BUS 100 EXAM 2 PRE LECTURE QUIZES
_____ 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
A corporation is a separate entity from its owners where the:
owners are not personally responsible for the obligations of the company
In the context of funding options for small businesses, which of the following offers a potential funding source for new business start-ups?
peer-to-peer lending
Which of the following statements is true of international trade?
It offers companies an invaluable source of new ideas
A Franchise Disclosure Document (FDD) is:
a document provided by a franchisor to the franchisee
One of the major sources of equity financing for corporations is _____.
retained earnings
Which of the following is an advantage associated with a sole proprietorship?
retention of control
The preparation of operating budgets begins with the development of a(n) _____.
sales budget
Which of the following companies is involved in foreign licensing?
A European company that grants a company in Asia the rights to produce and sell its products
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
Which of the following statements is true of a franchisor-franchisee relationship?
A franchisor limits the franchisee's territory from expanding into other areas.
Which of the following is a similarity between angel investors and venture capitalists?
Both invest in risky opportunities that offer the possibility of high rates of return
In the context of emerging economies, which of the following statements is true of the BRIC countries?
India's subscriber base for cell phones has grown explosively over the past five years
Which of the following pieces of information is found in the U.S Small Business Administration (SBA) resources?
Industry-specific statistics
The basic mission of the _____ is to promote global economic cooperation and stable growth.
International Monetary Fund
Which of the following statements is true of foreign outsourcing?
It drives down the cost of production
Sloimekia can manufacture more of a certain kind of cloth than its neighboring countries, although they all have the same amount of resources for the cloth's production. In this scenario, which of the following statements is true of Sloimekia?
It enjoys an absolute advantage in terms of the particular cloth it produces
Which of the following statements is true of a limited liability company (LLC)?
It is a relatively new form of business ownership in the United States
Runion Bank is well-known for providing funds to start-ups. The bank lends money to an entrepreneur at an interest rate of 5%, which is to be repaid only after the business earns a sizable profit. If the business fails, then only the primary amount needs to be returned. In the given scenario, which of the following statements is true of Runion Bank?
It provides loans to entrepreneurs
Which of the following features of a sole proprietorship proves that it is a risky endeavor?
Its unlimited liability
Yennex Inc., a textile company, planned to sell its stock products in two months' time. The company was able to sell those products within a month's time. Therefore, it was able to sell double the estimated amount in a year. Given the scenario, which of the following ratio analyses is most likely to have been analyzed by Yennex Inc. to achieve this success?
Profitability ratios
Who among the following is most likely to benefit when the dollar is strong and the euro is weak?
Ron is an American who is touring Europe
Congress passed the _____ that banned business relationships that might create conflicts of interest between certified public accounting (CPA) firms and the companies they audit.
Sarbanes-Oxley Act of 2002
Small firms tend to be effective innovators for a number of reasons. Most importantly, their very reason for being often ties to:
a brand-new idea
Fred, a financial accountant at a multinational company, is asked by his supervisor to find out the exact income the company earns from the sale of its products over the next five weeks. To do this, for the next five weeks, Fred matches the revenue earned from the sale of the company's products and matches the expenses incurred by the company to the revenue they help produce. In this scenario, which of the following has Fred used to get the required information?
accrual-basis accounting
_____ is a deep-seated sense that forces other than the individual are responsible for what happens in his or her life.
an external locus of control
Bon Suede, a shoe manufacturing company, produces ten thousand units of shoes of a distinct design. In 2015, the company was able to sell all the units within six months of manufacture, prompting the company to produce an additional ten thousand units. Which of the following financial ratios has most likely been analyzed in the given scenario?
asset management ratios
Umbero Nix, a garment manufacturing company, produces twenty thousand units of sweaters. These units are sold within three months and replenished with another twenty thousand units. In one year, Umbero Nix replaces its inventory of sweaters four times over. Umbero Nix most likely analyzes _____ to measure how many times its inventory is sold and replaced each year.
asset management ratios
Marcus is a venture capitalist who invests in start-ups and small businesses. He is interested in investing in an online start-up company that has been in business for a year. Before making a decision, Marcus does some research on the value of the company's assets and liabilities. In this scenario, Marcus is most likely analyzing the company's:
balance sheet
A textile corporation has two hundred odd stockholders. As it is inconvenient for so many stockholders to manage the company, the stockholders elect a group of individuals to oversee the company's operation and to represent their interests. In this scenario, the stockholders elect a _____.
board of directors
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
The _____ of a firm uses information from the sales budget and various cost budgets to develop a forecast of net earnings for the planning period.
budgeted income statement
Correct Razak's, a popular chain of fast-food restaurants in the Middle East, plans to expand its market in Asia and signs a contract with an Indian firm. The contract allows the firm to set up restaurants with Razak's name and trademark and use the supplies provided by Razak to make its products. Under the contract, the Indian firm is required to adhere to the same cooking procedures and use the same equipment that are used by other outlets of the restaurant. The given scenario exemplifies a _____.
