Business Finance Exam

When you ask coworkers for help and they aren't able to help you, which of the following responses would be most appropriate

"Thanks anyway; maybe another time." This is an appropriate response because it expresses your thanks for their response and lets them know you understand and will ask them again. Reminding coworkers that you had helped them earlier is attempting to make them feel guilty, which they will probably resent. Saying that you won't bother them again indicates you are offended by their refusal. Saying you don't know how you'll get done (without help) is whining, which is a very negative habit that annoys other people.

Which of the following comments by a supervisor is an example of destructive criticism:

"You're a real dummy if you don't know how to do that by now." Destructive criticism not only points out mistakes but includes a personal attack on the individual. In this case, the supervisor has called the employee a dummy, which is insulting. All of the other comments are examples of constructive criticism given to help an employee improve.

The American Heart Association's promoting healthy diets is an example of marketing by a __________ organization.

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What type of accounting system is used for internal decision-making, is not governed by generally accepted accounting principles, and emphasizes the future?

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Which of the following situations could be prevented through the use of a financial-information management system:

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Which of the following technologies has proven very successful in creating "what-if" scenarios in the finance industry:

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If you are 17 right now, what is the best age to begin investing?

17. If you are 17 now, the best age to begin investing is 17! The sooner you begin to take advantage of the compounding growth of the stock market, the better. Compounding is your best friend, because right now, time is on your side. As a teenager, you have more years ahead of you to invest than your grandparents, your parents, and even your older siblings. Waiting until you're 25, 27, or 32 could cost you hundreds of thousands of dollars.

Under which of the following circumstances should applicants send interview follow-up letters:

After every employment interview. Job applicants should send follow-up letters after every employment interview in order to thank the interviewer for considering them. Sending follow-up letters is a common courtesy to interviewers, but it also benefits the applicant. Even if the applicants are not hired at that time, they have created a favorable impression in the event that they apply for other positions with that business in the future. Applicants should always send follow-up letters, not only if they are interested in the job, sure they will get the job, or convinced they are qualified.

Which of the following is the best course of action to take if a financial client reports a problem with her/his portfolio:

Apologize and resolve the problem immediately. Finance professionals are most likely to build customer loyalty and retention if they resolve any client problems and complaints as soon as possible. Waiting until later to deal with the problem is unwise; while waiting for a call back, the client may become even more upset than s/he already is. Before involving a manager, finance professionals should attempt to resolve their clients' problems themselves. While waiving the client's fees for future transactions can benefit the client, doing so doesn't necessarily resolve the client's problem.

To guard against intentional ethical violations, such as deliberate financial data tampering, an organization should maintain

Audit trails of data changes. An organization should maintain audit trails to record the details of any financial data tampering and/or erasures. After the organization discovers tampering and/or erasures, the data in question can be recovered and/or restored to its original state. It is not necessary to keep hard copies of every document. An accounts receivable schedule and daily balance sheets do not guard against deliberate financial data tampering or erasures.

One of Megan's coworkers frequently makes critical comments about Megan's computer skills. Megan can use self-control in this situation to help her

Avoid an angry response. Megan's coworker is engaging in aggressive behavior. Aggressive people often make remarks intended to aggravate others. Using self-control to avoid making an angry response is a good way to handle such people because it denies them the satisfaction of having upset you. Getting back at the coworker or trying to learn to be aggressive would only make the situation worse. Formal complaints are used in more serious circumstances.

Before implementing data mining procedures, a business must first identify how the financial information is

Categorized. Data mining is the process of searching computer databases to look for patterns and relationships among information. Before a business can retrieve certain types of information, it must identify how the data are stored and categorized in the database. After identifying storage and categorization methods, the business decides which approach to use to obtain the information. After the information is obtained, the business views and analyzes it.

John is a recent college graduate with very little experience in operating a business, but he wants to own a business that has a well-known trade name. If he has sufficient capital to invest, what type of business ownership should he consider?

Business-format franchise. A business-format franchise is a franchise arrangement in which the franchisee must operate under the trade name of the parent company which provides continuous assistance in setting up and operating the business.

Given financial information, how could you identify trends in the data?

By comparing data across time periods to determine similarities and differences. For fi nancial information to be useful to decision makers, the information should possess the qualitative characteristics of relevance, reliability, understandability, and comparability. Comparability is the ability to bring together for the purpose of noting likenesses and differences. This characteristic is needed to identify trends in a business's financial position and to compare the performance between/among companies. The characteristic of relevance involves ensuring that the financial information addresses the economic decision at hand. When financial information is neutral, prudent, and complete, it possesses the characteristic of reliability. By presenting financial information in the simplest manner possible, businesses ensure that the information is understandable.

Which of the following is not a way that businesses contribute to society:

By minimizing profits. Businesses can show their social responsibility by maximizing their profits. This enables them to have funds to contribute. Socially responsible businesses develop new products that improve the quality of life, provide employment opportunities, and support many different kinds of community cultural activities. Businesses also contribute to society by paying taxes, contributing to charities, participating in community events, and offering job training and retraining programs.

