include that it:

-carries a lower interest rate than commercial bank loans -is sold to investors, not banks -is unsecured

Disadvantages of using credit cards in small business financing include:

-higher interest rates -penalties on late payments

It is better to got to banks instead of family and friends for business loans because:

-loans from family can hurt family relationships -banks can assist the business in analyzing problems

An organization that issues bonds is legally obligated to:

-make regular interest payments -repay the entire bond principal amount at a prescribed time

Advantages of using retained earnings for financing:

-save interest payments -dividends -any possible underwriting fees for issuing bonds or stock -create no new ownership in the firm

The results of the weakness of the banking system in the early days of the United States included the fact that:

-the barter system was common -it made business and trade more difficult -some local government issued their own currency

Which of the following information is provided in a stock quote?

-the highest and lowest price the stock traded for that day -the stock's high and low over the past 52 weeks -the dividend paid -the stock's dividend yield -important ratios like the price/earnings ratio -the earnings per share

Characteristics of a bond include promises:

-to repay the amount owed -to repay on a certain date -to pay a certain interest rate

Accounting cycle

1. Analyze source documents 2. Record transactions in journals 3. Transfer journal entries to ledger 4. Take a trial balance 5. Prepare financial statements 6. Analyze financial statements

What are the steps in PERT?

1. Analyzing and sequencing tasks that need to be done 2. Estimating the time needed to complete each task 3. Drawing a PERT network illustrating information from steps 1 and 2 4. Identifying the critical path

Select the three basic requirements of production:

1. Build and deliver products in response to the demands of the customer at a scheduled delivery time 2. Provide an acceptable quality level 3. Provide everything at the lowest possible cost

Steps in investing in stocks and bonds from beginning to end with the first step at the top of the list

1. Decide that you want to buy stocks or bonds. 2. Find a stockbroker. 3. The stockbroker negotiates a price and places an order. 4. The trade is reported to your broker, who then notifies you.

What rights do common stockholders have?

1. Elect members of the company's board of directors and vote on important issues affecting the company and 2. Share in directors and vote on important issues affecting the company, if approved by the firm's board of directors

Three steps in the financial planning process in order from beginning to end:

1. Forecasting the firm's short-term and long-term financial needs. 2. Developing budgets to meet those needs. 3. Establishing financial controls to see whether the company is achieving its goals.

Three general good steps in estate planning are:

1. Select a guardian for minor children 2. Prepare a will 3. Prepare a durable power of attorney

What are the three things that every loan agreement should have?

1. agree to specific loan terms 2. put the agreement in writing 3. arrange for repayment in the same way they would for a bank loan

Benefits of a 401k include:

1. your contributions reduce your present taxable income 2. tax is deferred on the earnings 3. many employers will match your contributions

The term "2/10, net 30" means a discount of _______ percent in _______ days, all due in _____ days.

10, 2, 30

Companies with _____ or fewer workers can provide them with a Simple IRA and the company can match contributions.

100

International standards for the environment ISO

14000

A _______ is an employer-sponsored savings plan that allows you to deposit a set amount of pretax dollars and collect compounded earnings tax-free until withdrawal, when the money is taxed at ordinary income tax rates.

401k

Assures quality control ISO

9000

Pledging?

A percentage of the value of a firm's accounts receivable pledged (usually about 75%) is advanced to the borrowing firm.

Part of Securities and Exchange Act of 1934

A prospectus must be sent to prospective investors, prevent insiders within the company from taking advantage of privileged information they may have

The abbreviation for the independent agency of the US that insures bank deposits is the _______.

FDIC

The __________ __________ __________ __________ defines the generally accepted accounting principles.

Financial Accounting Standards Board

An advantage related to conducting quality control throughout production instead of at the end of the production line

Finding defects prior to completion saves expensive resources

The electronic-based network that links dealers so they can buy and sell securities electronically is:

NASDAQ

What does NASDAQ stand for?

National Association of Securities Dealers Automated Quotations

What type of securities markets handle the sale of new securities?

Primary

That part of the production process that physically or chemically changes materials

Process manufacturing

_______ ratios measure how effectively a firm is using its various resources to achieve profits.

Profitability

An investment where the withdrawals are tax-free is a ______ IRA.

Roth

An investment where the withdrawals are tax-free is a __________ IRA.

Roth

Various state agencies and the ____ have regulations on the issuing of stock.

SEC

What is the term given to a summary of all financial data to make certain the figures are correct and balanced?

Trial balance

When a manager continually monitors all phases of the production process to assure quality is being built into the product from the start, she is likely to be using _______ _______ _______.

Statistical quality control (SQC)

Government bonds compete with U.S. corporate bonds in securities markets

U.S. government bond, treasury bill, treasury note, treasury bond, municipal bond, yankee bond

Reasons bond interest rates may differ?

Vary according to the state of the economy, the reputation of the issuing company, and the interest rate for bonds of similar companies

What is a bull market?

