Intro to Business
Exchange-traded funds and mutual funds account for:
financial diversifications.
An advantage of factoring is that:
firms using factors get their money almost immediately.
A(n) _____ makes a profit by purchasing the receivables of a firm at a discount and collecting the full amount from the firm's customers.
. factor
_____ are also sometimes called activity ratios.
Asset management ratios
A wave of bank failures occurred in the United States in the early 1930s as the economy sank into the Great Depression. Congress responded by passing the _____ of 1933.
Banking Act
_____ consists of short-term (and usually unsecured) promissory notes issued by large corporations.
Commercial paper
The Securities Act of 1933 created the Federal Reserve System to serve as the central bank in the United States.
False
The members of the Financial Accounting Standards Board (FASB) are appointed by the Securities and Exchange Commission.
False
_____ perform a variety of accounting functions for local, state, or federal agencies, such as the Internal Revenue Service (IRS) and the Federal Deposit Insurance Corporation (FDIC).
Government accountants
Which of the following would most likely be a question asked by the stockholders of a firm?
Has the management generated a strong-enough return on their investment?
Which of the following statements is true of activity-based costing (ABC)?
It is more complex than the direct labor method.
Which of the following is a disadvantage of market timing?
It requires investors to make frequent trades.
_____ are ratios that measure the extent to which a firm relies on debt financing in its capital structure.
Leverage ratios
_____ provide analysis and prepare reports and financial statements for their organization.
Management accountants
_____ is found by multiplying the price per share times the number of shares of common stock outstanding.
Market cap
_____ measures the income earned per dollar invested by the stockholders of a firm.
Return-on-equity
_____ refers to financing that arises during the natural course of business without the need for special arrangements.
Spontaneous financing
_____ overturned the section of the Banking Act of 1933 that prohibited commercial banks from selling insurance or performing the functions of investment banks.
The Financial Services Modernization Act of 1999
Glen wants to find the stock prices of some of the large actively traded companies listed on the Tokyo Stock Exchange. Which of the following stock indices should Glen follow?
The Nikkei 225
Which of the following is true of balance sheets?
The balance sheets of different firms vary in specifics.
Which of the following is a leverage ratio?
The debt ratio
Which of the following statements is true of credit unions?
They are open to individuals who belong to a specific field of membership.
Which of the following is true of current assets?
They are resources that a firm expects to use up within a year.
_____ is a spontaneous financing granted by sellers when they deliver goods and services to customers without requiring immediate payment.
Trade credit
Dividends of a company are:
a distribution of earnings that are paid to a corporation's stockholders.
A high inventory turnover ratio is good because it indicates that:
a firm can continue its daily operations with a small amount of inventory on hand
A firm's _____ refers to its holdings of currency plus demand deposits.
cash
A _____ is the most common depository institution.
commercial bank
A _____ is a requirement a lender imposes on the borrower as a condition of the loan.
covenant
Leemo, a soft drink manufacturing company, sells approximately 400 batches of its soft drinks worth $80,000 every week. In this context, the 400 batches of soft drinks that Leemo produces weekly represent the company's _____.
current assets
Financial managers emphasize the goal of maximizing the market price of stock because:
have a fiduciary duty.
The _____ measures how many times a firm's stock is sold and replaced each year.
inventory turnover ratio
For a corporation, direct investment from owners occurs when:
it sells newly issued stock.
In the accounting equation, assets are equal to:
liabilities plus owners' equity.
In finance, a _____ is one that can be quickly converted into cash with little risk of loss.
liquid asset
The price at which shares of an open-end mutual fund are issued and redeemed is based on the fund's _____.
net asset value per share
A(n) _____ is a type of stock that gives its holder priority over common stockholders in terms of dividends and claims on assets.
preferred stock
Daniel, the owner of a bookstore, decides to reinvest his personal profits from the current fiscal year toward renovating the store and expanding its inventory. In the context of owners' equity, the profits that Daniel reinvests in the bookstore are called:
retained earnings.
Which of the following is true of accumulated depreciation?
. It is the decrease in the value of assets such as machinery, equipment, and property over time.
