Midterm 2

A secured loan is back by

collateral, something valuable such as property.

Major duties of the Federal Reserve include

collecting data on money policy setting reserve requirements buying and selling government securities

Careful control of a firm's inventory allows it to maintain :

correct levels of stock and product.

The formula for the costs of goods sold is

purchase price + freight charges + storage costs

Profit =

revenue - costs

The role of an auditor is to

review and evaluate a company's financial information

The primary users of government and nonprofit accounting information are

special interest groups, legislative bodies, taxpayers

A ______ accountant is trained in tax law and is responsible for preparing tax returns.

tax accountant

Which of the following are considered disciplines within the accounting profession

tax accounting, managerial accounting, financial accounting

Which are considered to be the working areas of accounting?

tax accounting, managerial accounting, government and not-for-profit accounting, financial accounting, auditing

Finance

the function in a business that acquires funds for the firm and manages them within the firm

What is the discount rate

the interest rate that the Federal Reserve charges for loans to member banks

In MikesBikes, the shareholder value will go _____ if my debt goes _____

up if my debt goes down

When the Federal Reserve buys and sells government bonds it is

engaging in open market operations

If we make any changes in the Development Section it will _____our existing inventory.

get rid of

Which are forms of debt financing

getting a loan from a bank issuing bonds

Banking has to be seen today as

global in nature

Banking is not just a domestic function anymore since it is influenced by____ issues

global/internation/world

The most common reason a firm fails financially

1. undercapitalization 2. poor control over cash flow 3. inadequate expense control

What was the total change in the balance of Common Stock from 2016 to 2017?

2,000

If a mountain bike needs 0.5 SCUs to be produced and we have a capacity of 1,000 SCUs, we can build

2,000 bikes

Which of the following is an example of a long-term liability?

30-year mortgage

If our forecasted sales are 19,000 bikes and we have 18,500 bikes in our inventory, we should produce:

500 units

Items of value owned by a firm are called

assets

The information and analysis that comes from managerial accounting is used to

assist managers inside the organization with their decision making

A loan backed by collateral, something valuable like property, is called a(n)

A secured loan

Which of the following best describes electronic funds transfer

A way to send funds from one computer to another

What is the highest possible rating for a bond?

AAA

Net income or loss is

ALL REVENUE MINUS ALL EXPENSES AND TAXES

Through the recording, classifying, summarizing, and interpretation of financial events in an organization, the function of_____helps managers make good decisions about the firm's operations

Accounting

What is considered to be the "language of business"?

Accounting

_____ is the recording, classifying, summarizing, and interpreting of financial events and transactions in an organization to provide interested parties with needed financial information.

Accounting

If financial management is the heartbeat of competitive businesses, what keeps that heartbeat stable?

Accounting Information

______ ratios tell us how effectively management is turning over inventory

Activity Ratios

Later on in the simulation, Corporate Branding will benefit:

All of my products, my current products, and my brand

The first step in the accounting cycle is to

Analyze source documents

Stakeholders who want to look at detailed financial information on whether a company is profitable, is able to pay its bills, and how much debt it owes will look at the firm's:

Annual Report

The accounting equation is:

Assets = Liabilities + Owners' Equity

Which three components make up the fundamental accounting equation?

Assets, Liabilities, and owners equity

Reviewing and evaluating records used to prepare a company's financial statements is referred to as:

Auditing

Common Stock shows up on the: .

Balance sheet

Commercial banks, savings and loans, credit unions, and non-banks are all considered to be a part of the U.S. ____ system

Banking

What is true about banking

Banking is now a global industry Issues around the world can influence banking on the local level

Why might loans obtained from families and friends be problematic

Because all parties may not understand cash flow.

Why does Macy's have to pay a very high interest rate?

Because their debt-to-equity ratio is very high

Which option tells you what the value of each share is?

