Business Finance Chapter 1
Which of the following is NOT an operating decision?
Deciding on the amount of operating expenses.
Which of the following is NOT a source of financing?
Dividends
What does ROA measure?
Efficiency
What term refers to the relationship between assets and profit for the year?
Efficiency
A commercial bank is a "form" of financing.
False
Funds obtained from "external financing" include depreciation/amortization and retained earnings.
False
Investing decisions have to do with the management of current assets.
False
Investing decisions relate to borrowing funds from investors.
False
Financial management ensures that operating managers formulate accounting and financial policies that are clearly defined.
False The controller formulates accounting and financial policies that are clearly defined.
__________ is defined as the process of decision-making and the process by which decisions are implemented (or not implemented).
Governance
Funds obtained from retained earnings and depreciation/amortization are considered ____________________ financing
Internal
Funds obtained from retained earnings and depreciation/amortization are considered ____________________ financing.
Internal
The acquisition of a business and the purchase of non-current assets are considered ____________________ decisions.
Investing
__________ decisions relate to the acquisition of non-current assets.
Investing
__________ is a financial objective that shows if a firm has the ability to meet its short-term obligations.
Liquidity
________________ is a financial objective that shows if a firm has the ability to meet its short-term obligations.
Liquidity
Match each term with the correct definition
Machinery and equipment -investing decision Profit for the year -operating decision Return on revenue -efficiency Dividends -financing decision Working capital -liquidity External activities -treasurer Internal activities- controller Revenue -prosperity Return on sales -efficiency Meeting short term equipment -liquidity Budgeting technique -planned downsizing Working capital account -trade receivable Operating decision -statement of income Equipment -capital asset Financing -matching principle
Which of the following is an example of a non-current liability?
Mortgage Payable
Which of the following is used to calculate the weighted average cost of capital?
Mortgage Payable
Net profit for the year is the difference between ____________________and income tax expense.
Profit before taxes
__________ is a financial objective that deals with the relationship between debt and equity.
Stability
Which of the following activities is NOT a financial management function?
The treasurer is responsible for corporate accounting.
Which of the following statements describes a source of funds?
Trade Credit
A term loan and mortgage are considered "forms" of financing.
True
Capital shares can be considered an "external" source of funds.
True
Corporate culture is a management wave that appeared in the early 1980s and has to do with a shared system of values and beliefs within an organization.
True
Efficiency measures the relationship between profit for the year (outputs) generated and assets employed (inputs).
True
Financial management deals with two things: raising funds and buying and utilizing assets in order to gain the highest possible return.
True
Financing decisions focus on long-term borrowings.
True
What type of decision is the management of working capital?
an operating decision
What do investing decisions deal with?
buying non-current assets
Which of the following is an example of an investing decision?
buying non-current assets
How is gross profit determined?
by deducting the cost of sales from revenue
How is ROR calculated?
by dividing profit for the year by revenue
The ____________________ controller / financial manager is the person responsible for establishing the accounting and financial reporting policies and procedures
controller / financial manager
Funds obtained from investors are considered ________________ decisions.
financing
Funds obtained from investors are considered ____________________ decisions.
financing
What is the chief financial officer NOT responsible for?
internal
Which of the following is an example of an external financing source?
mortgage payable
What is considered an "efficiency" financial objective?
the return on revenue
The ____________________ is the internal employee responsible for raising funds for a firm.
treasurer
The ____________________ is the person responsible for raising funds.
treasurer
The ____________________ is the person responsible for establishing the accounting and financial reporting policies and procedures.
Controller
General accounting is the responsibility of the__________________
Controller