When the market is doing well

The ______ ______ is responsible for financing international economic development and is sometimes called the International Bank for Reconstruction and Development

World Bank

The Sarbanes-Oxley Act prohibits account firms from providing consulting services to companies they ________.

audit

______ is the reviewing and evaluating of records used to prepare a company's financial statements

auditing

Internal ______ ensure that all transactions are performed in accordance with GAAP.

auditors

Stocks issued by higher-quality companies are referred to as _______-chip stocks.

blue

The _____ of _____ of the Federal Reserve System sets margin rates in the U.S. market.

board of governors

A _____ quotation gives the bond's interest rate, maturity date, rating, and current price, as well as whether it's callable.

bond

A _______ is a corporate certificate indicating that an investor has lent money to a firm (or a government).

bond

Long-term liability that represents money lent to the firm that they must pay back is a

bond payable

recording

bookkeeping

Leverage or debt ratios measure the degree to which a firm relies on:

borrowed funds

Items on a firm's cash budget include:

borrowing needs, debt repayment, operating expenses, and short-term investments

When a company allocates the use of specific resources throughout the firm based on a financial plan indicating management's expectations, then the company is using a ______ as the basis for making decisions.

budget

Capital, cash, and operating are three types of _____.

budgets

The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding:

business operations

Borrowing some of a stocks' purchases cost from the brokerage firm is called:

buying stock on margin

Common financial transactions include:

buying/selling goods and services, acquiring insurance, paying employees, and using supplies

If the Federal Reserve wants to increase the amount of money in circulation, it will ______ government bonds.

buys

Cellular or modular layout

can accommodate changes in design

The interest rate attached to a bond:

cannot be changed and payments are usually made twice a year

The positive difference between the purchase price of a stock and its sale price is called _______ _______.

capital gains

A ______ ______ forecast is part of a short-term forecast to predict monies coming in and going out of a girm.

cash flow

A statement of ______ ______ provides a summary of money coming into and going out of the firm.

cash flows

A professional who has completed a curriculum on 106 financial topics and a 10-hour examination is called a ______ ______ planner.

certified financial

Mutual funds called _______ funds limit the number of shares; once the fund reaches its target number, no new investors can buy into the fund.

closed-end

Which of the following was considered the cause of the market turmoil of 2008?

collapsing of the real estate market

What are factors in setting the interest rate?

collateral, firm's credit rating, market interest rates

_______ _______ companies are firms that make short-term secured loans with higher interest rates than banks.

commercial finance

A non-deposit institution that will make short-term loans to borrowers who offer tangible assets as collateral are called ______ finance companies which are different from ______ which accept deposits.

commercial, banks

_______ stock is the most basic form of ownership in a firm.

common

Companies can issue ______ and ______ stock.

common and preferred

Earnings per share is profit earned by a company for each share of outstanding ______ ______.

common stock

Basic earnings per share is the ratio of net income after taxes to:

common stock shares outstanding

Tremendous career opportunities exist in operations management as manufacturing and service companies attempt to remain ________ in the global market.

competitive

Investors can exchange ______bonds for shares of common stock in the issuing company.

convertible

The rate of return a company must earn in order to meet demands of its lenders and expectations of its equity holders is called the:

cost of capital

Benefits of using the internet as a purchasing tool

cost savings, access to many suppliers, time savings

Nonbanks are financial organizations that accept no ______ but offer many of the services provided by regular banks.

deposits

When an insurance company pays the current value of a loss it is called the _______ cost.

depreciated

If you follow the six steps to controlling your assets you are more likely to :

develop financial techniques for becoming financially secure and have money for investment

_________ insurance pays part of the cost of long-term sickness or an accident.

disability

If a bond does not have features that make it attractive to other investors, you may have to sell at a _______. But if other investors do highly value it, you may be able to sell your bond at a _______.

discount, premium

The length of time your money is committed to an investment is referred to as the ______.

duration

A debit card is a _______ check that withdraws money from a checking account.

electronic

________ ________ ________ systems send transactions directly from one computer to another.

electronic funds transfer (EFT)

Today, bonds are registered to specific owners and changes in ownership are recorded ______

electronically

Credit cards are most useful to:

ensure payment to the merchant, track purchases, replace the need to carry cash

On a balance sheet, assets may include:

equipment, buildings, land, furniture, motor vehicles that help generate income, patents, trademarks, copyrights, and goodwill (TANGIBLE AND INTANGIBLE RESOURCES)

With regard to repayment in financing, financing that has no repayment date is a sign of ______ financing.

equity

_____ financing is selling part of the company or reinvesting retained earnings in the company.

equity

A barter _______ is a modern-day technique to swap goods and services for other goods and services through the use of trade credits.

exchange

Collections of stocks and bonds that are traded on exchanges but are traded more like individual stocks than like mutual funds are ______-______ funds.

exchange-traded

A person who distributes the assets of your estate is a _______.

executor

The physical arrangement of resources in the production process refers to:

facility layout

________ is a significant question because, once the decision has been made and implemented, the firm must live with it due to the high costs involved.

facility location

Examples of a problem solved by operations management planning as it relates to manufacturing include:

facility location, time-to-market, inventory control

A financial institution or commercial bank that purchases a business' accounts receivable at a discount and then keeps what they collect is a:

factor

The selling of accounts receivable, known as ________, is more common in industries such as clothing, furniture, and global trade.

factoring

When a firm sells its accounts receivable at a discount rate in return for cash, the firm is _______.

factoring

While a loan must be repaid, ______ is the selling of accounts receivable.

factoring

A comprehensive set of environmental standards that encourages companies to conduct business in a cleaner, safer, and less wasteful way is known as

ISO 14000

What certification does the European Union demand in order to do business with companies?

ISO 9000

What is the first public offering of a corporation's stock?

Initial public offering (IPO)

_______ investors are large organizations, such as pension funds, mutual funds, and insurance companies, that invest their own funds or the funds of others.

Institutional

As an investor, you may want to explore opportunities in global markets. What are suggestions to consider when investing in global markets?