business format franchise
_____ consists of short-term (and usually unsecured) promissory notes issued by large corporations.
commercial paper
A(n) _____ refers to a group of countries that have eliminated tariffs and harmonized trading rules to facilitate the free flow of goods among the member nations.
common market
Through the establishment of a set of generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (FASB) aims to ensure that financial statements are:
comparable
Hot and Black Tide Inc., an electronics manufacturer, merges with Crimp Corp., a food manufacturing brand, to make the firms less vulnerable to adverse conditions in any single market. This scenario is an example of a(n) _____.
conglomerate merger
A _____ is a requirement a lender imposes on the borrower as a condition of the loan.
covenant
Balance sheets usually organize liabilities into two broad categories, which are:
current liabilities and long-term liabilities
A _____ is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.
distributorship
In the context of statement of cash flows, cash flows from operating activities show the amount of cash that flowed into the company from:
dividends
When a company issues and sells new stock or uses retained earnings to meet its financial needs, it is using _____.
equity financing
Which of the following statements is true of the formation of general partnerships?
expert legal assistance can be acquired when drawing up a partnership agreement
Maurio Inc., a publishing house, wants to invest in digital publishing. However, the company does not possess enough capital to kick start the project. In order to gain immediate funds, Maurio Inc. sells its accounts of credits to Restube, a financing firm, at a discount. Which of the following short-term financing options is being used by Maurio Inc. in the given scenario?
factoring
When customers of Trankent Corp., an equipment manufacturing unit, buy equipment on credit and then delay making payments, they receive a bill from a collection agency. Which of the following sources for short-term financing is being used by Trankent Corp. in this scenario?
factoring
A budgeted income statement is a projected financial statement that forecasts the types and amounts of assets a firm will need to implement its future plans and how the firm will finance those assets.
false
A corporation is a voluntary agreement under which two people act as co-owners of a business for profit. T or F
false
Based on statistics from the U.S. Small Business Administration (SBA) , small businesses account for 78% of all private sector employees. T or F
false
In order for CPA firms to perform audits with integrity, they must be tied to the firms they audit. T or F
false
In the context of foreign direct investment, a joint venture involves the merger of companies. T or F
false
In the context of foreign direct investment, a partnership typically involves a less formal, less encompassing agreement than a strategic alliance. T or F
false
In the context of self-reliance, people with an external locus of control rely more on their own efforts and less on the actions of others. T or F
false
Small businesses generate 50% of total employment in American inner cities. T or F
false
Ted's new company is experiencing a steady decline in profit. He needs external financing to prevent his company's profits from declining further. Considering the fact that he wants to exercise sole ownership and control over the firm for as long as possible, Ted is likely to find angel investors who are interested in helping him meet his financial needs. T or F
false
The current ratio is calculated by dividing a firm's current liabilities by its total assets. T or F
false
The members of the Financial Accounting Standards Board (FASB) can be reappointed to serve two additional terms after the completion of their first term. T or F
false
A sole proprietorship tends to be both larger and more profitable than a partnership. T or F
fasle
Neman, a single parent, quit his job and started a small independent business because he was unable to give adequate attention to his child. Being an entrepreneur gives him the freedom to give undivided attention to his child without jeopardizing his work. Which of the following advantages of entrepreneurship is highlighted in the given scenario?
flexibility
Pyoiunalek's, a restaurant chain, markets and endorses its businesses in other countries by offering buyers the rights to launch and operate the restaurant in that country. It lends financial and marketing assistance to the buyers. In this scenario, Pyoiunalek's is employing the strategy of _____ to reach global markets.
foreign franchising
Which of the following statements is true of buying an established business?
getting financing and credit is less challenging than when starting a business from scratch
Samuel and Dexter start a logistics company together. Both of them have an equal right to participate in the company's management and share in the company's profits. In this scenario, Samuel and Dexter most likely _____.
have a general partnership
Compared to the United States, China and India have:
higher gross domestic product growth rates
In the context of corporate restructuring, a common objective of a horizontal merger is to:
improve efficiency by eliminating duplication of facilities and personnel
The _____ measures how many times a firm's stock is sold and replaced each year.
inventory turnover ratio
A steel manufacturing company is going through a financial crisis because of which it is unable to pay its employees and suppliers their dues. The management of the company sells some of the fixed assets of the company to cover these expenses. In the context of the statement of cash flows, the company gets the required capital by engaging in _____.
investing activities
Hevron Hrist, a multinational company, finances itself each year by procuring 25 percent of its yearly budget through loans from banks. The remaining budget is covered by the company itself. The given scenario suggests that the firm most likely relies on measuring _____ to decide its capital structure.
leverage ratios
FoodieGo, a catering company, is owned by foreign investors and local businessmen. Its earnings are equally divided among its members. It does not face the problem of double taxation as taxes are only levied on the personal income of the members. The owners of FoodieGo do not have personal liability for any debts incurred by the company. In the given scenario, FoodieGo is an example of a _____.