Book value

An example of a Fixed Cost is:

Both Selling and Administrative expenses are fixed costs

A _____ is a financial plan that sets forth management's expectations and, on the basis of those expectations, allocates the use of specific resources throughout the system

Budget

When a company allocates the use of specific resources throughout the firm based on a financial plan indicating management's expectations, then the company is using a ____ as the basis for making decisions

Budget

items that are considered to be a capital expenditure

Buildings and equipment Land Patents and copyrights

An accountant's time is freed up to do more important tasks such as financial analysis due to the assistance provided by using

COMPUTERIZED ACCOUNTING PROGRAMS

Major investments in either tangible long-term assets such as land, or intangible assets such as patents are considered to be ____ expenditures

Capital

The Income Statement tells us all of the following information, EXCEPT

Cash

Which of the following falls under Assets?

Cash

The statement of cash flows is a financial statement that shows:

Cash receipts and disbursements

The Federal Reserve banks provide the ______ function for checks written across states

Check-clearing

A demand deposit is the technical name for a(n) _____account since it is a means of paying for almost any purchase or transaction

Checking

Pros of working remotely include:

Choice of where to live, more flexibility, better work-life balance

Accounting involves:

Classifying, interpreting, recording, and summarizing

The check ____ function of the Federal Reserve enables banks to settle demand deposits between member banks

Clearing

A _____ bank is a profit-seeking organization that receives deposits from individuals and corporations in the form of checking and savings accounts and then uses some of these funds to make loans

Commercial

The term used for unsecured notes of $100,000 and up that are due in no more than 270 days is

Commercial Paper

Which statements about commercial banks are true

Commercial banks are equally responsible to their depositors and borrowers Commercial banks make loans from the deposits of its customers

Mass customization is made possible by:

Computer aided design

What term describes the cost of merchandise the firm sells:

Cost of goods sold

Variable Costs (Cost of Goods Sold) Include all of these EXCEPT:

Cost of research and development

During tough economic times, customers are happy when firms extend ____ for purchases

Credit

A nonprofit, member-owned financial cooperative that offers the full variety of banking services to their members is called a

Credit Union

What form of financing takes place when the merchant accepts payment immediately from the bank and the customer agrees to repay the bank

Credit cards

Which four institutions are members of the U.S. banking system?

Credit unions Commercial banks Savings and loans Nonbanks that offer financial services

are an example of electronic money.

Cryptocurrencies

To calculate the Current Ratio, you divide

Current assets by current liabilities

is debt that needs to be paid back within one year.

Current debt

Quick / Acid Ratio is calculated by Current Assets - Inventories / ______

Current liabilities

A company that takes out a loan from a bank is using which type of financing

Debt financing

Borrowing money the company has a legal obligation to repay is

Debt financing

Is it better to use debt financing or equity financing?

Depends on the situation

Why do you need to compare debt-to-equity ratios within a specific industry?

Different industries have different standards of what a good, or average, debt-to-equity ratio is.

The interest rate the Federal Reserve charges for loans made to its member banks is called the ______ rate

Discount

In a ______ funds transfer system, transactions are sent directly from one computer to another.

Electronic

When the Federal Reserve buys and sells government bonds it is

Engaging in open market operations

Functions of financial management do NOT include

Ensuring employees are paid fairly (job for human resource)

______ financing is another way to bring cash into the business.

Equity

Financial control is a process through which a firm periodically compares its budget to which of the following?

Expenses Costs Revenues

An independent agency of the U.S. government that insures bank deposits is called the

FDIC - federal deposit insurance corporation

A summary of all the financial transactions that have occurred over a particular period is referred to as a

FINANCIAL STATEMENT

is the physical arrangement of resources, including people, to most efficiently produce goods and provide services.

Facility layout

Operations Management is responsible for determining:

Facility location and layout, inventory and quality control, and material requirement planning and purchasing

A financial institution or commercial bank that purchases a business' accounts receivable at a discount and then keeps what they collect is a

Factor

T/F Gross profit is what a company shows on its income statement as the bottom line figure

False

T/F Having a weak dollar means the amount of goods/services you can buy with $1 increases.

False

T/F Making too much inventory is a really good thing

False

T/F Students find it easy to increase their shareholder value in rounds 5, 6, and 7 if they don't add a new product.

False

T/F The intermittent process is long production runs to turn out finished goods over time.