Invest in companies with a solid track record, consider mutual funds and exchange-traded funds, trade with an established broker that has an office abroad

Preferred stock differs from common stock as it:

It is callable, which means preferred stockholders could be required to sell their shares back to the corporation. It can also be converted to shares of common stock, and it can be cumulative. Does not usually have voting rights, pays dividends to preferred stockholders first, pays a fixed dividend

Advantages of mutual funds:

It is simple to change your investment objectives, investors can buy directly from the fund and avoid broker fees, they provide professional investment management

What is the preemptive right of a common stockholder?

It is the right to purchase any new issues of shares of the same class.

A financial report showing profitability is called a _______ statement.

income

Return on sales is net ______ divided by net sales.

income

The ______ ______ summarizes all the revenue from operating activities, money resources used up, expenses, and resources left after all costs and expenses.

income statement

The ______ _______ summarizes revenues, costs, and expenses over a specific period of time.

income statement

Firms will leverage (raise needed funds through borrowing) because it will:

increase a firm's rate of return on ownership's investment

The terms of the bond such as interest and repayment date are called the ________.

indenture terms

An _______ audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

independent

A _____ fund may reflect a group of large companies, small companies, emerging countries, or real estate.

index

Because of ________ _______, more flexibility in choice of business location has increased while allowing firms to remain competitive.

information technology (IT)

Types of organizations that can issue bonds include:

federal, state, and local governments, federal government agencies, foreign governments, and corporations

A smaller firm may have more cash management problems than a larger one, including:

fewer options to finance using credit cards

A company's __________ statements summarize all of the transactions that have occurred over a particular period.

financial

When considering long-term financing options a financial manager must consider the organization's _______ goals and objectives.

financial

Financial management primarily involves managing a firm's:

financial resources

What is the term for a written report that quantitatively describes the financial health of a company?

financial statement

________ assets are long-term assets like land, buildings, and equipment.

fixed

Using machines designed to do multiple tasks in order to produce a variety of products is called _______ _______.

flexible manufacturing

A capital budget is:

for spending plans on major purchases

An example of _____ utility is when a butcher produces a specific cut of beef.

form

In order to save money it is important for a person to live ______ by choosing inexpensive options.

frugally

A firm's ______ must be made available in the correct amount and time in order to fulfill its needs and obligations, such as payroll or loan payments.

funds

Finance is the function of acquiring and management of:

funds

A demand deposit (checking account) is known as that because:

funds may be withdrawn at any time by its owner

If interest rates go down, then bond prices:

go up

Revenue is the monetary value of what a firm received for:

goods sold, services rendered, interest earned

Aspects of outputs in production process

goods, services, ideas

U.S. ______ bonds are considered the safest investments.

government

Considered users of managerial accounting information:

government taxing authorities, government regulatory agencies, people interest in the organization's income and financial position, managers of the firm

Revenue minus cost of goods sold is called ______ _____.

gross profit or gross margin

Stocks of corporations in emerging fields such as technology and biotechnology or Internet-related firms, whose earnings are expected to grow at a faster rate than other stocks, are referred to as ______ stocks.

growth

When your insurance company will pay what it takes to purchase a lost item new, it is called:

guaranteed replacement cost

Penalties for insider trading

imprisonment, fines

The members of a stock exchange such as the NYSE:

sell and buy securities for companies and individuals

It is easy for investors to buy securities from companies almost anywhere in the world because:

there are fewer legal barriers

It is easier to design mass customization for services rather than products because

there is no tangible good to be adapted

Which of the following is true about venture capitalists?

they invest in businesses with high potential, they have assisted many major companies during start-up

Which of the following are key benefits to investors in investing in a mutual fund or ETF?

they offer small investors a way to spread the risk of stock and bond ownership and have their investments managed by a financial specialist for a fee

A durable power of attorney allows the person you name to:

take over your finances if you become incapacitated

On the statement of cash flows financing activities would include:

taking on new debt, or equity capital or cash used to pay business expenses, past debts, or company dividends

Characteristics of a Simple IRA include:

the employer can match contributions, employees can contribute up to $12,000

What type of long-term assets have no real physical form but do have value?

intangible assets

A bond's ______ rate is sometimes called the coupon rate.

interest

_______ is the payment the bond issuer makes to the bondholders to compensate them for the use of their money.

interest

Credit cards can be most harmful when:

interest accumulates on debt, one makes purchases for non-needed items

What influences the bond interest rates that businesses must pay?

interest rate paid by U.S. government bonds

What is on a bond quotations?

interest rate, maturity date, rating, current price, whether it's callable

A short production run with frequent adjustments to machines is considered a ___________ process of production.

intermittent

Producing customized pieces of furniture for clients requires a short production run with frequent machine adjustments to satisfy customer requirements. This type of production lends itself to a _______ production process.

intermittent

Careful control of ______ costs allows a firm to maintain correct levels of stock and product.

inventory

Which ratio is the cost of goods sold divided by the average inventory?

inventory turnover ratio

When selecting an investment option, which criterion relates to the chance that an investment will be worth less at some future time than it's worth now?

investment risk

Key criteria for selecting investments

investment risk, yield, duration, liquidity, tax consequences

_______ are cash used in or provided by the firm's investment activities.

investments

A typical mutual fund:

invests in both stocks and bonds

It is important to remember that a budget:

is a financial plan

A uniqueness of a certificate of deposit compared to a time deposit is that:

it has a maturity date

An advantage of a mutual fund is that;

it is simple to change your investment objectives

Reasons to invest in a home include:

it keeps your housing costs more stable, it can gain in value

What happens if a company calls a bond before the maturity date?

