Ch. 15

Which of the following best describes a collection period ratio?

Accounts receivable divided by average daily credit sales

________ are those paid without an intermediary to a taxing authority by the person or business against which they are levied.

Direct taxes

If a firm is making profits, it is impossible for that firm to fail financially.

False

Planning is the process of assuring that organizational goals are achieved.

False

Working capital can be calculated by subtracting current assets from total assets.

False

Which of the following statements is a characteristic of an internal audit?

It functions primarily as a service to management for the improvement of its financial controls.

Which of the following statements is a characteristic of a cash flow budget?

It tells whether arrangements need to be made for external sources of cash, such as borrowing or owner investments.

Which of the following is a method of computing inventory that small firms tend to use to save taxes when prices rise?

Last-in, first-out method

A(n) ________ budget forecasts sales and allocates expenses for achieving them.

Operating

Visa and MasterCard are examples of one of the many choices available to use the services referred to as ________.

Peer-to-Peer (P2P) payment services

________ are acceptable levels that are set in advance that is used to measure how well employees meet expectations.

Performance standards

Which of the following helps increase the assets or decrease the liabilities of a company?

Retained earnings

________ is the percentage of net profit the owners' equity earns, before taxes.

Return on equity

Which of the following budgets is planned first when preparing the operating budget?

The sales budget

Which of the following is true of S corporation shareholders?

They are taxed at individual rates

A capital budget reflects a business's plans for obtaining, replacing, and expanding its physical facilities.

True

A financial audit of a company consists of a formalized, methodical study, examination, and/or review of its financial records.

True

If a company turns its inventory over too slowly, it is most likely to be keeping obsolete or deteriorating goods.

True

A(n) ________ budget plans expenditures for obtaining, expanding, and replacing physical facilities.

capital

________ is the amount of current assets less current liabilities.

Working capital

The ________ is the ratio of current assets, less inventory, to current liabilities.

acid test ratio

The ________ shows how easily a company can pay its short-term obligations.

current ratio

A(n) ________ is an additional tax on certain items imposed by the federal government.

excise tax

A ________ is a formalized examination and/or review of a company's financial records.

financial audit

Working capital indicates the ability a company has:

to pay its current liabilities.