Which of the following is a financial report that financial institutions often review to decide if they will approve applicants' requests for business loans:

Cash-flow statement. A cash-flow statement is a financial report that contains estimates as to when, where, and how much money will flow into and out of a business in a given timeframe. Lending institutions want to look at loan applicants' cash-flow statements to determine if they have enough money to operate. If an applicant seems to have problems paying bills due to continuous cash shortages, a lending institution may believe it is too risky to process the loan because the applicant may not be able to pay back the loan. A corporation charter is a permit granted by the government to a business that allows the business to operate as a corporation. A petty-cash summary documents a business's small cash transactions. A payment voucher is a receipt.

Which of the following is considered a business maintenance activity:

Cleaning equipment and fixtures. Maintenance schedules are established to ensure that these activities are completed on a regular basis. Protection against shoplifting is a security responsibility. The receiving department is responsible for receiving and checking goods, and the sales department is responsible for selling goods and services.

What type of money is recorded in the cash receipts column of a cash flow statement?

Collected. Only collected money is recorded under cash receipts. For example, if a business expects to make $5,000 from cash sales and $2,000 from credit sales, it records only the $5,000 in the cash receipts column. The $2,000 in credit sales is referred to as accounts receivable and should not be recorded until it is actually collected; otherwise, the business will appear to have more money on hand than it actually does. Expenses are listed in the cash payments column rather than in the cash receipts column.

Which of the following is a type of information that supervisors often communicate to employees in writing:

Company policies. Supervisors and employees need to communicate with each other on a regular basis in order to function effectively. One type of information that supervisors often communicate to employees in writing is information about company policies. Supervisors want to make sure that employees understand company policies so that they will be able to work efficiently and accomplish company goals. Providing this information in writing ensures that it is available to employees at all times. Personal opinions and workplace rumors usually are communicated verbally. Supervisors usually do not communicate community news to employees.

One of the advantages to businesses of using spreadsheet software is its ability to

Do calculations. Businesses often use spreadsheet software to organize and prepare financial documents, such as budgets and profit statements. One of the advantages of using spreadsheet software is its ability to do mathematical calculations. A business can input columns and rows of dollar amounts or percentages, and the software will complete the computations accurately and quickly. Also, businesses can change various figures to determine the effect a planned price increase would have on profit. Word-processing software is used to write brochures. Graphics software is used to create visuals. Database software is used to store information.

Businesses keep records of accidents and injuries in order to identify unsafe situations and to

Correct hazards. Businesses keep a running log or record of work-related accidents in order to identify patterns or trends in workplace accidents. Businesses use this information to correct the hazardous or unsafe situations and help prevent accidents from occurring. Businesses do not keep accident reports for the purpose of completing paperwork. The accident reports may answer certain questions about the incident, although that is not their primary purpose. Accident reports are not needed in order to administer first-aid.

One of the main parts of the United States' judicial system is the __________ system.

Court. The court system includes the federal court and each states court system.

Which of the following capabilities would be most useful when using budgeting applications:

Creating unlimited scenarios to depict the impact of decisions. When using budgeting applications, users can benefit by creating a variety of "what-if" scenarios in order to develop the most realistic budget. Automatic deletion of files would be a disadvantage since the prior year's budget is used in developing future budget. An audit trail should be maintained on all data entries rather than audits occurring at random. An effective budgeting application would set limits on how much over budget an account can go and flag the overage so that steps can be taken to handle the situation.

Advantages to business owners of reading trade journals are that they contain reports by industry experts and

Current product information. One of the values of trade journals is the up-to-date product and technology information that they provide. Trade publications keep business owners and their employees informed about their industry. Advertising in trade journals is extensive and provides additional information. Trade journals are written for specific groups of workers/industries and do not have articles about other industries or articles directed to consumers.

What do most businesses maintain to help them plan future sales and promotional activities?

Customer records. Most businesses maintain customer records that contain information about what customers are buying, when they are buying, and how much they are buying. By analyzing this information, businesses are able to plan future sales and promotional activities that will appeal to customers and encourage them to buy. Without this type of information, businesses might have no idea what customers will want to buy in the future. Businesses do not maintain advertising proofs, inventory systems, or operating procedures to help them plan future sales and promotional activities.

What does the SQL statement "FROM" do at the beginning of a database clause?

Designates tables. SQL—Structured Query Language—is used for building queries and performing database administration tasks. All queries in Access have a SQL statement. SQL statements are made up of clauses with each clause beginning with a keyword that is typically written in all caps. Other key words used in SQL query statements are: SELECT - Retrieves fields WHERE - Identifies filter criteria ORDER BY - Sort order(s)

By analyzing a customer's financial information, a finance professional should be able to

Develop a financial strategy to help the customer. Whether the finance professional works internally or externally, or works with individuals or businesses, s/he should be able to analyze the customer's financial information to recommend an appropriate financial strategy for the "customer." Business management would declare a company in bankruptcy based on information provided by the finance professional. Just having a customer's financial information requires finance professionals to protect its privacy—analysis is not required. The customer's marketing department would determine its newest target market, while the finance professional will measure the target market's profitability.

What feature do many word-processing software programs contain that enables businesses to prepare accurate written documents?

Dictionary. Many word-processing software programs contain a dictionary, which enables businesses to check the spelling in their documents. The dictionary feature identifies words that are incorrectly spelled and provides several alternatives. This feature helps businesses to prepare accurately-written documents and avoid sending letters or reports to customers that contain misspelled words. Some word-processing software programs include a calculator, which helps businesses with mathematical tabulations. A flowchart is part of spreadsheet software programs. Businesses with Internet capability have access to online encyclopedias.

