13-16 ch exam
Ryan Witz sells vacuum cleaners door-to-door. After showing Mrs. Davis several models and demonstrations, Ryan can tell she is hesitant but interested. Which trial closing is Ryan likely to use to ensure a sale?
"Do you want the standard model, or the one with the special options package?"
Schluster Hardware, Inc., had a gross profit of $380,000, operating expenses of $210,000, and income taxes of $48,000. What is Schluster's net income after taxes?
$122,000
Lutex Corporation began its accounting period with a merchandise inventory (beginning inventory) that cost $10,000. During the period, it purchased for resale merchandise with a retail value of $100,000. With purchase discounts, it paid only $80,000 for this merchandise. Thus, during this period, Lutex had ____ in goods available for sale.
$90,000
Morgan is currently a manager of a small financial planning firm. He is seeking a new career with a large corporation in the banking industry. He recently applied for the financial manager opening at G & T Bank. He is concerned that the transition from his small firm to a large corporation will be difficult. To better prepare himself for this change, he has decided to enroll in a few business classes to strengthen his understanding of corporate finance. The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan, equity financing, and debt financing. Morgan now believes he has strengthened his competitive advantage in his quest for the job. Refer to Morgan's Transition. Morgan's business classes taught him that the financial manager should do which of the following?
(A)Determine the best way to raise money. (B)Ensure the business success of the company. (C)Ensure that projected uses are in keeping with the organization's goals. Both A and C. (Answer)
In a revolving credit agreement, the borrower typically pays ____ of the ____ portion of the agreement.
0.25 to 1.0 percent; unused
Sanchez Company sells its garden hoses to Gary's Lawn and Garden Center but does not require Gary's to pay for them right away. If this is a standard trade-credit agreement, Gary's will have to pay for the garden hoses in
30 to 60 days.
Most mature corporations distribute ____ of their after-tax profits as dividends to stockholders.
40 to 60 percent
Which of the following would be considered a revenue stream?
Advertising Subscription fees Sales of products Sales of services Correct Answer All of the above
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules, just like any other accounting firm. If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations. Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained. Refer to Ridgley, Cooper, and Ross. If you applied for a job at RCR and were asked to state the accounting equation, which of these would you state?
Assets = liabilities + owners' equity
If the liabilities of a business are $85,000 and the owners' equity is $110,000, which of the following is a correct statement?
Assets equal $195,000
Rosie's Flowers Company in Tulips, Ohio, uses an e-commerce software program on its website to allow customers to enter their own orders for flowers that are delivered by the end of the next business day. Rosie's Flowers follows a(n) ____ model.
B2C
Which section of the statement of cash flows would show Wendy's payments for food ingredients and wages paid to employees?
Cash flows from operating activities
Which of the following presents assets in the correct balance sheet order?
Cash, inventory, equipment
With regard to the ongoing expense of long-term corporate financing, which of the following would be the least expensive?
Common stock
Morgan is currently a manager of a small financial planning firm. He is seeking a new career with a large corporation in the banking industry. He recently applied for the financial manager opening at G & T Bank. He is concerned that the transition from his small firm to a large corporation will be difficult. To better prepare himself for this change, he has decided to enroll in a few business classes to strengthen his understanding of corporate finance. The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan, equity financing, and debt financing. Morgan now believes he has strengthened his competitive advantage in his quest for the job. Refer to Morgan's Transition. When Morgan creates a financial plan, his first step should be which of the following?
Establish a set of valid goals and objectives.
Pure Training, Inc. Pure Training, Inc., is a company that helps people start their own businesses. As part of the training it provides, the company covers many different aspects of entrepreneurship for Internet-based companies. One principle its trainers focus on is customer service. They also stress the importance of connecting with current and potential customers. Developing a social media presence is another focus of Pure Training in its entrepreneur-based sessions. The trainers provide their clients with sufficient market research and statistics to understand trends in various areas that involve the Internet and social media. Pure Training prides itself on helping entrepreneurs launch and maintain successful businesses through a major Internet presence. Refer to Pure Training, Inc. When Pure Training is discussing typical measurements for various types of social media and it starts discussing "number of fans," "number of likes," and "growth of wall responses," clients should know that these are typical measurements for
Facebook.