_____ measures how long it takes for a firm to receive payment from customers who buy on credit.
. The average collection period
Colbert Blanc is a financial intermediary that helps firms raise their capital by facilitating the firms in issuing new securities and making sure that the securities are sold out in the market. In this scenario, Colbert Blanc is a(n) _____.
. investment bank
_____ is a guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement.
A revolving credit agreement
Which of the following statements is true of financial leverage?
It is the use of debt in a firm's capital structure.
_____ are ratios that measure the rate of return a firm is earning on various measures of investment.
Profitability ratios
A sell limit order tells a broker to sell the shares only if the price is at or above a specified value.
True
Financial diversification is a strategy of investing in a wide variety of securities in order to reduce risk.
True
Institutional investors:
amass huge pools of financial capital from various sources.
In the context of financial accounting, the external stakeholders of a firm:
are seldom interested in analyzing detailed accounting information about the individual departments within the firm.
In the context of balance sheets, resources owned by a firm are known as _____.
assets
The three kinds of basic financial statements that are prepared in financial accounting are:
balance sheet, income statement, and statement of cash flows.
Dylan is a supervisory manager in the production department of a tea manufacturing company. Each year, he actively participates in the budgeting process of the company. His input is valued by the top management as he is able to identify the issues in his department. In this scenario, it can be said that Dylan's company follows the _____ to budgeting.
bottom-up approach
A _____ can help a firm evaluate how much internal financing (funds generated by earnings) will be available for a planning period.
budgeted income statement
Damien buys stocks worth $2800 in a cosmetic products manufacturing company. His investment turns out to be a sound decision as the prices of his stocks go up by $900. In this scenario, Damien earns a _____.
capital gain
The Federal Reserve System was:
created to serve as the central bank in the United States.
Corporations that get into serious financial difficulties sometimes:
default on their bonds.
In financial management, risk is referred to as the:
degree of uncertainty about the actual outcome of a decision.
It is fairly easy to acquire loans in Arzenia as the financial intermediaries of the country receive sufficient funds in the form of savings from its people and businesses. This enables them to turn the funds obtained into loans. Based on the information given in the scenario, these financial intermediaries are a form of _____.
depository institutions
In the context of managerial accounting, _____ are costs that are incurred as the result of some specific cost object.
direct costs
Leverage ratios measure the extent to which a firm uses _____
financial leverage
The term _____ refers to the use of debt to meet a firm's funding needs.
financial leverage
Dora works for PowTran Corp. Her primary responsibilities include managing the firm's working capital and analyzing long-term investment opportunities for the firm. Dora is most likely a part of the firm's _____ team.
financial management
Markets that transfer funds from savers to borrowers are referred to as _____.
financial markets
Firms that rely on a lot of debt in their capital structure are said to be _____.
highly leveraged
According to critics, the Glass-Steagall Act:
impeded financial innovation.
Janice is an accountant in a public relations firm. She prepares financial reports upon request by the management of the firm and does not stick to a predetermined schedule. The reports that she prepares mainly help the internal stakeholders of the firm. Given this information, it can be said that Janice performs _____.
managerial accounting
A _____ issued by an investor instructs a broker to buy or sell a security at its reigning price at that particular time.
market order
Paula wants to buy stocks in a publicly traded company that deals in networking equipment. However, the company is not listed on any of the major stock exchanges. Paula should, therefore, purchase the stocks of the company in the _____.
over-the-counter market
In the context of balance sheets, retained earnings are a major component of the _____ section.
owners' equity
Elliot holds a bond in a health care company that matures after a period of ten years. Taken together with the interest on the principal amount, on maturity, Elliot will receive a sum of $55,000, which is the bond's _____.
par value
Trestone, a guitar manufacturing company, produces a thousand units of electric guitars each year. The company has been able to sell all its guitars by the end of the fiscal year and earn twice the amount spent on production and marketing. The given scenario indicates that Trestone most likely analyzes _____ for its financial planning.
profitability ratios
Lorraine works for an accounting firm that performs external audits, provides consulting services, and does the tax preparation for other businesses and individuals. Given this information, Lorraine is most likely a __________.
public accountant
A project with a negative net present value should be:
rejected since the expected future cash flows from the project are less than the cost of the investment.
