Chapter 3 Test

The amount to which an amount of money will grow in a defined period of time at a specified investment rate

Future Value (A)

A business has total assets of $3.56 million and owner's equity of $2.47 million. Find the total liabilities.

1.09 Million

Use the figures in question 4 to find Bugzapper Company's net income.

172,810

If a business borrows $10,000 for one year from a bank at an interest (discount) rate of 7 percent, what is the actual amount of money received by the business?

9,300

Business financial goals are developed to respond to all of the following financial needs EXCEPT

A business must maneuver itself so that it pays no corporate taxes. (A)

Which of the following is probably MOST concerned about receiving the highest possible return on their investment?

All of the above would be equally concerned (D)

A decline in the value of an asset as it ages is known as

Balance Sheet

Cash Receipts - Cash Payments =

Capital Budget

The sheet identifies the assets, liabilities, and equity of a business as of a specific date

Collateral

A(n) is an individual or organization that provides funds to a business, with repayment of the funds and agreed-upon interest due at a future date.

Creditor

Which of the following would be considered a liability?

Equipment (D)

An operating budget corresponds to a company's cash flow statement.

False

If a small business does not eventually grow into a large business, it must be considered a failure.

False

If the amount of income received from sales exceeds the costs of producing the sales, the financial position of the business will decline.

False

The difference in purchasing power of an amount of money at a future date is called inflation

False

The amount paid for the privilege of borrowing money is called is an asset promised by a business to a creditor if repayment of a loan isn't completed.

Finance Charge

The costs of acquiring, expanding, upgrading, or renovating the major assets of a company would be included in a(n) _budget.

Financial Statements

is the general increase in the price of all goods and services over time.

Inflation

A business financial goal must have all of the following characteristics EXCEPT

It must never change be changed under any circumstances. (B)

The amount of money a business borrows is called the

Principal (C)

This type of budget analysis examines financial performance over several periods of time to determine patterns.

Trend analysis (D)

An annual interest rate and an effective interest rate are the same thing.

True

Business financial goals establish direction for the financial plans of a business.

True

If a business owner wants to know whether the amount of available cash for her business is increasing or decreasing, she would probably consult the cash flow statement.

True

Pressure on corporate management to maintain a high rate of return for investors sometimes leads to poor financial decisions.

True

In the formula for determining simple interest, i = Prt, the interest rate is represented by

r (C)

If $5,000 is loaned at 5 percent simple interest, how much interest has been earned at the end of five years?

1,250

The Pork Iron Company wants to increase sales of its metal bars by 1.5 percent over the next 12 months. If sales were $2.4 million last year, what will sales need to be this year if Pork Iron meets its goal?

2.436 Million

The cash budget for The Century Corporation shows the following: Beginning cash balance: $375,000 Total inflow: $980,000 Total outflow: $1,150,000 What is the estimated ending cash balance?

205,000

The following entries appear on Crazy Co.'s balance sheet: Cash: $25,000 Land: $109,900 Stock: $500,000 Mortgage: $365,000 Capital Surplus: $205,000 Capital Equipment: $457,800 Retained Earnings: $134,500 Using these figures, find owner's equity for Crazy Co.

800,390

What is the basic accounting equation?

Assets = Liabilities + Owner's Equity (D)

A financial is a projected financial statement for a specific future time.

Depreciation

A(n) is the amount of money subtracted from a loan at the time of lending equal to the interest charged by the lender.

Discount Points

The Securities and Exchange commission requires all public and private corporations to prepare financial statements and have them audited by an independent certified public accountant.

False

This financial statement provides a view of the financial changes in a business that have occurred during a specific period of time.

Income Statement (A)

Which type of budget projects all income and expenses for the operations of a business for a specific time period?

Operating Budget (D)

After you identify the type of budget you wish to prepare, you need to?

Organize the information into categories to reflect the financial calculations that must be completed. (B)

If liabilities increase in relation to the value of assets, owner's equity declines.

True