A neighborhood shopping center usually has at least one large department store to attract customers to the center.
False
An initial public offering occurs anytime that a corporation sells stock to the general public.
False
Bonds that are secured by various assets of the issuing corporation are called debenture bonds.
False
Determining the location and demographics of people in the advertising target, the content of the message, and the characteristics of the audiences reached by various media is done when creating the advertising message.
False
Equity capital generally provides the greatest part of a firm's financing.
False
Flickr would be considered a social gaming site.
False
For a manufacturer, it is impossible to have cash-flow problems before peak sales periods.
False
Private placements are used to sell stock to individual investors.
False
Reading comments on social media sites about companies or products rarely offers valid insight into how consumers are reacting to products or services.
False
Short-term financing is used to finance a merger or expansion.
False
The Nasdaq only carries small company's stocks; by regulation, large firms' stock must trade on the NYSE, not on the Nasdaq
False
The ending cash balance reported on the statement of cash flows is the same as the net sales amount reported on the firm's income statement.
False
The lowest interest rate charged by a bank for a short-term loan is called the discount rate.
False
While chief executives and financial officers are currently not subject to criminal penalties, they are required to certify periodic financial reports.
False
While common stockholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.
False
What is usually the primary revenue stream for online auction sites such as eBay?
Fees charged for selling products on the site
Which of the following type of individual who uses social media maintains a profile and visits social networking sites?
Joiners
____ is considered a social networking site for professionals.
What are the three activities according to which a statement of cash flows is organized?
Operating, investing, financing
Rick's Wholesale Office Supplies prefers to handle its accounts receivable itself, but it also needs to use them to facilitate short-term borrowing. What can Rick's do?
Pledge them as collateral.
Which of the following might be considered the most drastic step in securing funding, often a last resort for a corporation?
Sale of assets
Regina owns and operates her own bakery and coffee shop. Regina has no accounting training and has only three employees. How does she most likely handle the necessary accounting for her business?
She pays a public accountant to do the accounting for her business
Which of the following statements about the Sarbanes-Oxley Act is incorrect?
The act was passed in 2006.
Which of the following is not an internal force affecting e-business?
The economy
Which of the following statements is true?
The more information a manager has, the less risk there is when making a decision.
Which of the following statements is incorrect?
The size of the investment banker's commission depends on the financial health of the corporation issuing stock. Although a corporation can have only one IPO, it can sell additional stock after the IPO. The cost of selling stock is referred to as flotation costs. The ongoing costs associated with selling stock are low. Correct Answer All of these statements are correct.
The Cheese Shoppe's liabilities total $59,000 and its owners' equity is $124,000. Which of the following is true?
The total assets equal $183,000.
Which of the following statements is correct?
There are many definitions of "social media."
For a corporation such as AT&T, what are the two primary advantages of equity financing?
There is no obligation to pay dividends or to repay the money obtained from the sale of stock.
Which of the following is not a financial reform regulation proposed by the U.S. House of Representatives and Senate as a reaction to the economic crisis?
Tighten access to long-term financing by large corporations
Which of the following is not a financial reform regulation proposed by the U.S. House of Representatives and Senate as a reaction to the economic crisis?
Tighten access to long-term financing by large corporations.
A firm's MIS data bank should include all past and current data that may be useful in managing the firm.
True
Bonds from a single issue that have staggered maturity dates are called serial bonds.
True
Bonds that can be exchanged for a specified number of shares of common stock are called convertible bonds.
True
Commercial paper is short-term promissory notes issued by large corporations.
True
Commercial paper short-term financing is usually available only to large firms
True
Effective financial management involves careful planning to determine the best financial sources and to ensure that projected uses are in keeping with the organization's goals.
True
In order to catch problems before they get out of hand, a business firm should compare its financial performance against various budgets.
