chapter 14,15, and 16 acp buisness

Which of the following is an asset in the balance sheet?

Accounts RECEIVABLE is the money owed to a company by its clients or customers who have promised to pay for the products at a later date. Accounts receivable usually includes an allowance for bad debts that management does not expect to collect.

An income statement shows

An income statement is a financial report that shows a company's profitability over a period of time—month, quarter, or year. By its very design, the income statement offers one of the clearest possible pictures of the company's overall revenues and the costs incurred in generating those revenues.

________ is the movement of money through an organization over a daily, weekly, monthly, or yearly basis.

CASH FLOW... is the movement of money through an organization over a daily, weekly, monthly, or yearly basis. Obviously, for any business to succeed, it needs to generate enough cash to pay its bills as they fall due.

________ is the single most important source of capital for most new companies.

COMMON STOCK is the single most important source of capital for most new companies

________ are savings accounts that guarantee a depositor a set interest rate over a specified interval of time as long as the funds are not withdrawn prematurely.

Certificates of deposits

________ is a written promise from one company to another to pay a certain amount of money.

Commercial paper

________ ratios provide information about how much debt an organization is using relative to other sources of capital, such as owners' equity.

DEBT utilization ratios provide information about how much debt an organization is using relative to other sources of capital, such as owners' equity.

Hannah has borrowed money from a bank to start her new hair salon and spa. Her direct costs of borrowing this money is known as her ________ expenses.

Hannah's direct costs of borrowing money are her INTEREST expenses.

Which of the following statements is true of the eurodollar market?

It is used by companies to invest idle cash in international markets.

What is meant by owners' equity?

It refers to the money contributed to a firm that never has to be paid back.

________ includes the owners' contributions to a company along with income earned by the company and retained to finance continued growth and product development.

OWNERS EQUITY includes contributions to the organization along with income earned by the organization and retained to finance continued growth and development. If the organization were to sell off all of its assets and pay off all of its liabilities, any remaining funds would belong to the owners.

________ analysis refers to calculations that measure an organization's financial health.

RATIO analysis refers to calculations that measure an organization's financial health

________ is the total amount of money received from the sale of goods or services, as well as from other business activities such as the rental of property and investments.

Revenue

The amount of money budgeted for the purchase of long-term assets is called the ________ budget.

The CAPITAL budget is the amount of money budgeted for investment in long-term assets that will maximize the value of the business.

The ________ rate is the interest rate commercial banks charge their best customers for short-term loans.

The PRIME rate is the interest rate commercial banks charge their best customers for short-term loans. For many years, loans at the prime rate represented funds at the lowest possible cost.

Marty's Savings Bank is holding $20 million in deposits, with a 10 percent reserve requirement. As a result, the bank must have reserves of $2 million. If the Federal Reserve Board reduced the reserve requirement to 5 percent, what would this mean for Marty's Savings Bank?

The bank could lend to customers the $1 million difference between the old reserve level and the new lower reserve level.

Which of the following characteristics of money allows people to postpone purchases and save their money to do so?

The principle of stability allows people who wish to postpone purchases and save their money to do so without fear that it will decline in value. Money must be stable and maintain its declared face value.

Which of the following is a reason that credit cards are a popular substitute for cash payments?

They are accepted by merchants around the world

Which of the following statements is true of bonds?

They must be repaid according to the terms set in the indenture.

________ are marketable securities that are short-term debt obligations sold by the U.S. government to raise money.

U.S. Treasury bills

Which of the following is an arrangement by which a bank agrees to lend a specified amount of money to an organization upon request?

a line of credit

Tom is completing a balance sheet for his home improvement company. He must include the amounts he owes to suppliers for lumber, tools, equipment, and other materials that he purchased with credit. These liabilities are called

accounts payable

Credit cards

allow cardholders to pay for transactions at a later date.

Emily's Embellishments, a craft store, displays various types of paper, stickers, glue sticks, yarn, canvases, paints, and other craft supplies on shelves. These items are examples of the company's

assets.

The ________ presents a snapshot of an organization's financial position at a given moment.

balance sheet

Which of the following categories of cash flow is calculated from changes in the long-term or fixed asset accounts?

cash from investing activities

As a measure of value, money primarily serves as a(n)

common standard or yardstick of the worth of goods and services.

When it comes to long-term liabilities, the key word is

debt

to be used as a medium of exchange, money must be

durable.

Net income is

earnings after all expenses have been deducted.

Potential investors typically study the ________ in a firm's annual report to determine whether the company meets their investment requirements.

financial statements

In the context of expense accounts, salaries of executives and their staff are included under the category of ________ expenses.

general and administrative

Profitability ratios measure

how much operating income or net income a firm is able to generate relative to its assets, equity, and sales.

If Linda Wilson borrows $20,000 to buy a car and ends up paying the lender a total of $24,000, the $4,000 represents the

interest.

The primary advantage of owning preferred stock is that it

is a safer investment than common stock.

A company with a low return on assets

is not using its assets very productively.

Ian got a loan from the Small Business Administration to start his own house contracting business. This loan is a(n)

liability.

A debit card

looks like a credit card but works like a check

Working capital management refers to

managing short-term assets and liabilities.

Since idle cash does not make money, a manager may choose to invest this extra cash in temporary investments called

marketable securities.

Melanie manages a used car dealership that allows customers to buy cars for no money down and pay in installments throughout the year. Her company builds in a bad-debts adjustment that is deducted from the accounts receivable balance to present a more realistic view of the payments likely to be received in the future for these cars. The payments the company expects to receive are called

net receivables.

The ________, an asset utilization ratio, indicates how many times a firm collects its accounts receivable in one year.

receivables turnover

Accounting refers to the process of

recording, measuring, and interpreting financial information.

Thomson is a manager at a bank. He has to decide whether to lend $10,000 to Safe Toys, a company that produces toys that don't have a choking hazard. He should

review the company's financial statements.

When money serves as a way to accumulate wealth, money primarily functions as a Correct Answer

store of value

The Federal Reserve Board controls the amount of money available in the economy

through monetary policy

Craig's Construction Company bought a crane for $200,000, which it expects to be able to use for 50 years. Rather than showing an expense of $200,000 in the first year and no expense for the crane over the next 49 years, Craig can report depreciation expenses of ________ per year in each of the next 50 years because that better matches the cost of the machine to the years it is used.

$4,000

Fresh and Fit, a large chain of health food stores, sells its common stock at a par value of $15, and the offering price of the stock is $10. This means that the capital in excess of par is

$5.00

Why is the life span of a $5 note likely to be shorter than that of a $100 note?

A $100 note is less frequently passed between users.

________ is best described as a paper money that is not readily convertible to a precious metal such as gold.

FIAT money is best described as a paper money that is not readily convertible to a precious metal such as gold. It did not gain full acceptance until the Great Depression in the 1930s.

________ is the study of how money is managed by individuals, companies, and governments.

FINANCE is the study of how money is managed by individuals, companies, and governments.

The ________ is the guardian of the American financial system.

Federal Reserve Board