False

T/F When using human laborers, it is a bad idea to locate production in an area with low-cost labor.

False

T/F Financial management is only concerned with items involving cash

False, they also deal with credit, loans, and stock

In any business, funds come into and go out of a business. What business function acquires funds for the firm and then manages those funds on a day-to-day basis?

Finance

In financial planning, what is the process in which a firm periodically compares its actual revenues, costs, and expenses, with its budget

Financial Control

3 steps of financial planning

Forecasting the firm's short-term and long-term financial needs Developing budgets to meet those needs Establishing financial controls to see whether the company is achieving its goals

A demand deposit (checking account) is known as that because

Funds may be withdrawn at any time by its owner

Open-market operations consist of the buying and selling of

Government bonds

What are two criteria a business should use to determine how much money it should borrow

How quickly it can generate funds using the borrowed cash and The kind of business it is in

The amount a business borrows and for how long depends on which of the following

How quickly it can resell the merchandise it purchases with the funds The type of business and industry it is in

Humans are still necessary to be used in combination with robots because:

Humans use their eyes and can spot things robots cannot

What inventory management procedure helps a firm to control inventory costs?

Implementing a just-in-time inventory control method

Today the World Bank lends most of its money to developing nations to

Improve their quality of life Improve their productivity Raise their standard of living

Which financial statement shows a firm's bottom line—its profit (or loss) after costs, expenses, and taxes for a specific period?

Income Statement

If my awareness is less than my competitors I should:

Increase my spending on advertising ertsiing and reallocate my advertising funds

The amount of goods and services you can buy with a dollar in the global market

Increases witha rising dollar value

The economic condition that results from a continual rise in prices, or what some people call "too much money chasing too few goods" is

Infalation

The saying "too much money chasing too few goods," is used to refer to

Inflation

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that

Insures bank deposits

Examples of ______ could include building a new factory, increasing capacity, and increasing automation.

Investing

What could I do if my forecast cash was not good?

Issue equity

What does an increase in Plant & Equipment do?

It follows any increase in the value of plant and equipment in an investment in your firm.

What is true about debt financing?

It is a contract and the terms do not change

what is true about commercial paper

It is a short term source of funds Only large, stable firms offer it.

What is true regarding trade credit

It is usually more convenient than bank loans. It is the most widely used source of short-term funds. It is used by large and small businesses

What role of the Federal Reserve has been cited as contributing to the banking crisis of 2008

It kept the cost of borrowing too low

____inventory control is a production process in which a minimum of inventory is kept and parts, supplies, and other needs are delivered just in time to go on the assembly line.

Just-in-time

What do banks typically do with the money you give them?

Keep a small amount and loan the rest out to businesses and other kinds of ventures.

_____parts with easy assembly are often made in the U.S.

Large

In international banking, a ____ of ______is a promise by a bank to pay the seller a given amount if certain conditions are met

Letter of credit

Raising needed funds through borrowing to increase a firm's rate of return is called

Leverage

What type of ratios measure the degree to which a firm relies on borrowed funds in its operations

Leverage

_____means to raise funds through borrowing to increase a firm's rate of return

Leverage

firm's rate of return is referred to as

Leverage

ratio's evaluation a firm's debt.

Leverage

Assets =

Liabilities + Owner's Equity

______is defined as how quickly we can turn something into cash.

Liquidity

______ measure a company's ability to turn assets into cash to pay its short-term debt

Liquidity ratios

It is better to go to banks instead of family and friends for business loans because

Loans from family can hurt the relationship Banks can assist the business in analyzing problems

When considering ____ financing options a financial manager must consider the organization's financial goals and objectives.

Long-term

Compared to a bank, the interest on commercial paper is

Lower

What is the job of the Federal Reserve?