it pays investors a price above the bond's face value

A record book or computer program where accounting data are first entered

journal

Financial data from transaction documents are first recorded in a _______. The data are then transferred into categories in a ______ so managers can find all the information about a single account in one place.

journal, ledgers

Bonds can range from the highest quality to _____ bonds.

junk

Bonds that have higher returns but are considered very risky are called:

junk bonds

Balancing customer needs with production needs is the primary goal of ______-______-______.

just-in-time

The goal of operations management is to:

keep operations running efficiently, create a good experience for the customer

Inputs into the production process

land, labor, capital, entrepreneurship, knowledge

Factors of production?

land, labor, entrepreneurship, knowledge

Half the human effort, half the defects, one-third the engineering effort, and half the floor space with 90% inventory are characteristics of _________.

lean manufacturing

Information in the journal is transferred to the ______, so managers can find all the information about a single account in one place.

ledger

The groups the cost of capital (rate of return) must satisfy are:

lenders, stockholders or venture capitalists

Benefits of telecommuting?

less dependence on locating near sources of labor, employees are in touch with company and customers right from home, firms may choose less expensive locations

Lean manufacturing uses:

less human effort, less manufacturing space, less investment in tools, less engineering time to develop a new product

When doing business internationally, a promise by a bank to pay the seller a given amount if certain conditions are met is a _______.

letter of credit

Major services that banks provide to international business include:

letters of credit, banker's acceptances, currency exchange

A debt a firm owes to others is called a _______.

liability

The factors to consider in an investment include:

life (how long), amount, rate of return (interest rate)

To protect your loved ones from the loss of your income, you shoud buy:

life insurance

What is the name of the order that you place to buy a share at a price you specify?

limit order

If a firm wants to speed up the borrowing process with an unsecured, non-guaranteed loan, it will seek a _____ of _____ from its bank.

line of credit

Unsecured, short-term funds a bank will lend to a business, provided the funds are readily available, is called a:

line of credit

The risk/return trade-off principle means that:

the greater the risk for a lender making a loan, the higher the interest rate

Facts about the Federal Reserve Board of Governors include the fact that:

the seven members are appointed by the president and confirmed by the Senate, the primary function is to set monetary policy, they administer and supervise the twelve Federal Reserve banks

What is diversification?

the spreading of investments across different areas to reduce risk

The ease with which an asset can be converted to cash is called:

liquidity

What type of ratio measures a company's ability to turn assets into cash to pay its short-term debts?

liquidity ratio

Types of financial ratios used in ratio analysis:

liquidity, leverage, profitability, activity, debt

Steps to building capital include:

living within your means, investments, income management

A ____ fund is a mutual fund that charges investors a commission to buy or sell its shares.

load

The M-3 (money supply) includes:

only M-2 and institutional money market funds

Mutual funds called ______ funds will accept the investments of any interested investors.

open-end

In operating a business, rent, salaries, supplies, utilities, and insurance are all examples of:

operating expenses

What would be shown on an income statement?

operating expenses, revenue, net income

A manager responsible for producing products, and delivering them on time, on budget, and to specifications is likely an _________ manager

operations

Of the three major activities of a firm, cash transactions associated with running the business are known as:

operations

A specialized area of management that converts or transforms resources, including human resources, into goods and services is the definition of:

operations management

A way to save money for the future is to _______ your financial expenditures carefully.

plan

Enterprise resource planning took the idea of materials planning a step further by:

planning for material needs within the entire company on one database

Aspects of production control in production process

planning, routing, scheduling, dispatching, follow-up

When accounts receivable are ______, they are used as collateral for a loan. The lender advances a percentage of the value to the borrowing firm and collects from the firm as customers pay their bills.

pledged

_____ stockholders do not have voting rights in a firm.

preferred

______ stock is identified by the letters pf on a stock quote.

preferred

What does the term callable mean?

preferred stockholders can be required to sell their shares back to the corporation

The key activities of finance include:

preparing budgets, doing cash flow analysis, and planning for the expenditure of funds on such assets as plant, equipment, and machinery

Corporations make money on the sale of their securities (stock) only once, when they sell them on the _____ market.

primary

_____ markets handle the sale of new securities.

primary

An accounting system includes inputs, _______, and outputs.

processing

_______ is the creation of finished goods and services using land, labor, capital, entrepreneurship, and knowledge.

production

Earnings per share, return on sales, and return on equity are all examples of _______ ratios.

profitability

When investors give computer instructions to sell automatically to avoid potential losses if their stock price dips to a certain point, it is called:

program trading

A promise to pay a person or firm a certain amount at a specified time is a _____ _____.

promissory note

The purpose of the Securities Act of 1933 is to:

protect investors by requiring full financial disclosure by firms selling bonds or stock

Credit cards can be useful to small businesses by

providing the business its own financing, extending repayment over time

Which type of accountant would be available to businesses or individuals on a fee basis?

public accountant

The formula for the costs of goods sold is:

purchase price + freight charges + storage costs

Term that describes the act of buying all materials needed by an organization

purchasing

__________ a moderately priced house is a great way to have fixed payments and hopefully build equity.

purchasing

Whole life insurance combines:

pure insurance and savings

In the past, conducting inspections at the end of the production line was the approach to _________ ________

quality control

When are dividends generally paid?