limited liability company
Chloe and Tamara start a vintage fashion boutique. While both invest equally in the store and are entitled to equal profits, it is Tamara who looks after the day-to-day business transactions and manages the store. Chloe does not actively participate in managing the store, and her personal wealth is not at risk in case the business suffers losses. In this scenario, Chloe is a _____.
limited partner
Glossamer Inc., a company owned by George and Alex, faces huge debts and is eventually shut down due to bankruptcy. The company's financial loss affects Alex personally, and his house and other personal assets are seized by the bank. However, George's personal assets are not affected. This is most likely because George is a(n) _____.
limited partner
Maude Shade, a fashion apparel manufacturing company, wants to invest in research before finalizing the production of its proposed product. In order to do so, it approaches Ruemen Bank and takes a loan of $80,000 in the form of bonds. Which of the following financing options is being used by Maude Shade in the given scenario?
long-term debt
Sidney is a member of the Financial Accounting Standards Board (FASB) and is entrusted with the responsibility of establishing accounting principles in the United States. As a member of the board, Sidney:
must sever all ties with any firms or institutions that she served prior to joining the board
In the context of the barriers to international trade, establishing standards on how certain products are produced is most likely a(n) _____.
nontariff barrier
According to the Global Entrepreneurship Monitor (GEM), the most effective way to evaluate entrepreneurship levels is by phase. A country's total early-phase entrepreneurship rate includes the:
percentage of adults who have been running their own business from three months to 3.5 years
_____ refers to national policies designed to restrict international trade, usually with the goal of protecting domestic businesses.
protectionism
Bertha runs a fashion boutique. She prefers to personally interact with her customers to gauge the styles that would suit their personality. Her customers also prefer talking to her in person to share their preferences in colors, designs, styles, and fabric as they value her suggestions. The opportunity of _____ is highlighted in the given scenario.
providing personal customer service
Nuno owns a recording studio with high-quality equipment. He allows artists to schedule sessions based on their flexibility, and he also allows them to bring their own sound engineer and work with him or her to achieve the desired result. As a result, his customers frequent his studio and recommend it to their friends and colleagues. The opportunity of _____ is highlighted in the given scenario.
providing personal customer service
Andrew is performing an audit of the financial statements of a cosmetics company. While analyzing the financial statements, he identifies some minor concerns. However, he believes that on balance the company's statements are accurate and its accounting methods are consistent with the generally accepted accounting principles. In this scenario, the independent auditor's report will most likely offer a(n) _____.
qualified opinion
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 an advantage of a C corporation?
shareholders have limited liability in the firm
The _____ of a company is a simple statement that shows how the accumulated revenues that have been reinvested in the company have changed from one accounting period to the next.
statement of retained earnings
Inicell Inc., an American camera manufacturing company, wanted to import a few camera parts from Ruelia, an Asian company. However, the American government passed a taxation law that stated that a tax of 4% would be levied on all electronic imports. In this scenario, the American government imposed a(n) _____.
tariff
Which of the following is an appealing benefit that entrepreneurs enjoy?
the ability to set their own hours
In the context of the strategies for reaching global markets, which of the following is a disadvantage of foreign outsourcing?
the adherence to ethical standards by foreign producers is at risk
_____ helps financial managers determine the amount of additional financing a firm must arrange to acquire the assets needed to implement its future plans.
the budgeted balance sheet
Which of the following is an advantage of debt financing?
the interest payments a firm makes on debt are a tax-deductible expense
Which of the following statements is true of necessity entrepreneurship in high-income countries?
the rate of necessity entrepreneurship is low
Identify a true statement about current assets.
they are resources that a firm expects to convert into cash within a year
Identify a true statement about angel investors.
they invest in promising start-up companies because they want to make money for themselves
An advantage of cash equivalents is that:
they offer a better financial return than currency
In the context of the U.S. economy, which of the following statements is true of small businesses?
they often display a refreshing lack of bureaucracy
Timothy wanted to start a coffeehouse. However, he could not buy a space to start his business because of lack of funds. Which of the following threats is highlighted in the given scenario?
too little money
When the total value of a nation's exports is higher than the total value of its imports, that country has a(n) _____.
trade surplus
Albert is the owner of a car service center. As a sole proprietor, any profit that he earns is:
treated as Albert's personal income
A country has an absolute advantage when it can produce more of a good than other nations, using the same amount of resources. T or F
true
Common stock is a key owners' equity account for corporations. T or F
true
Expenses such as insurance and advertising that have been cleared before they are due are known as prepaid expenses. T or F
true
In foreign licensing, licensors run the risk that unethical licensees may become their competitors, using information that they gained from the licensing agreement. T or F
true
The balance of payments includes financial flows such as foreign investments. T or F
true
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
Caroline owns an online jewelry store. She has developed a smartphone application for her business that allows her customers to take their pictures and try out virtual jewelry over those pictures before placing the orders. The opportunity of _____ is highlighted in the given scenario.
using technology