An online food delivery service goes out of business owing to stiff competition. The company has long overdue taxes because of which its stockholders do not receive the proceeds of the company after its dissolution. In this case, the company is not able to fulfill the _____ of its stockholders.
right to a residual claim on assets
The preparation of operating budgets begins with the development of a(n) _____.
sales budget
Vincent is actively engaged in the stock market and frequently buys and sells stocks for personal profits. With a good insight about the market trends, Vincent is mostly able to sell his stocks at higher prices than the prices at which he purchases them. Vincent is a(n) _____.
securities dealer
In private placements, _____.
securities that haven't been registered with the Securities and Exchange Commission can only be sold to other accredited investors
In a buy-and-hold investment approach, _____.
solid financial returns are the usual results
A _____ tracks the prices of a large group of stocks that meet certain defined criteria.
stock index
Aaron buys 300 shares in a tobacco company. Within a year, he receives a capital gain on his stocks. This means that:
the price of the shares soared in the market.
T he difference between the prices at which securities dealers buy and sell a security is called _____.
the spread
Grisham is the financial manager of Plink Inc., an electronics company. He invests a major portion of the company's profit in his business. He believes that money has the potential to grow in value over a certain period, which is why he prefers to receive and invest an amount of money today rather than in the future. In this scenario, Grisham is most likely to be influenced by _____ while utilizing the finances of the company.
time value of money
Alpha Inc. saw an increase in profits in the previous year following which the management decided to reinvest its earnings. These retained earnings will be used to:
. meet the company's long-term financial needs.
_____ measure how effectively an organization uses its resources to generate net income.
Asset management ratios
_____ is a management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period.
Budgeting
Which of the following is a source of long-term funds for firms?
Corporate bonds
Which of the following is the most commonly used liquidity ratio?
Current ratio
Betty ' s job entails detecting problems such as embezzlement, waste, mismanagement, and employee theft at her organization. In this case, Betty is a(n) _____.
internal auditor
While performing a financial analysis for his organization, Morris discovers that there has been mismanagement of employee funds over the past three months. He immediately reports this to his supervisors. In this scenario, Morris is most likely a(n) _____.
internal auditor
In addition to contributions from owners, firms can also raise long-term funds by:
issuing bonds.
Sebastian is an employee at Plowell Inc. His duties include preparing reports and analyzing company data. He also appraises financial performances and verifies the accuracy and validity of the company's internal records. In this scenario, Sebastian's role is that of a _____ in the organization.
management accountant
_____ refers to funds provided by creditors.
Debt financing
Miller is the owner of a restaurant that has several franchises. One of the franchisees owes Miller a sum of $18,000 for the goods that he had bought from Miller on credit. In this scenario, the money owed to Miller is known as _____.
accounts receivable
A(n) _____ is the first time a company issues stock that may be bought by the general public.
initial public offering
Anvis Asset Management Fund is a mutual fund company that sells securities to investors and uses the money to purchase bonds and corporate stocks. Anvis Asset Management Fund is a(n) _____.
institutional investor
In the context of balance sheets, patents, trademarks, and copyrights are examples of _____.
intangible assets
The employees of an information technology company complain that the company has been spending a lot of funds in wasteful activities, such as office renovation, instead of revising the employees' salaries. In this case, the company should hire a(n) _____ to keep a check on the company's expenses and prevent the problem from aggravating.
internal auditor
The management of Lovelo, a candy manufacturing company, comes across a case of employee theft in their inventory. In this case, the company should seek the help of a(n) _____ to look into the matter .
internal auditor
Investors using a(n) _____ often invest in stocks of relatively new companies with innovative products in a hot sector of the economy.
investing for growth strategy
A _____ is an order to a broker to buy a specific stock only if its price is below a certain level, or to sell a specific stock only if its price is above a certain level.
limit order
Daryl is an accountant in Vansert Inc., a multinational healthcare company. He is responsible for providing analysis, preparing financial statements, and reporting the financial transactions of the company to the deputy chairman of the company. In this scenario, Daryl is most likely a _____.
management accountant
If Carl is a preferred stockholder at Cedia Inc., and Cedia goes out of business, Carl's claim on the firm's assets:
takes precedence over common stockholders.
If an auditor doesn't find any problems with the way a firm's financial statements were prepared and presented, the report will offer a(n) _____ opinion.
unqualified