quarterly

Government and not-for-profit accounting involves working for organizations whose purpose is to serve:

ratepayers, taxpayers

Historically, a secure investment has been:

real estate

Items that may back a secured bond include:

real estate, equipment, other pledged assets

Items that can be financed by being the collateral in a secured loan include:

real estate, raw materials, automobiles

During the recent financial collapse, financial managers failed to do their job effectively because of:

risky financial decisions and poor investment decisions

Inputs to the accounting system

sales documents, purchasing documents, shipping documents, payroll records, bank records, travel records, entertainment records

It's important to ________ money each month in a separate account in order to pay for large purchases you'll make in the future.

save

Which of the following would be considered an example of the M-2 (money supply)?

savings accounts, certificates of deposit, money market accounts

A financial institution that accept checking and savings deposits and provides home mortgages is a _______ and _______ association.

savings and loan

Fixed position layout

scheduling work operations at site of end product as in home building

The ______ market handles the trading of securities that have already been issued between investors, with the proceeds of the sale going to the investor selling the stock, not the corporation whose stock has previously been sold in an IPO.

secondary

Securities markets are divided into _____ and ______ markets.

secondary and primary

A loan backed by collateral, something valuable like property, is called a _____ loan.

secured

A corporation can issue two different classes of bonds, ______ and ______.

secured and unsecured

A ______ bond is backed up by a pledge of assets, whereas a _______ bond (also called a debenture bond) is backed only by the reputation of the issuer.

secured, unsecured

Investment bankers are specialists who assist in the sale of new _____.

securities

The length of time covered in a long term forecast is usually:

at least a year

Interest on your home mortgage payments is tax _________.

deductible

The purpose of a callable bond is to

pay off the principal balance before maturity.

What stocks are considered risky investments?

penny stocks

______ funds are monies put aside by corporations and others for the retirement of their employees.

pension

Health insurance is important because:

the costs of health care are very high

Needs for operating funds include:

-Managing day-by-day needs of the business -Controlling credit operations -Acquiring needed inventory -Making capital expenditures

Five standards of money:

-Portability -Divisibility -Stability -Durability -Uniqueness

Which of the following are advantages of issuing bonds?

-Bondholders are creditors of the firm, not owners. -Bond interest is a business expense and tax-deductible to the firm. -Bonds are a temporary source of funding. -Bonds can be repaid before the maturity date if they are callable.

Which of the following are disadvantages of issuing bonds?

-Bonds increase debt and may adversely affect the market's perception of the firm. -Paying interest on bonds is a legal obligation. -The face value of the bond must be repaid on the maturity date.

Manufacturers and service organizations can remain competitve in global markets by:

-Focusing more on customers -Maintaining closer relationships with suppliers and other companies to satisfy customer needs -Practicing continuous improvement -Focusing on quality -Saving on costs through site selection -Relying on the Internet to unite companies that work together -Adopting production techniques

Which of the following relate to a prospectus?

-It is a condensed version of the registration statement -It must be sent to prospective investors

What is an index fund?

A utual fund with a portfolio that matches a particular stock index.

Common liability accounts recorded on a balance sheet:

Accounts payable, notes payable, bonds payable

What is NASDAQ?

An automated system for trading stock

_______ are economic resources owned by a firm.

Assets

Fundamental rule of accounting

Assets - Liabilities = Equity

Why are institutional investors a powerful force in securities markets?

Because of their vast buying power

Why do most companies issue no-par stock?

Because par values do not reflect the market value of the stock

The acronym for using computers to design products is referred to as ________.

CAD (computer-aided design)

What is the acronym used for the system of production that uses computers to control the manufacturing process?

CAM (computer-aided manufacturing)

The acronym for computer software that combines CAD and CAM systems in production is

CIM

_______ expenditures are considered major investments in long-term assets.

Capital

What is true of commercial paper?

Consists of unsecured promissory notes, in amounts of $100,000 and up, that mature or come due in 270 days or less

Which of the following are features that preferred stock has but common stock does not have?

Cumulative, fixed dividend, callable

________ is the systematic write-off of the cost of a tangible asset over its estimated useful life.

Depreciation

______ are part of a firm's profits that the firm may distribute to stockholders as either cash payments or additional shares of stock.

Dividends

What does DJIA stand for?

Dow Jones Industrial Average

The acronym for the newer version of MRP (materials requirement planning) is

ERP (enterprise resource planning)

A retirement savings plan aimed at small-business owners is called a _______ plan.

Keogh

______ means to raise funds through borrowing to increase a firms rate of return.

Leverage

When selecting an investment, which criterion relates to how quickly you can get back your invested funds if you want or need them?

Liquidity

_____-_____ forecasts will look at all major inflows and outflows of the firm for a period of more than one year.

Long-term

The money supply term that refers to money that can be access quickly and easily is ________.

M-1

The term for the money supply that includes cash, checking accounts, Certificates of Deposit, money markets, and big deposits such as institutional money market funds is:

M-3

Using sales forecasts to make sure needed parts and materials are available at the right time and place using a computer-based operations management system is the definition of _________ _________ ________ .

Materials requirement planning (MRP)

The U.S. Congress passed legislation which created new government reporting standards for publicly traded companies under the ________ Act.

Sarbanes-Oxley

The ________ and ________ Commission is the federal agency that has responsibility for regulating the various stock exchanges.

Securities and Exchanges Commissions

Process layout

Serving different customers with different needs

A quality control standard that allows for 3.4 defects per one million opportunities is called:

Six Sigma quality

The SEC was created by:

The Securities and Exchange Act of 1934

How do voting rights in a corporation allow common stockholders to influence corporate policy?

