business ch. 14,15&16 quiz

The _____ system is the first electronic-based stock market and the largest over-the-counter market.

NASDAQ

The oldest and largest organized securities exchange in the United States is the:

New York Stock Exchange

Which of the following businesses would be most likely to require an unsecured bank loan, such as a line of credit or a revolving credit agreement?

a Christmas tree farm

Which of the following would be an example of a capital expenditure for a superstore that specializes in outdoor grills and other items needed for outside dining?

a parking lot

Commercial paper is:

a type of IOU

Another name for a stockbroker is a(n):

account executive

A short-term loan from a bank, supplier, or others that must be repaid within a year is a(n):

account payable

Grainger Distribution Company sold Long Electronics ten circuit breakers for $179.00 each. Long Electronics will be allowed thirty days to pay the bill. Grainger will carry the $1790.00 on its books as a(n):

account receivable

The first step in the accounting cycle is to

analyze business transaction documents

Private individual investors who sometimes provide venture capital to small firms in need of equity capital are called:

angel investors

A(n) _____ is a yearly document that describes a firm's financial status and usually discusses a firm's financial activities during the past year and its prospects for the future.

annual report

In which of the following industries are you most likely to find factoring being used?

appliance industry

Term loans:

are available from commercial banks, insurance companies, pension funds, commercial finance companies, and manufacturer's financing subsidiaries; are capital expenditure loans with a maturity of more than one year; can be secured or unsecured; and may be repaid on a quarterly, semiannual, or annual schedule

Short-term loans:

are shown as a current liability on the balance sheet

Which of the following calculations is a formal expression of the accounting equation?

assets=liabilities+ owners' equity

The _____ summarizes an organization's financial status at the end of an accounting period.

balance sheet

In its role as lender to member banks, the Federal Reserve is called the:

banker's bank

The Federal Deposit Insurance Corporation (FDIC) insures deposits in commercial banks. The FDIC was created by the:

banking act of 1933

Dalrymple Bay Coal Terminal, a coal-handling facility and export terminal in Queensland, Australia, has issued triple-A rated bonds for $680 million in Australian dollars. The bonds will be used to refinance existing bank debt caused by the acquisition of eases from the Queensland government in 2002. The Commonwealth Bank of Australia acted as investment bankers to the transaction. This means the Commonwealth Bank of Australia:

bought the bonds from Dalrymple and sold them to the public

Funds invested in long-lived assets, such as land, buildings, machinery, and equipment, are called:

capital expenditures

In the accounting field, CMA stands for:

certified managerial accountant

State banks are:

chartered by the state in which they are based

The two types of finance companies are:

commercial finance companies and consumer finance companies

Albee Construction Company, a financially strong corporation that builds roads and bridges, finances its equipment leases by issuing unsecured short-term debt, which is called:

commercial paper

_____ is a short-term unsecured debt issued by a financially strong corporation.

commercial paper

_____ are specific repayment conditions as to how long customers have to pay bills and the amount of cash discount allowed.

credit terms

_____ are debts that are to be paid within twelve months.

current liabilities

The major advantage of debt financing is the:

deductibility of interest expenses

A checking account is also commonly referred to as a:

demand deposit

Bo Riley pays his rent and utility bills each month by writing checks. Riley is using a _____ account.

demand deposit

In terms of financial intermediation, the couple who went to a bank and took out a $200,000 loan to buy a new house is an example of a:

demander of funds

Which of the following statements about competition among stock exchanges is true?

electronic communications networks (ECNs) allow institutional traders to make direct transactions in what is called the fourth market

A company sells its accounts receivable to a financial institution that is in the business of buying accounts receivable at a discount. This sale is called:

factoring

Keisha Hunter keeps track of day-to-day operational data to make sure her employer has enough cash to run the business and will determine if and when the company she works for should open a second distribution center. Hunter is a(n) _____ manager.

financial

Which statement describes the major drawback to the use of debt financing?

financial risk is always a possibility with debt financing

Many large investors are now handling trades without Wall Street's services. Through the use of computer technology, they are making direct transactions. This relatively new development is called the _____ market.