Maintain maximum employment while keeping prices stable

As a result of the Great Depression, Congress established deposit insurance to

Make sure depositors did not lose money in a bank failure

Virtually all organizations have operational need for which they needs funds. Key areas included:

Managing day-by-day needs of the business Controlling credit operations Acquiring needed inventory Making capital expenditures

Tailoring products to meet the needs of a large number of individual customers is called:

Mass customization

Anything that can be used for payment of goods and services is defined as

Money

In the past, objects such as salt, feathers, fur pelts, stones, rare shells, tea and horses have served as

Money

The _____ is the amount of money the Federal Reserve Bank makes available for people to buy goods and services.

Money Supply

Money is considered to have a time value because

Money has more value in your possession today than at a later point in the future

I want my awareness to be _____ than my competitors.

More

How much should we invest in different features?

More on the features that customers have a higher preference for

Debt financing refers to funds that____

Must be repaid

Financial organizations that accept no deposits but offer many of the same services as regular banks are called

Nonbanks

The ______ of operations management is to provide high-quality goods and services in response to customer demand.

Objective

Short-term financing is more important to a small business than long-term financing because

Small businesses are more concerned with funding day-to-day operations

An advantage of the use of computers to maintain and compile accounting information is

Speed

Cash receipts and disbursements related to operations, investments, and financing are reported on the

Statement of cash flows

In a public corporation, the ownership is held by

Stockholders/Shareholders/investors

Operating expenses include

Supplies, utilites, and rent

What type of accountant is most likely to develop strategies for a firm in dealing with the Internal Revenue Service:

Tax accountant

Users of managerial accounting information include:

The Chief Finacial Officer, Department managers

Setting the reserve requirement, setting the discount rate, and collection data on the money supply are all activities of

The Feds

The organization responsible for funding international economic development is

The World Bank

What role did banks play in the banking crisis of 2008

They did not take creditworthiness into account when making loans

Why might you see a low debt-to-equity ratio in tech companies?

They don't have a lot of physical assets, so they haven't had to take on lots of loans.

Advantages of using a credit card in small business financing include that

They save time, cards are accepted in many places

Managerial accounting is used to provide information to:

Those inside the firm

The _____ value of money is the idea that money in your possession today is worth more than money that will be in your possession in the future.

Time

What could you expect to see an increase of if the dollar is weak in the US?

Tourism

The practice of buying goods and services now and paying for them later is termed

Trade credit

T/F A balance sheet is made up of assets and liabilities & owner's equity.

True

T/F A long term bond is a long term type of borrowing.

True

T/F Bonds are a form of long-term debt for a firm.

True

T/F Building an airplane is a good example of a fixed position layout.

True

T/F Having a high interest rate makes it incredibly expensive for businesses to try and borrow money.

True

T/F Production is the creation of goods using land, labor, materials, capital, entrepreneurship, and knowledge (factors of production).

True

T/F The financial crisis that began in 2008 was due, in large part, to financial managers making poor investment decisions and engaging in risky financial dealings

True

T/F The goal of business is to create wealth for its owners.

True

T/F This is the last practice round.

True

T/F You should check the Market Research Report to determine how many units to produce.

True

T/FNet Profit (loss) = Revenue - Expenses

True

Because a majority of small business are rejected for traditional business loans, many ______ for short-term financing

Use credit cards

In setting long-term financing objectives, financial managers generally ask three questions:

What are our organization's long-term goals and objectives? What funds do we need to achieve the firm's long-term goals and objectives? What sources of long-term funding (capital) are available, and which will best fit our needs?

The income statement shows:

a firm's profit (or loss) after costs, expenses, and taxes

What is an annual report

a yearly statement of the financial condition, progress, and expectations of an organization

The discount depends on the: age of the accounts receivable, the nature of the business, and the condition of the economy.

age of the accounts receivable, the nature of the business, and the condition of the economy.

Throughout the history of the United States, central banks were created and disbanded with much controversy until ______ ensured that a central bank was needed

The bank panic of 1907

the percentage of commercial banks' checking and savings accounts that must be kept in the bank is referred to as

The reserve requirement

When it comes to cryptocurrency, the currency is .

The transaction history

Which three activities are part of the function of accounting?

-Classifying financial transactions -Interperting financial transactions -Recording financial transactions

Using the balance sheet shown in Video 3, how much is the factory and equipment worth today?