The board members they elect choose the firm's top management and make major policy decisions.

How do cash flow problems usually start?

The firm uses up its credit.

Advantages to a corporation of issuing stock includes which of the following?

There is no legal obligation to pay dividends to stockholders

Role of investment bankers?

They help prepare for new stock issues, they underwrite new issues of stocks or bonds

What role do investment bankers play in securities markets?

They help sell corporation securities in the primary market.

A bar chart indicating what projects are being worked on and what stage they are in is representative of:

a Gantt chart

To encourage a customer to pay its bill on time or early, a firm will often offer:

a discount for payment before a certain date

Statements about pledging:

a firm's accounts receivable are used as basis for loan, the firm gets a percentage of the pledged accounts receivable as a loan

What makes buying on margin a risky way to invest in stocks?

a margin call

Examples of a fixed-position layout

a new home build, new road construction, bridge construction

What is a stock?

a share of ownership in a company

A unique element of ERP is that it combines computerized functions of all divisions into one database supported by:

a single integrated software system

An IRA (individual retirement account) is:

a tax-deferred investment plan that lets you save part of your income for retirement

Putting together components is the ________ process.

assembly

When producing large quantities of a few types of products, a _______ _______ layout should be used.

assembly line

One should only borrow money for...

assets that increase in value and assets that generate income

A balance sheet includes:

assets, liabilities, owners- equity

Which of the following are services provided by nonbanks?

accept loan applications, brokerage services, investment services

Reasons bond interest rates may differ

according to the state of the economy, the reputation of the issuing company, and the interest rate for bonds of similar companies

Classifying, summarizing, interpreting, and reporting

accounting

Computerized _______ programs post information from journals instantaneously so that financial information is readily available.

accounting

______ payable are current liabilities involving money owed to others but not yet paid.

accounts

______ ratios, such as inventory turnover, measure the effectiveness of managers in the basic function of creating profits.

activity

Net income is:

all revenue minus all expenses, including taxes

Besides Social Security, the government:

allows some tax-deferred investments and contributions, wants you to save for retirement

Seven times your family income plus extra ($100,000) for college is:

an estimate for life insurance needs

Financial managers must understand tax regulations because:

analyze the tax implications of managerial decisions to minimize the taxes the business must pay

A rule of thumb is not to buy a home that costs more than two and half times your ______ ______.

annual income

Stakeholders who want to look at detailed financial information on the financial condition, progress, and expectations of a company will look at:

annual report

A contract to make regular payments to a person for life or for a fixed period is called a ________.

annuity

Secured bonds are

backed by collateral

In order to get control of your finances the first step is to take an inventory of your financial assets by developing a personal _______ sheet.

balance

The financial statement that reports a firm's financial condition at a specific time is the:

balance sheet

A ____________ is a promise to pay a certain amount at a certain time with no conditions.

banker's acceptance

Statements about banking

banking is now a global industry, issues around the world can influence banking on the local level

Commercial banks, savings and loans, credit unions, and non-banks are all considered to be a part of the U.S. _______ _______.

banking system

Banks prefer to lend short-term money to larger, established businesses because:

banks are very sensitive to risk

Reasons a firm should stay in close touch with its banks include

banks may assist in spotting cash flow problems, banks like to see regular financial statements from borrowers

When the prices of stocks decline steadily, the market is called a ______ market.

bear

Planning, routing, scheduling, distribution, and follow-up are all aspects of _______ in the production process.

control

CIM?

computer integrated manufacturing

CAD?

computer-aided design

CAM?

computer-aided manufacturing

An accountants' time is freed up to do more important tasks such as financial analysis due to the assistance provided by using:

computerized accounting programs

As an investor, you may want to explore opportunities in global markets. Which of the following are suggestions to consider when investing in global markets?

consider mutual funds and exchange-traded funds, trade with an established broker that has an office abroad, invest in companies with a solid track record.

In order to be a quality organization, a firm must

consistently produce what the customer wants

What process requires long production runs that turn out finished goods over time?

continuous process

The ________ approach is buying stock when everyone else is selling or vice versa.

contrarian

Customers are happy when firms extend _____ for purchases.

credit

A nonprofit, member-owned financial cooperative that offers the full variety of banking services to their members is called a:

credit union

What are quality of life issues that must be considered by companies when choosing a facility location?

crime, climate, schools

A final step used in PERT is to identify the _______ _______.

critical path

The related tasks that take the longest to complete in a project are called the:

critical path

If one or more dividends are not paid when promised, they accumulated and the corporation must pay them later before it can distribute any common stock dividends. This is referred to as:

cumulative

When preferred shareholders are due any skipped dividend payments before common stock holders can be paid, they hold which type of stock?

cumulative preferred stock

______ assets are items that can or will be converted into cash within one year.

current

Social Security money comes from:

current workers

Sometimes a company is willing to spend millions to move their facility from one location to another in order to increase buyer traffic, drawing more potential

customers

Making a unique product or providing a unique service to a specific individual means to do what?

customize

Bonds that are unsecured are called ________ bonds.

debenture

______ bond is another term for unsecured bond.

debenture

The benefit of using a _____ _____ is that it is set up so that you cannot spend more than you have in the bank.

debit card

A firm raising funds through various forms of borrowing with the intent to pay it back is using _____ financing.

debt

With regard to tax considerations in financing, the fact that interest is tax deductible is a sign of ______ financing.