True
In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until the bond's maturity in a sinking fund.
True
Inventories and accounts receivable are the assets most commonly used as collateral for short-term financing.
True
Most financial managers consider long-term financing to be money that will be used for longer than one year.
True
Most local firms use immediate-response advertising
True
Reducing paper usage in an organization can be an example of green IT.
True
The Electronic Funds Transfer Act protects the customer in case a bank makes an error or the customer's credit or debit card is stolen.
True
The costs of selling stock to the general public are referred to as flotation costs
True
The growth of the Internet has created some new customer needs that did not exist before the creation of the Internet.
True
The interest rate and repayment terms for term loans often are based on such factors as the reasons for borrowing, the borrowing firm's credit rating, and the value of collateral.
True
The maturity date is the date on which the corporation is to repay the money borrowed from bondholders.
True
The most expensive form of short-term financing is factoring of accounts receivable.
True
The quality of a firm's accounts receivables is the credit standing of the firm's customers, coupled with the customers' ability to repay their credit obligations.
True
Vending machines are classified as retail outlets.
True
Website designers are examples of specialized human resources required by a firm that wishes to successfully carry on any significant e-business activities.
True
Shawn starts a business called ValueCentral.com, the concept takes off, and the company has an IPO and goes public. The company is growing very rapidly and trying to keep up with customer demand. What type of dividend is this company likely to pay its stockholders?
Very small or no dividend
Which of the following firms is most likely to receive venture capital?
Virtual reality Internet company
Which of the following is most likely to be the manner in which a business connects and communicates with other businesses rather than with customers?
Webinars
____ is the largest video site on the Internet.
YouTube
A written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date is called
a promissory note.
A reduction in price that is offered to customers who accept slightly damaged or soiled merchandise is referred to as
a sales allowance.
Merchandise that has been sold and is returned to the firm by the customer is called
a sales return.
The assets most commonly used as collateral for short-term financing include
accounts receivable and inventory.
The amounts owed to a firm by its customers are called
accounts receivable.
R&P Inc. R&P Inc. is an emerging company that wants to focus on personal selling, sales promotion, and public relations activities. R&P's management understands that personal selling is about the personal communication aimed at customers, but they feel that determining more specifics about the products they sell will allow them to better achieve their goal. Another important route they would like to take is to learn more about the various types of sales promotion. Finally, management would like to focus more on publicity-based PR. By concentrating on these areas, the company believes that it will be able to successfully create a promotional campaign. Refer to R&P Inc. R&P management knows that ____ is the most effective and least expensive means of communicating product information to a large number of individuals and organizations.
advertising
The mode of transportation that carriers the smallest percent of all intercity freight is ____
airplanes
External forces that affect e-business include all of the following except
available financing.
A written order for a bank to pay a third party a stated amount of money on a specific date is referred to as a
banker's acceptance
Inventory requires considerable investment for most manufacturers, wholesalers, and retailers. This problem is complicated by the fact that most goods are manufactured four to nine months before they are actually sold to consumers. Manufacturers that engage in this type of speculative production often need short-term financing to do all of the following except
buy equipment.
Kliting Co. is concerned with whether or not it will be able to pay its bills with money coming in from sales. It would be helpful for Kliting to prepare a ____ to better understand its needs.
cash budget
The movement of money into and out of an organization is called
cash flow.
Melissa feels confident about obtaining short-term financing for her art gallery because, like many companies, she has a(n)
close working relationship with a lender.
If Sunbelt Computers were to take out a short-term loan from Chase for $5 million and were required to keep $500,000 of that in its Chase account, this would be called a(n)
compensating balance.
A venture capital firm
consists of a pool of investors or a family partnership.
Each of the following causes a cash flow problem except
customers who pay early.
L'eggs Pantyhose often sends potential customers free trails of its pantyhose in the mail. This is an example of _____.
direct-response marketing
In regards to cash flow, a firm should ideally have
enough money coming into the firm to cover the expenses in that period.