Which of the following technologies is frequently used to provide a source for master data management in the finance industry:

ERP (Enterprise Resource Planning). Master data management is made up of processes and tools that define and manage non-transactional data entities. In other words, it collects, pulls together, matches, consolidates, and distributes data throughout an organization. ERP is an example of a system that's intended to integrate all data and processes into a unified system. A key ingredient of most ERP systems is the use of a unified database that stores data for the system. Accounting systems do not provide a source for master data management. Their focus is on collecting and storing financial data for the accounting department. SutiExpense is a mobile expense management application used to monitor, manage, and simplify travel and expense recordkeeping. Users are able to attach receipts "on the go" from their smart phones, enabling them to save both time and money.

Being persuasive is a characteristic of a(n)

Effective leader. Being persuasive is a characteristic of an effective leader. A leader is a person who guides or directs the actions of others in a desired manner. Leaders help others make decisions and encourage them to do their best. People often follow leaders because they are persuasive. Leaders also persuade by setting the example. Persuasive people are not domineering. A loyal follower is someone who always goes along with the suggestions of another, usually the leader. An authority figure is someone who has power and is in control. Authority figures are not always persuasive.

Which of the following is typically an effective method to build trusting relationships with financial clients:

Explaining the benefits and drawbacks of different financial products. One responsibility that finance professionals have is to provide complete product information to clients. This means explaining the benefits as well as the drawbacks of different financial products so that clients can make educated decisions about what to do with their money. When finance professionals communicate openly, their clients are much more likely to trust them. And, when clients trust their finance professionals, they are more likely to become loyal and satisfied customers. Rather than using precise technical language and financial jargon, finance professionals can build more trust by talking to their clients in language that the clients understand. Rather than asking others in the organization to follow up after sales transactions, finance professionals can build trusting relationships with clients by following up with them themselves. Although some clients may only want to be contacted when problems arise, most clients prefer to stay in communication with their finance professionals on a more regular basis.

What is one way that the trend towards protecting the environment has a negative effect on many businesses?

Increases costs. Many businesses are spending large sums of money to repair the damage their operating techniques did to the environment. The trend towards protecting the environment is forcing many businesses to correct the problem and find ways of operating that will not be destructive. This trend is expensive for businesses that must now pay for past mistakes. Protecting the environment often involves reducing pollution. Promoting growth would be a positive effect. Many businesses increase prices in order to generate additional funds to use for developing ways of protecting the environment.

Bank of America Corporation owns most or all of the shares of thousands of different companies. Some of these companies are in the finance industry, but others are not. Bank of America Corporation is an example of a(n)

Financial holding company. A financial holding company, also known as a parent company, is usually a banking company that owns most or all of the shares of multiple individually incorporated, independently funded subsidiaries that engage in other types of financial activities such as insurance and securities. A financial holding company is also permitted to own a controlling interest in non-financial firms, but the parent company can only act as a passive investor in such firms. Bank of America Corporation is a good example of a financial holding company. A fully integrated financial provider is a company that offers multiple types of financial products using one pool of capital. A universal bank offers retail/business and investment banking products directly but also sells other financial products through subsidiaries that the universal bank owns. A universal bank typically does not own nonfinancial companies. A cooperative bank is a state-chartered savings association.

One factor that contributed to financial globalization was the shift of many developed countries from __________ exchange rates to __________ exchange rates.

Fixed, floating. To enable capital to flow more freely internationally, countries around the world have reduced or eliminated many regulations and restrictions. For example, many developed countries shifted their exchange rates from being fixed to floating. Fixed exchange rates are set by the government, while floating exchange rates are determined by market supply and demand for currency. Although fixed exchange rates are still popular in some parts of the world, most developed countries have floating exchange rates. A pegged exchange rate is a fixed exchange rate. Declining exchange rates have not significantly contributed to financial globalization.

Why do some businesses install electronic video monitor systems for surveillance of the premises?

For security. Some businesses use electronic video monitor systems to watch the interior and exterior of the property in order to make sure these areas are secure for customers and employees. These systems record on videotape any breakdowns in security and can be used to identify suspects in the event of theft. Communication involves the exchange of information between individuals or groups. Maintenance involves the upkeep and repair of equipment and facilities. Management involves overseeing the operation of a business or a certain aspect of a business.

Stocks in which of the following industry sectors are least likely to be affected by changes in the business cycle:

Healthcare. Healthcare, food, drink, and tobacco are generally considered to be non-cyclical industries, meaning that they are not greatly impacted by changes in the business cycle. The demand for such products and their stocks remains fairly steady regardless of the stage of the business cycle. Stocks in industry sectors such as energy, technology, and capital goods, on the other hand, often change in response to changes in the business cycle. The energy sector is affected by supply and demand of energy around the world, and political unrest can impact the industry considerably. Energy stocks seem to perform best late in the business cycle. Technology stocks are also affected by the business cycle, often in direct relation to the demand for capital goods. Technology stocks and capital goods stocks do well during business cycle expansion.

Which of the following is an essential element of responsible behavior:

Honesty. Responsible behavior is made up of five essential elements—honesty, compassion/respect, fairness, accountability, and courage. Determination, flexibility, and leadership are all great characteristics to cultivate, but they are not elements of responsible behavior.