$9,552

What was the total change in cash from Accounts Receivable between 2016 and 2017?

(976)

Which are steps in the accounting cycle?

- Analyze transactions -Record transactions in the journal -Prepare a trial balance

How much higher is the inventory line from 2016 to 2017? (previous image)

8,120

Generally speaking, commercial banks grant loans based on

A borrower's creditworthiness

Which statement about a falling dollar value in the global market is correct?

A falling dollar value means you cannot buy as many goods and services in the global market.

What was one of the causes of the banking crisis of 2008?

A lot of poor investing strategies by banks

To prevent forgery, everyone generates a __________ pair.

A public/private key

A major problem during the Great Depression created by a weak banking system was

A run on and closure of many banks

____ allows customers the ability to complete most transactions electronically without leaving home

Online Banking

_____funds are typically needed to manage day to day needs of a business as well as acquiring needed inventory

Operating

In operating a business, rent, salaries, supplies, utilities and insurance are all examples of

Operating expenses

The statement of cash flows reports cash receipts and disbursements related to

Operations, invenstments, and financing

Most Common Stock Certificates will display

Owner information, stock number, number of shares, issuing investment bank

stockholders become _____ in the organization

Owners

The major categories of the balance sheet are assets, liabilities, and

Owners equity

What can be thought of as the money the owners have put into the business?

Owners' Equity

Stockholders are the ____ of a public corporation

Owners/Investors

Top U.S. retail banks allow customers to access their accounts online so they can

Pay bills Transfer funds Check account balances

A letter of credit is a promise by a bank to

Pay the seller a given amount if certain conditions are met

Which are considered to be nonbank financial institutions

Pension funds Insurance companies Brokerage firms

Is it more common for a firm to fail due to lack of sales or poor financial management?

Poor financial management

During the recent financial collapse, financial managers failed to do their job effectively because of

Poor investment decisions and risky financial decisions

The primary reason for the creation of the Federal Reserve was to

Prevent another crisis of bank failures

The part of production that physically or chemically changes materials is called:

Process maufacturing

______ is all the activities managers do to help firms create goods.

Production Management

The Statement of Cash Flows reconciles net ______ back into ____.

Profit, cash

S&Ls were originally set up to

Promote home ownership

In cryptocurrency, a block is only considered valid if it has a

Proof of work

Accepting credit cards can be useful to small businesses by

Providing the business with payment more quickly Providing ease of payment for customers

______is the monetary value of what a company received for goods sold, services rendered, and all other payments to the firm.

REVENUE

Government and nonprofit accounting involves working for organizations whose purpose is to serve:

Ratepayers, taxpayers

The assessment of a firm's financial condition and performance through calculations and interpretation of financial ratios developed from the firm's financial statements is called

Ratio Analysis

Debt financing is funding raised through various forms of borrowing that must be:

Repaid

The _____is a percentage of commercial banks' checking and savings accounts they must keep in the bank

Reserve Requirement

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called:

Return on equity

Price * Units Sold = .

Revenue

The less risk there is the less _____ there is.

Reward

Some argue that one of the reasons for the banking crisis was that banks were pressured by Congress and other groups to make ___ loans

Risky

Often called "thrifts," this financial institution primarily offers checking and savings accounts and makes long-term loans for residential mortgages

Savings and loan association S&L

When previously issued stocks are being sold by subsequent owners, they are being sold on the _____ market.

Secondary

The new Distribution Segment (not summary) allows us to:

See and alter where we sell our products

What was the result of the 2008 'housing bubble' bursting?

Sharp decline in home values

Small business managers are more concerned with ____ funds

Short-term

The cash shortage problems and failure of banks in 1907 led to

The creation of the feds

Credit unions are owned by _____

The credit union's members

The contribution margin measures:

The efficiency of the production process

The _____ is the organization that has the most power over the currency in the united states.

The federal Reserve

What does a high debt/equity ratio indicate about a firm?

The firm has been aggressive in financing growth with debt.

In the United States, the Federal Reserve is in charge of

The money Supply

Outside users of financial information are interested in all of the following things, EXCEPT:

What new products will be released this year