Jacob and Molly decide to start a new cake-decorating business. They each contribute $10,000 to get the business off the ground. This money is considered
equity capital
The steps in effective financial planning are
establishing organizational goals and objectives, budgeting for financial needs, and identifying sources of financing.
Rolls-Royce uses _____ distribution on sell its automobiles.
exclusive
A firm that specializes in buying other firms' accounts receivable is called a(n)
factor
Kirsten purchased a new dining room table and china cabinet from Discount Furniture, which offered a one-year special with no interest or financing charges. When Kirsten makes her purchase, Discount Furniture checks her credit and seeks approval for her. Upon approval, Kirsten receives information informing her that she will make payments to Regional Finance Company. This arrangement is an example of
factoring.
The highest cost of short-term finance generally is
factoring.
All of the activities concerned with obtaining money and using it effectively are called
financial management.
Commonly used in accounting analysis, a ____ shows a relationship between two elements of a firm's financial statements.
financial ratio
Maria has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.
goals
Like newspaper ads and unlike magazine advertising, television advertising:
has a short life.
Selective-demand advertising aimed at persuading consumers to make purchases within a short time is called ____ advertising.
immediate-response
Walmart is opening a new store in a shopping mall. It announces a grand-opening sale in the local newspapers. This type of advertising is referred to as ____ advertising.
immediate-response
Wally's Hardware store is located in a small town in the Midwest. This store would best be classified as a(n) _____.
independent retailer
During 2010, Bedford Technology sold common stock for the first time to whoever wanted to buy it. This was the ____ for Bedford.
initial public offering
Vicky works as a salesperson for Lands' End. Her duties consist of taking customer orders over the telephone and ensuring that the information is properly entered so that customers will receive the products they need. Vicky is a(n) _____.
inside order taker
Advertising geared toward attracting not only customers but also potential investors and employees is classified as ____ advertising.
institutional
The number of times a company sells and replaces its merchandise inventory in one year is known as
inventory turnover.
For a department store such as Macy's, the most likely need for short-term financing will be for
inventory.
Since business has been rapidly expanding, A Shot of Sugar Bakery decides to purchase a second industrial oven. The cash paid for this oven would be listed in the ____ section of the statement of cash flows.
investing
A loan that is approved before the money is actually needed is called a
line of credit.
Slater Co. has very old computers and manufacturing equipment and knows it needs to upgrade them or risk losing much of its business. Slater does not have the money to purchase the computers, so it will most likely need
long-term financing.
Debts that are to be repaid in two years are referred to as
long-term liabilities.
All of the following are categories of promotion except:
managerial relations.
Jack Stanley graduated from college and obtained a full-time job in accounting. At the end of his first year of employment, his assets totaled $9,000. His liabilities totaled $3,000. His ____ was $6,000.
net worth
Sales promotion methods include all of the following except:
news releases.
Rebecca is willing to invest time and money in attracting and retaining customers for her Mary Kay cosmetics business because she knows that
one loyal customer's repeated purchases for life will be well worth the expense.
It is not unusual for companies to issue ____ type(s) of common stock and ____ type(s) of preferred stock
one; many
Selling expenses are considered to be a type of
operating expense.
The Nasdaq, part of the ___ market, provides price information on more than 3,600 stocks.
over-the-counter
The two types of stock a company can sell are
preferred and common.
Over the years, Zebra Productions has been slow making payments to its bank. Now it is in need of financing. Based on past experience, the interest rate Zebra will pay is the
prime rate plus 4 percent.
Burberry Mills sold stock to an insurance company to raise needed financing for expansion and new product development. This type of transaction is referred to as a(n)
private placement.
Marilyn provides piano lessons to students in her home four days a week. The money she earns from providing these services would be called ____ on an income statement.
revenues
The ____ ratio is based on the principle that a high-risk investment should generate higher financial returns for a business and more conservative decisions often generate lesser returns.
risk-return
Sally Overall is thinking about two different decisions. One decision is quite risky, while the other decision is more conservative. To help her make the right decision, she decides to calculate the
risk-return ratio.