debt

_____ financing involves borrowing money.

debt

There is no management influence for ______ financing whereas common stockholders have voting rights for _____ financing.

debt, equity

When the Federal Reserve wants to encourage economic activity, it will ______ the discount rate.

decrease

The goal of living frugally is to:

have a better future

A firm's chance of success is increased by:

having a good financial plan

Stocks of public utilities are considered income stocks because of their:

high dividend yield

Penny stocks are sold by corporations that compete in:

high-risk industries

The government gives several motivations, including interest deductions, to encourage __________.

home ownership

The amount a business borrows and for how long depends on which of the following?

how quickly it can resell the merchandise it purchases with the funds and the type of business and industry it is in

When choosing an investment an individual will take into consideration tax consequences which is:

how the investment affects your tax situation

The best determination of how a house will appreciate is:

location

Financial managers take the data and reports prepared by accountants and:

make recommendations on improving the financial performance of the firm

A ______ accountant works for a single firm or agency and performs accounting functions for use in making decisions within that firm or agency.

managerial

________ accounting is used to provide information to managers within the organization to assist them in making decisions

managerial

The key working areas of accounting include:

managerial accounting, financial accounting, auditing, tax accounting, and government and not-for-profit accounting

Select the key functions of financial management:

managing the firm's cash, credit accounts, and inventory, managing taxes, collecting funds, controlling funds

401k money can only be invested in:

many different combinations

An order to buy or sell stock immediately at the current price is a:

market order

The type of production that does not concern itself with customer preferences, but instead focuses om making a large number of a few products is called ________ production.

mass

Which production systems tailors products to meet the needs of large numbers of individual customers?

mass customization

The operating budget is also called the:

master budget

The exact date the issuer of a bond must pay the principal to the bondholder is called the ______ ______.

maturity date

A CPA must:

meet a state's requirements for education and experience and pass a series of exams

The basic premise of just-in-time inventory is:

minimum inventory is kept on hand

Short-term funds should be used for

monthly expenses, unanticipated emergencies, cash flow problems, expansion of current inventory, temporary promotional programs

Commercial finance companies take ______ risks than banks and charge ______ interest rates.

more; higher

Items that are included in a household budget include:

mortgage/rent, utilities, food, clothing, vehicles, furniture, life insurance, car insurance, medical care, taxes

Time-to-market means:

moving products quickly to customers at the lowest cost

One reason a firm is cautious about extending credit is:

much of a firm's total assets can be tied up in accounts receivable (credit accounts)

A certified public accountant:

must pass a series of exams, must follow GAAP in the United States

The purpose of a will is to:

names the guardian for your children, states how you want your assets distributed, names the executor for your estate

Commercial paper is often used when the firm:

needs cash for a few months and does not want to go through a bank

Another name for profit is:

net income

The difference between revenue and costs is:

net income (or loss)

Long-term Funds should be used for

new-product development, replacement of capital equipment, mergers or acquisitions, expansion into new markets, new facilities

A mutual fund that charges no commission is called a _______ fund.

no-load

Social security is:

not an actual fund, but it uses monies from current taxpayers to pay retirees, a taxpayer-funded retirement program

Major methods of efficient credit procedures include:

offering cash discounts for prompt payment, studying payment history of potential customers to access risk, offering discounts for cash payments

When providing a service the goal of __________ __________ is to create a good experience for the customer.

operations management

The _____ market provides companies and investors with means to trade stocks not listed on the national securities exchanges.

over-the-counter (OTC)

A stock certificate represents stock ______.

ownership

Preferred stock is generally issued with a _____ value that becomes the base for a fixed dividend the firm is willing to pay.

par

The dollar amount assigned to each share of stock which is included in the corporation's charter is called the:

par value

A great benefit of a tax-deferred contribution is that it:

reduces your tax liability

In case of bank failure, the FDIC will:

reimburse account holders, transfer the accounts to a new bank

A term-loan agreement is a promissory note that requires the borrower to:

repay the loan with interest in monthly or annual installments

The ______ ______ is percentage of commercial banks' checking and savings accounts they must keep in the bank.

reserve requirement

The ________ _______ is a powerful tool of the Federal Reserve that controls the amount of money banks have available to lend to customers.

reserve requirement

Profits the company keeps and reinvests in the firm are called:

retained earnings

The accumulated earnings from a company's profits that are reinvested into the business and not paid out to stockholders are called:

retained earnings

The most favored source of meeting long-term capital needs is ______ _______.

retained earnings

The most favored source of meeting long-term capital needs is:

retained earnings

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called:

return on equity

How much money a firm will borrow often depends on how long it takes to convert inventory into ______.

revenue

Financial control is a process through which a firm periodically compares its budget to which of the following?

revenues, costs, expenses

A line of credit that is guaranteed but usually comes with a fee is called:

revolving credit

The difference between a line of credit and revolving credit agreement is that the:

revolving credit agreement is guaranteed

A __________ is a special policy purchased to cover certain expensive items.

rider

Changes in the financial markets and closely linked world economies will increase investor _____.

risk

Independent rating firms such as Standard & Poor's and Moody's Investors Service rate bonds according to their degree of ______.

risk

A ______-term forecast is usually for one year or less.

short

The difference between short- and long-term financing is that:

short is for a year or less

What is the meaning of notes payable?

short-term or long-term liabilities that a business promises to repay by a certain date

Benefits of enterprise resources planning (ERP)

shorter time between orders and payment, less staff needed to do ordering and order processing, reduced inventories, and better customer service, any department can see the status of an order at any time