The primary reason that businesses use data mining techniques to obtain various types of financial information is to

Identify relationships and patterns among data. Data mining is the process of searching computer databases to look for patterns and relationships among information. Businesses use the information they obtain from data mining to make business decisions, such as determining which customers may qualify for credit. Businesses do not use data mining techniques to develop financial goals, manage their working capital, or analyze the accuracy of their accounting records.

Riley is an employee of the federal government who studies the financial reports of major businesses in a specific industry. The government's purpose in assigning this task to Riley is to

Identify trends in the industry. Various governmental offices study businesses' accounting reports in order to obtain information about industry trends and to make economic forecasts. Information related to employment statistics and compliance would be obtained from other sources. Businesses calculate the amount of tax they owe based on their financial records. Government would use the records only if the businesses' tax returns are being audited.

When financial institutions follow government regulations pertaining to the industry, the institutions are

In compliance. There are various government regulations pertaining to the finance industry that financial institutions are required to follow. When financial institutions follow the regulations, they are in compliance with the laws and regulations. Many of these laws affect how financial information is reported, and how the privacy of personal financial information is protected. When financial institutions follow government regulations, they are abiding by the law rather than being ethical. Being ethical is voluntary whereas being in compliance is required by law. The financial institutions are not in mediation or being independent.

Which of the following is a financial-information management problem that businesses often encounter:

Incompatible information systems. Businesses work with a variety of information systems that do not share information with or feed information into each other. This results in businesses taking risks with the accuracy of their financial information. Since effort is required to pull the financial information together and to verify its accuracy, financial operations run less productively than they could with compatible information systems. Using the same chart of accounts, having a single source of financial data, and having aggregated financial-information management would increase productivi ty in finance operations rather than being problems.

What is often the result when a business's employees practice good human relations skills?

Increased cooperation. When a business's employees practice good human relations skills, increased cooperation usually results because employees are willing to help each other. Practicing good human relations skills usually increases communication and loyalty. Benefits are not affected.

What is usually the tone of a simple written report?

Informal. Simple written reports are usually informal and friendly in tone. They are intended to transmit information to business colleagues on a less formal basis than is used in complex written reports. Many simple reports take the form of internal memorandums, which are friendly and informal in tone. Complex written reports may be solemn in tone. Written reports should not be overly dramatic, and they should never be imprecise.

Credit for which a buyer signs a contract, makes a down payment, has interest and carrying charges added, and makes equal periodic payments until the amount due is paid in full is known as __________ credit.

Installment. This type of credit is used for large purchases, such as automobiles and major appliances. Revolving, budget, and coupon credit are examples of charge-account or open-account credit. This means the customer can continue to add purchases to his/her account up to a predetermined amount.

Which of the following is a public good that is provided by the government:

Interstate highways. Public goods are goods and services that are used by all people and cannot be withheld from those who don't help to pay for them. Marketing research, automobiles, and private schools are goods and services provided by private businesses.

How do finance companies commonly raise capital?

Issuing notes, bonds, and other obligations. Finance companies, also known as credit companies, are a type of financial institution. Finance companies raise capital by issuing notes, bonds, and other obligations. They use this capital to provide loans to businesses and consumers. Insurance companies raise capital by investing funds from premiums and offering loans to clients. Deposit-taking institutions accept funds from savers and use those funds to offer loans to borrowers. Investment institutions, not finance companies, establish mutual funds and investment banks.

Stock market returns are commonly considered to be __________ economic indicators

Leading. Stock market returns are commonly considered to be leading economic indicators because they often decline in advance of an economic decline and improve prior to positive movement in the overall economy. Lagging economic indicators such as the unemployment rate do not change direction until after the general economy improves or declines. Coincident economic indicators move simultaneously with the overall economy. Exploratory economic indicators are fictitious.

Justin's company is keeping documents regarding the accidental death of an employee while on the job. In case the employee's family sues the company, the business should have __________ records on hand.

Legal. Any lawsuit in which a company is involved requires the business to have legal records. These records can be almost any business document created. Payroll records, asset records, or promotional records may be required in certain legal situations. But in Justin's company's situation, there has been an accidental death of an employee while on the job. This means that legal records should be on hand in case the family sues.

An employee who charges a customer less than the actual price for a good or service creates a __________ for the business.

Loss. When any employee charges a customer less than the actual price, the business does not make enough money on the sale to cover the cost of providing the good or service. Therefore, the business loses money on that transaction. If employees undercharged customers on a regular basis, the loss might be large enough to put the company out of business. Undercharging a customer does not create a gain or a profit for the business. A leader, or loss leader, is a price that the business has set low to attract customers.

One of the purposes of having business policies is to

Make sure the business's actions are consistent. Business policies keep the day-to-day operations running smoothly and consistently. Policies ensure that employees will handle the same situations in the same manner, rather than making decisions regarding each customer, because the policies provide guidelines for employees to follow. Business policies cannot ensure profits. Policies usually set rules for exchanges of goods, but they do not encourage customers to make exchanges frequently.

A reason that many companies update or alter existing products is to

Make them competitive with similar products. Updating or altering an existing product is a good way to compete effectively with similar products produced by other companies. Changing products is usually much less expensive than creating new products. Updated or altered products are not new products but new versions of old products. Changing products does not help the business to plan quantities since it does not know how well the revised product will sell. Being able to use a known production process would not be a valid reason for updating or altering products.