Energizer offers its customers a reduction in price if they pay for their shipments of batteries within ten days of receiving them. This is a(n)
sales discount.
Dave Jones's responsibilities at Ford include educating customers, building goodwill for the firm, and providing follow-up service. Dave is a _____.
sales support person
Surf 'N' Sun Shop sells ski boats and other boating accessories. It receives most of its inventory about three months in advance of the summer season, but it is not able to pay for the inventory up front. Instead, its suppliers allow Surf 'N' Sun to use its inventory as collateral. This type of agreement is called
secured short-term financing.
Clothing manufacturers typically prefer _____ distribution.
selective
Steven Monahan owns SME Ads Inc., an advertising agency. At present, the company focuses on advertising only. However, Steven plans to expand the company's focus to include all the major elements of an organization's promotional mix. Steven feels that expanding the focus in such a way will allow the firm to meet customer needs in a more coordinated fashion. Currently, the firm organizes its work according to the media being used. Steven believes this is the most effective way to subdivide advertising. Since television is the most widely used advertising medium, the company spends most of its time on television advertising. SME knows what it takes to get the job done, and it is committed to success. Refer to SME Ads Inc. SME recently created advertising for Maruti Automobiles for its new line of cars called Maruti Marvels. Such brand-oriented advertising is called _____.
selective-demand advertising
Sara Lee Corporation is a large conglomerate of businesses participating in a variety of industries. A few years ago, Sara Lee was considering the purchase of Bryan Foods. If Bryan Foods represented a tremendous opportunity to make the company more successful, Sara Lee may, as a last resort, have considered
selling assets from another division to pay for Bryan Foods.
When bonds issued at the same time mature on different dates, they are referred to as ____ bonds.
serial
Mrs. Thomas has received an invoice from the manufacturer for which she distributes products. The invoice states credit terms of 3/10, net/30. Puzzled by this, she calls on you to explain. You indicate that the notation 3/10 means that
she may take a 3 percent discount if she pays the invoice within ten days.
Money that will be used for one year or less is called
short-term financing.
For a corporation, equity capital is obtained from
stockholders.
Kroger is an example of a _____.
supermarket
Meijer, a retail chain, carries a full line of food and nonfood items as well as product lines such as small appliances, some furniture, automotive items, clothing, and lawn and garden equipment. Meijer is a(n) _____.
superstore
As a stockholder in the Giant Plants Company, you have the right to vote on all of the following issues except
the price the firm charges for its products.
R&P Inc. R&P Inc. is an emerging company that wants to focus on personal selling, sales promotion, and public relations activities. R&P's management understands that personal selling is about the personal communication aimed at customers, but they feel that determining more specifics about the products they sell will allow them to better achieve their goal. Another important route they would like to take is to learn more about the various types of sales promotion. Finally, management would like to focus more on publicity-based PR. By concentrating on these areas, the company believes that it will be able to successfully create a promotional campaign. Refer to R&P Inc. R&P management could use sales promotions for any of the following objectives except:
to steady increasing sales patterns
Retained earnings are
undistributed profits.
Tom Jackson, president of Jackson Manufacturing, suspects that the managers of two departments have been padding their budgets for the last three years. To eliminate this problem, Tom would
use zero-base budgeting.
Money invested in small firms that have the potential to become very successful is called
venture capital
With ____, community members are the editors and gatekeepers of the content of a site.
wikis
Which of the following would be part of a media sharing site?
Podcast
Suppose Sears Roebuck & Company dissolved. After creditors are paid, what is the name of the next group to have claim on profits and assets?
Preferred shareholders
What do users say is their primary reason for using social media?
Staying in touch with family and friends
The first step for selecting the right social media tool(s) is
determining the company's social media objectives.
Most corporations include important elements of their financial statements ___ in their annual reports to permit readers to compare financial data.
for recent years
Tech savvy, digital natives born after 1980 are known as
millennials.
"Digital natives" are considered to be anyone
under the age of 32.
Money invested in small firms that have the potential to become very successful is called
venture capital.