A process layout is used in production when:

similar equipment and functions are grouped together

A ______ fund is a reserve account in which the issuer of a bond periodically sets aside some part of the bond principal prior to maturity, so that enough capital will be accumulated by the maturity date to pay off the bond.

sinking

Running a household as been compared to running a _____ business.

small

Short-term financing is more important to a small business than long-term financing because:

small businesses are more concerned with funding day to day operations

Uniting of CAD and CAM systems into CIM allows for both design and manufacture using ________.

software

A company that uses a capital account for owners equity is organized as a _________ ________ or a partnership

sole proprietorship

Mutual fund managers pick what they consider to be the best stocks and bonds available and help investors:

specialists who pick what they consider to be the best stocks and bonds available and help investors diversify their investments, change investments more easily

What is specified on a stock certificate?

specifies the name of the company, the number of shares owned, and the type of stock it represents

ISO is a worldwide nongovernmental federation of national _________ bodies

standards

Cash receipts and disbursements related to operations, investments, and financing are reported on the:

statement of cash flows

The three major activities of operations, investments, and financing are included on which financial statement?

statement of cash flows

The different between PERT and Gantt is that Gantt provides project _______ while PERT estimates _______ required for project completion.

status; time

A _______ _______ specifies the name of the company, the number of shares owned, and the type of stock it represents.

stock certificate

The places where stocks and bands are traded are called ______ ______.

stock exchanges

One of the best places to invest your money over a longer period of time is in the:

stock market

An action by a company that gives stockholders two or more shares of stock for each one they own is called a _____ _____.

stock split

In order to reduce a stock's high per-share price, a company can declare a ________ ________ in which they issue two or more shares for every one that's outstanding.

stock split

A ______ is a registered representative who works as a market intermediary to buy and sell securities for clients.

stockbroker

In a public corporation, the ownership is held by _______.

stockholders

What type of accountant is most likely to develop strategies for a firm in dealing with the Internal Revenue Service?

tax accountant

Disciples within the accounting profession:

tax accounting, financial accounting, managerial accounting

How the investment will affect your tax situation is referred to as ______ ______.

tax consequences

A modular layout is used in production when:

teams of workers produce complex units of a product

Developing countries are providing new markets for companies that can provide them with needed:

technology, goods, services

_______ affords a company less dependence on choosing a location tjat is close to labor sources and may allow it to keep employees who would otherwise refuse to move.

telecommuting

The simplest and least expensive form of life insurance which gives protection of a given number of years is called _______ _______.

term insurance

Variable life insurance is a form of whole life insurance:

that invests the cash value of the policy in stocks or other high-yield securities

The quality control steps of plan, do, check, act are aimed at finding potential errors before they happen as part of:

the Deming cycle, statistical process control

Reasons to invest in a moderately priced house include:

the chance of investment appreciation, it has a fixed housing cost

Who declares dividends?

the corporation's board of directors

The tax deduction allows a person to buy more home for the money because:

the interest you pay on the loan is deductible

The "bottom line":

the net income (or net loss) the firm incurred from revenue minus sales returns, costs, expenses, and taxes over a period of time, last line on the income statement

Securities that are not traded on registered stock exchanges are traded on:

the over-the-counter market

Preferred stockholders are given preference over common stockholders in:

the payment of dividends, the claim on company assets

The federal government makes homeownership more affordable because:

the real estate taxes are tax deductible and the loan interest is tax deductible

A savings account is also referred to as a:

time deposit

The ______ ______ of money is the idea that money in your possession today is worth more than money that will be in your possession in the future.

time value

Moving products quickly and at the lowest possible cost to customer in order to remain competitive is known as

time-to-market

Why do companies sometimes split their stock?

to decrease per-share prices

Technology allows the consumer:

to find the best loan deal quickly and easily, to have funds available with the use of ATMS

To really understand where your money goes, it is important:

to record all expenses

It is important to learn how to control your assets:

to stay out of debt, to accumulate funds for retirement, to reach personal and financial goals

________ _______ is the practice of buying goods and services now and paying for them later.

trade credit

summary of data in ledgers

trial balance

To become a certified internal auditor, an accountant must have at least ______ years' experience in internal auditing

two

A broadly based insurance policy that saves you money because you buy all your insurance from one company is called a:

umbrella policy

A life insurance policy that lets you choose how much of your payments should go to insurance or investments is called a ________ life policy.

universal

A line of credit loan is:

unsecured

A loan that does not require collateral is called a:

unsecured loan

Which statements are correct about loans?

unsecured loans are usually only for very stable customers, secured loans are backed by collateral

Product (assembly) layout

used to produce large quantities of a few products

What does the production process add to materials?

value, form utility

The conversion process of inputs into a final product is what adds ________ or ________ to a good or service.

value, utility

Money invested in new or emerging companies that investors believe have great profit potential is:

venture capital

By providing needed goods and services to developing markets a company:

will experience growth

Equity financing includes money raised from:

within the firm, from operations or through the sale of ownership in the firm

Advantages of using a credit card in small business financing include:

works well for Internet purchases, acceptance in many places

The banking industry is developing ways to reduce the cost and discourage the use of:

written checks

The expected of return on an investment is called ______.

yield

A danger of credit cards is that:

you may buy things that you would not otherwise

Disadvantages of bartering:

your items of value may have a limited life, you have to carry around goods that are hard to transport

When you make a house payment:

your money goes to interest and repayment of the loan