Sarah is a new employee who works in the finance department of a large firm. When Sarah first started working for the firm, she met Jan, who also works in the finance department. Jan has been with the company for several years, and has been promoted several times. Jan has been helping Sarah by providing her with professional advice, tips for handling office politics, feedback, and encouragement. Jan is Sarah's

Mentor. A mentor is an experienced worker who can act as a guide or helper to less experienced workers. Mentors can be supervisors or coworkers; or, they can be experienced professionals who work in the same industry, but for other companies. A companion is someone who accompanies another person to an event or activity. There is not enough information provided to determine if Jan is Sarah's supervisor, if Jan works as an editor, or if Jan has accompanied Sarah to an activity or event.

What is the most important component of an effective business letter?

Message. The message, or body, is the most important component of an effective business letter. The message explains the purpose of the letter and expresses the writer's thoughts to the reader. A business letter is ineffective if the message is not well written and clearly understandable. The opening, address, and heading direct the business letter to the appropriate person.

The effect of empathic behavior on interpersonal communication among employees is to make communication

More effective. Empathy is the ability to put yourself in another person's place. Employees who practice empathic behavior understand themselves and each other better; thus, they communicate much more effectively. Communication is less complicated, easier, and not likely to be awkward.

To build professional relationships, a finance professional might talk with friends, family, and business associates to discuss ways in which s/he can advance in his/her career. This is an activity called

Networking. When people connect with others who might help them accomplish their personal career and professional goals, they are networking. Finance professionals might learn about employment and continuing education opportunities as well as prospective clients (selling opportunities) through the networking process. Socializing involves personal activities rather than professional activities. Coordinating is linking activi ties together in a systematic or organized way.

To control its risk of financial loss of business assets, such as buildings, equipment, and inventory, the CNP Company should

Obtain adequate property insurance. Businesses purchase various types of insurance to transfer risk. To minimize its risk, a business must ensure that it obtains adequate insurance coverage. For one premium amount, a business can obtain comprehensive property insurance that covers losses associated with building damage and equipment and inventory theft or damage. Businesses can select the appropriate coverage based on their specific needs. If the business does not purchase enough insurance, the insurance payout amount may not cover all of the business's losses, which would be more costly to the business. To maintain insurance coverage, businesses need to pay premiums when they are due, which may be on a monthly, quarterly, or annual basis. Disability insurance is a type of insurance that pays a percentage of employees' salaries if they are unable to work for an extended period of time. Lenders often require that businesses carry certain types and levels of insurance before they will loan them money.

When a small business experiences a steady increase in cash inflow over an extended period of time, the business might decide to

Purchase office equipment. A business monitors its cash flow to determine how much money is flowing into and out of the business. Monitoring cash flow helps the business plan how and when it will pay its bills. If the business is making more sales and the cash inflows are steadily increasing, it may decide to use the cash surplus to buy office equipment (e.g., computers, printers, etc.). Businesses usually want low-interest loans. The business might sell assets or buy less inventory if it experiences a severe or ongoing cash inflow shortage.

Convergence and consolidation in the finance industry have resulted in a(n)

One-stop shopping environment for customers. Convergence, which is the merging of financial providers from different financial sectors, and consolidation, which is the merging of financial providers within the same institutional category, have created a one-stop shopping environment for consumers. Rather than having to go to different financial providers for different financial products and services, customers can find all of the financial products that they need—banking services, insurance policies, brokerage services, etc.—in one place, from one company. Rather than creating a highly compartmentalized finance industry, convergence and consolidation have created finance companies that want to be everything to everybody. Rather than specializing in any one service, many of today's financial firms offer a vast array of products and services. As financial firms merge and grow in size, it becomes more difficult for financial experts and the government to get an accurate picture of the firms' current financial condition. As finance corporations expand their product offerings to encompass several financial sectors, it becomes increasingly difficult to determine which agency should oversee the companies. There is no single supervisory agency to regulate the entire finance industry.

Stockholders monitor a business's income statement because they are the business's

Owners. Stockholders have part ownership of a business and use the income statement to monitor the business's profit levels. Stockholders have money invested in the business and monitor how much profit the business is making to determine if they are getting a good return on their investment. Employees, customers, and managers are not stockholders of the business unless they have also invested money in the business.

To become a certified financial planner, an individual must accomplish at least three things: acquire the required education, pay the appropriate fee, and

Pass the certification examination. Passing the exam verifies that the individual is qualified to be a financial planner. It is not necessary to join an association first. Recognizing the value of certification is something you might do before you seek certification. Solving financial problems is something you intend to do after certification.

Georgia peanuts that are available at a grocery store in Colorado is an example of a product that has __________ utility.

Place. Products that are available where they are needed have place utility. Making the peanuts available in Colorado where they are not grown gives them place utility. Time utility occurs when products are available when they are needed. Form utility involves altering the shape of a product, and possession utility is created when the ownership of a product is transferred from the seller to the person or business that will use it.

Businesses often monitor internal inventory records to obtain the information needed to

Plan special sales. Businesses monitor internal inventory records to keep track of the type and quantity of products that are in stock. By monitoring this information, businesses can identify an oversupply of certain products, or products that are slow sellers. The inventory records help businesses decide when it would be appropriate to plan a special sale to get rid of excess inventory or slow-selling items. Keeping these items in stock ties up money that the business could use to buy new products that customers want to buy. Businesses do not monitor internal inventory records to obtain the information needed to organize new displays, evaluate vendors, or create safety rules.

Which of the following is not a reason why planning is important to a business:

Planning is an independent business function. Planning affects all areas of the business because it lays the groundwork for the other management functions of organizing, staffing, directing, and controlling. Planning can help to prevent mistakes, and it enables employees to see how their efforts fit into the business's overall plan.

When preparing to deliver an oral presentation, the most important step is

Practicing the delivery. When preparing to deliver an oral presentation, practicing the delivery is most important because it uncovers any problems with timing, transitions, note cards, visual aids, and even language. Conducting research, writing useful note cards, and choosing the best visual aid are all important steps, but they do not affect other areas as much as practice does.

What does a group's leader do?

Puts the group on a certain course. Though each person in the group has the ability to influence the others, there's usually a leader who puts the group on a certain course.

John frequently lists or ranks the things he needs to do in the order of their importance. John is __________ his activities.

Prioritizing. Prioritizing is determining the order for completion of activities based on their importance. It is a helpful way to manage time. Classifying, categorizing, and grouping activities are sorting techniques in which the importance of each activity is not a factor.

Using an orderly and systematic approach to jobs should make a worker more

Productive. Organized workers tend to be more productive because they plan ahead and can do their work at a relaxed pace. Being organized does not necessarily make an individual open minded. Orderly and systematic workers are more likely to be careful than careless, and they are less likely to be tense because they have reduced stress.

Which of the following is considered the primary incentive for starting a business:

Profit motive. The profit motive is the hope of making a profit that serves as an incentive for individuals to assume risks involved in investing in business. It is a goal toward which an individual or a business can work. Competition is the rivalry among two or more businesses to attract scarce customer dollars. Private property is anything of value that is owned by an individual or a business. Supply and demand work together to determine prices.

One of the main provisions of the Gramm-Leach-Bliley Act requires financial institutions to

Protect the privacy of consumers' personal financial information. The Gramm-Leach-Bliley Act, also known as the Financial Modernization Act of 1999, requires financial institutions to protect the privacy of consumers' personal financial information that is held by the financial institutions. This means that the financial institutions must follow specific rules when collecting and disclosing financial information to protect the privacy of consumers

What is a benefit of being able to centrally store financial data?

Provides real-time reporting and analysis. Many financial services organizations are revamping their data management infrastructure to improve their operational efficiencies, as well as to satisfy mandates for processing and compliance monitoring. Since many applications access and update a common body of data, it makes sense to consolidate that common data in a central repository. Having one source for critical data ensures that the information used by distinct applications within the enterprise is both consistent, and up to date. This will result in decisions being made on current rather than historical data and reducing the time spent verifying data consistency across systems. Using centrally stored financial data will improve the business's ability to process a high volume of data rather than eliminating it. A central data repository should also reduce the response time utilized in data queries.

A budget helps a business evaluate long-term performance by

Providing benchmarks of past performance. A budget helps a business evaluate long-term performance by providing benchmarks of past performance. Examining previous budgets clarifies how the business has performed over time. Budgets do not help evaluate long-term performance by creating a trail of management decisions, by comparing current budget amounts to current actual amounts, or by providing details of related activities.

Which of the following is an ethical issue resulting from internal risks:

Providing incomplete data for audits. Ethical risk management must be implemented by everyone in an organization to protect the company's credibility with its stakeholders. By providing incomplete data for audits, employees are acting unethically and risking the company's future existence. Revealing discounted expenses is an ethical action. Using or not using insurance companies represents external risks for a business.

Many businesses have eliminated free services in order to

Reduce operating expenses. Operating expenses, or overhead expenses, are the amounts of money a business pays out in order to produce and/or sell its goods and services. Since operating expenses include salaries and wages, as well as equipment, eliminating free services would reduce operating expenses. The business would save the costs of delivery vans/trucks, the expense of packing for delivery, and the wages paid to delivery personnel. This would not control inventory shrinkage which is caused by employee theft and shoplifting. It would be likely to decrease customer satisfaction and to make the business less competitive if its competitors do offer free delivery.

The King Investment Company is developing a data-mining model to forecast customer profitability. What type of prediction would be most appropriate for this study?

Regression

Compliance in the finance industry involves financial institutions operating within

Regulatory guidelines. Financial institutions are required to follow governmental rules and regulations. Following these regulatory guidelines is the process of compliance. The purpose of compliance is to make the industry safe for consumers and to maintain the stability of the financial system. Compliance does not involve operating within specific territories, organization plans, or different relationships.

Use of budgeting applications that provide real-time data help companies to

Respond quickly to changes in the business environment. The use of budgeting applications can provide decision makers with real-time data on an ongoing basis so that they can make changes in response to what is impacting the business. To be effective, decision makers cannot wait a year to make budget revisions when changes occur. One of the goals of budgeting applications is to break down departmental silos by sharing information among departments. Use of real-time data does not automatically create a need to increase the amount budgeted to line items. The availability of real-time data enable a business to be flexible so that it can respond appropriately to changes.

Which of the following actions can the LBS Company take to control risk that is associated with external factors:

Review compliance requirements. Risk is the possibility of loss. Many internal and external factors affect the business's level of risk. Because risk affects the business's financial well-being, it must take steps to minimize risk. The government implements regulations, which are external factors that affect the business. It is important for the business to understand and keep up with the regulations that affect the way the business operates. If the business fails to comply with the regulations, it could be subject to penalties and fines, which can be very costly to the business. Updating customer data, maintaining Intranet security, and implementing business policies are ways that the business controls its internal risks.

Which of the following is an example of the impact of technology on the financial-services industry:

Rising concern about fraud and identity theft. One of the impacts of technology on the financial-services industry is rising concern about fraud and identity theft since so many financial products and services are now bought and sold online. Encryption technology helps guard against fraud and theft. Banks have fewer walk-in customers when they offer online banking. Blurred lines between the banking, insurance, and investment industries is the result of deregulation. Greater demand for investment professionals is the result of changing demographics.

To reduce the number of bad checks, businesses are turning to check verification companies that guarantee to pay each check that they approve. This is an example of

Risk management. Risk management is reducing and managing the risks of doing business. Natural risks are risks from natural causes, such as floods, tornadoes, fires, and earthquakes. Economic risks occur from changes in overall business conditions, such as inflation, recession, or government regulation. Risk retention occurs when a business retains a risk and the company must assume the loss.

Which of the following is not a standard financial statement:

Shareholder sheet. There is no such thing as a shareholder sheet. The balance sheet, income statement, and cash flow statement are three standard financial statements that are found in annual reports.

What type of customer typically requires the salesperson to exert extra effort in order to close the sale within a reasonable period of time?

Slow/Methodical. These customers may require more of your time because they lack confidence and are indecisive—they have trouble making the final decision to buy. Domineering/Superior customers are overly confident customers who feel they know more and are better than the average person. Dishonest customers attempt to avoid paying part or all of the price of a good or service. Disagreeable customers are unpleasant and hard to help.

Why do businesses need to accurately report a business's financial position?

So that investors trust the information presented in financial statements. Investors need to be confident that the information they read in financial statements is accurate. When they feel that they can trust the financial information they see, investors are more likely to invest. This supports the smooth functioning of a market economy. In many companies, executive bonuses are not tied to company performance. The government would not need to know that businesses are facing financial difficulties. In a market economy, supply and demand impact businesses' financial well-being, not the government (unless the business is a U.S. car manufacturer). Accurate reporting of financials would not impact a business's ability to expand as quickly as possible.

Joan borrowed $10,000 from a relative to start her own business. Assuming she takes all responsibility for the company's financial risks, the company is most likely a

Sole proprietorship. A sole proprietorship is owned and operated by one individual. Although Joan obtained a loan, she is still the sole owner/operator.

To obtain reliable information about securities, a potential investor might speak with a

Stockbroker. Securities refer to the legal owning or lending agreements between individuals, businesses, or governments. Securities include investments such as stocks, bonds, and mutual funds. A stockbroker is a licensed person who has the authority and expertise to buy and sell securities on behalf of a client. Unless they are stockbrokers, trusted friends, colleagues, and loan officers may not be the most reliable sources of securities information.

Capital gains taxes may be imposed on

Stocks, bonds, and real estate. When investments such as stocks, bonds, and real estate are sold at a profit, a capital gains tax may be levied. A capital gain is the difference between the purchase price and sales price of an asset. Investors can reduce their capital gains taxes in a number of ways, including selling some investments at a loss to offset the profit generat ed by the sale of other investments. Capital gains taxes can also be reduced by keeping investments for a longer length of time. Short-term capital gains are taxed at a higher rate than long-term and super-long-term capital gains. The capital gain generated by a real estate sale is often not taxed if the seller owned the home for at least two years. A gift tax, not a capital gains tax, may be imposed on financial gifts.

Most people can achieve their personal goals if they

Take steps to reach their goals. When people set goals which are important to them, they should take steps to achieve those goals. Thinking about goals and discussing them with others are part of the steps for goal achievement. Pursuing the goals only when it is convenient is not likely to lead to achievement of the goals.

Which of the following is a legal consideration that pertains to accounting:

Tax reporting. All businesses are required by law to report and pay a variety of taxes. Tax reporting is a legal consideration that pertains to accounting because income and expenses can be reported in different ways. For example, it is illegal for a business to misrepresent financial information to indicate a loss for the purpose of not paying taxes. It is also illegal for a business to fail to report and pay sales tax and payroll withholding tax for employees. Businesses need to be aware of legal issues to avoid potential problems. Gift giving, entertaining, and computer hacking are usually ethical considerations rather than legal considerations.

At the end of the last accounting period, the XYZ Company's virtual auditor reported that an expense account used to purchase gifts for clients had an erroneous credit balance rather than the anticipated debit balance. Which of the following reasoning techniques did the virtual auditor use to identify the noncompliant account:

Temporal reasoning. A virtual auditor, which is a type of compliance technology, uses multiple reasoning processes to review financial transactions and processes to identify errors and/or noncompliance. Temporal reasoning involves considering the timing of a financial transaction or process. In this instance, the XYZ Company's virtual auditor considered the fact that it was the end of the accounting period when reviewing the balance of the expense account. Since that particular account is expected to have a debit balance at the end of each accounting period, the virtual auditor identified the account's credit balance as a potential error or compliance violation to be corrected. Incremental reasoning involves studying a series of seemingly innocent events as they occur to determine if the chain of events as a whole represents a potential compliance violation. Cross-source reasoning is used to compare financial transactions and processes in multiple financial systems. Comparative reasoning is used to identify financial system transactions that are very similar to each other but not exactly alike.

The numbers listed in a stock table's 52-week high and low column tell you

The range of prices for the year. The numbers in a stock table's 52-week high and low column tell you the range of the prices for the year. But, the numbers simply give the range for the year. Alone they do not tell an investor if the stock is overvalued, what the best price for the stock is, or where the range should be

A worker who completes a transaction in which money changes hands but no receipts are kept and the income is not reported to the government is participating in

The underground economy. An underground economy is one in which money transactions take place (such as tips received in a restaurant), but since no record is made of the transaction and the income is not reported to the government, the GDP does not reflect the exchange. The underground economy actually reduces the GDP. An uncounted production involves goods and services that are not sold in the marketplace so their value can only be estimated. Double counting involves counting a product or service more than once. Accuracy in counting refers to the vast amount of information that must be collected to calculate GDP which can easily lead to error in the final figure.

What is the primary reason that creditors analyze their customers' financial information?

To determine the likelihood of getting paid. Creditors take risks when extending credit to customers whether they are letting them borrow money or defer payment for product. By analyzing customers' financial information, they have a better idea of whether the customers pay their debts. Stockholders analyze financial information to determine whether they are making good investments. The accounting method customers use indicates when sales and expenses are recorded in the customers' books. Determining how often inventory turns must be compared with other companies in the same industry to determine whether inventory is being held too long. The figure by itself does not communicate anything to creditors.

Which of the following is a way that businesses can use financial information:

To identify trends. Through financial-information analysis, businesses can recognize what products are selling well and in what colors, styles, models, and sizes. Over time, this helps businesses spot trends in customer buying habits so that the businesses provide more of the products customers are buying and less of those that are not selling well. Selling strategies are largely determined by the nature of the product being sold rather than by financial information. Focus groups are used to collect customer reactions to and opinions about product features or company image. Businesses function in economic systems rather than creating them.

Which of the following is a reason to analyze financial data:

To understand accounting treatment. By reviewing a business's financial data, a finance professional can learn whether the business is using accrual or cash accounting methods. With the accrual method, transactions are recorded at the time they occur, rather than when payment is received or made. With cash accounting, transactions are recorded when payment is received or made. The accrual method is used by most businesses since it allows the current cash flows to be combined with future expected cash flows, thereby giving a more accurate picture of a company's current financial condition. Cash accounting presents a more conservative view of a company's financial situation; therefore, it's important to analyze financial data to determine the accounting treatment that has been used. Marketing and management determine what products need to be recalled. Recalls are generally due to safety issues. Financial data are quantitative data rather than qualitative data. Financial models are used in analyzing financial data rather than being an outcome of the analysis.

Which of the following adds meaning to the words a speaker uses:

Tone of voice. People can change the meaning of their words by changing their tone of voice.

The primary function of the foreign exchange market is to

Trade currency. There are many types of currencies in the world—the yen (Japan), the U.S. dollar (United States), the Euro (European Union), the Peso (Mexico), etc. Each currency's value fluctuates. The foreign exchange market trades one currency for another currency, and determines each currency's conversion rate into other currencies. Stock exchanges buy and sell stocks. The bond market buys and sells bonds or debt securities. Insurance companies underwrite insurance policies.

Businesses often ask a new employee's coworkers to help __________ the new employee.

Train. Businesses often assign new employees to work with experienced employees who will be able to help train them. Current employees can help new employees learn their jobs and provide them with information about company procedures. Coworkers would not be asked to supervise, question, or test new employees.

The price of raw materials used in manufacturing a product was double what had been projected for the year. Which of the following could the business determine by analyzing its financial information:

Variances. Businesses analyze their financial information to determine the differences between what they had forecast and what actually happened. By doing this, they can account for those differences and improve future forecasts. In this scenario, equipment costs were not a factor. The business could not determine from its financial information whether the supply of raw materials decreased or demand increased. Forecasts are estimates based on information known at the time the forecast was made and will not be exactly what actually happens. In this scenario, therefore, the variances would not be considered forecasting errors.

Which of the following questions should the user of financial analysis applications be able to answer:

What is the change in the company's liquidity. By using financial analysis applications, businesses gain insight into its financial health, such as the company's liquidity. These applications also are useful in helping to identify trends. The applications cannot accurately forecast a business's actual amount of profit margin; however, they help to identify trends impacting the profit margin. These applications cannot identify project priorities or tell why products are being added to the product mix. They report financial data.

The amount of work that an individual can produce in a given period of time is a measure of

Worker productivity. Worker productivity is often measured by the amount of work produced in an hour or a day. Specialization, job simplification, and division of labor are methods of increasing worker productivity. Specialization is the process of making the best use of resources in the production of goods and services. Division of labor is dividing a large job into units, or job tasks, and assigning an individual to do each of the tasks. Job simplification is the process of making changes in a job task so that the job can be done more easily or quickly.

Which of the following international financial institutions provides financing and advice to countries to encourage economic development:

World Bank Group. The World Bank Group, which includes the World Bank as well as several other international organizations, is an international financial institution that provides financing and advice to impoverished countries to encourage economic development and eliminate poverty. The Small Business Administration is a U.S. government financial institution that provides financial assistance and advice to American small businesses. The Commonwealth of Nations and the Liberty Institute are not financial institutions. The Commonwealth of Nations is an international organization that promotes world peace, democracy, and free trade. The Liberty Institute is an international organization based in the country of Georgia that advocates civil liberties as well as public accountability and effective governance.