fourth

Electronic communications networks (ECNs):

have permitted the creation of the fourth market

Managerial accounting provides all of the following financial information EXCEPT:

income statements

_____ are investment professionals who are paid to manage other people's money.

institutional investors

Chez Dove is an independent coffeehouse/bookstore that went bankrupt only eight months after opening due to an unexpected demand for cash to fix a leaking roof. Better cash _____ might have allowed the business to continue operation.

management

Financial managers often shift temporary funds from checking accounts to _____ securities to earn higher interest returns.

marketable

Short-term investments that are easily converted back to cash and are used by financial managers to achieve higher returns than those offered by checking accounts are:

marketable credits

_____ are temporary investments of excess cash in bonds and stocks that can readily be converted into cash.

marketable securities

Securities that are not traded on the organized stock exchanges are traded in the:

over-the-counter market

Which of the following statements about preferred stock is true?

preferred stock produces a fixed-amount dividend

Accountants employed within organizations are called:

private accountants

Which of the following statements about the accounting profession is true?

private accountants are also called managerial accountants; managerial accountants become a certified management accountant when they meet the requirements of the professional certification program; most CPAs first work for public accounting firms and later become private accountants or financial managers

The Financial Accounting Standards Board (FASB) is a:

private organization that is responsible for establishing financial accounting standards in the United States

When a firm goes public, it must reveal such information as:

product details, financial data, financing plans, and operating data

_____ are independent accountants who serve organizations and individuals on a fee basis.

public accountants

The funds that are reinvested in the firm out of profits and after dividends are paid are called:

retained earnings

Which of the following terms equals the total profits of a company minus all dividends (distributions of profits) to stockholders?

retained earnings

In finance, the opportunity for profit is called:

return

The dollar amount of sales plus any other income received from sources like interest and dividends is called:

revenues

In finance, _____ is the potential for loss.

risk

A loan that requires the borrower to pledge specific assets as collateral is called a(n) _____ loan.

secured

About two-thirds of all U.S. commercial banks are chartered by the state in which they are based. The banks are called _____ banks.

state

A(n) _____ is a summary of the money flowing into and out of a firm.

statement of cash flows

Business loans available from commercial banks with terms generally five to twelve years and secured or unsecured are called _____ loans.

term

Three important forms of long-term (capital) expenditures are:

term loans, mortgage loans, and bonds

On a statement of cash flows for a provider of tutoring services, the cash flows from financing activities would include:

the money borrowed to purchase the furniture in the tutorial area and the interest owed on that debt

Financial managers constantly strive for a balance between:

the opportunity for profit and the potential for loss

On a statement of cash flows for a manufacturer of digital thermometers, the cash flows from investment activities section would include:

the sale of land adjacent to the manufacturer's administrative office building

When Magna Manufacturing sells hand on screwdriver sets to Malloy Building Supply Company, Magna bills the tool manufacturer for the screwdriver purchase with terms of payment, which specify when the account is due. This type of unsecured loan is called _____ credit.

trade

A(n) _____ is a type of loan often used to finance buildup of inventory for seasonal (cyclical) businesses just before their strongest sales period.

unsecured bank loan

Thrift institutions:

were formed specifically to encourage household savings

Secured short-term loans are usually secured by:

accounts receivable and inventory

The purchase or sale of U.S. government bonds by the Federal Reserve to stimulate or slow down the economy is called:

an open marker operation

TD Ameritrade is a company that buys and sells stocks and bonds as well as providing its customers with advice on when to buy and when to sell. TD Ameritrade is an example of a _____, a type of nondepository financial institution.

brokaerage firm

_____ are profit-oriented depository financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services.

commercial banks

_____ stock is a security that represents an ownership interest in a corporation and has voting rights.

common

The Securities Exchange Act of 1934 gave the SEC the power to:

control the organized exchanges

A _____ is a nonprofit, member-owned financial cooperative.

credit union

Which of the following financial institutions is a not-for-profit institution?

credit union

Which of the following is an example of a depository financial institution?

credit union

When The Bank of Bank County borrows funds from the Federal Reserve; the rate the Fed charges the commercial bank is called the _____ rate.

discount

Which of the following is an activity performed by the Federal Reserve System as it carries out its monetary policy?

distributing currency

The _____ characteristic of money is revealed by the fact that a dollar can be converted into four quarters or ten times.

divisibility

Cupcakes, hamburgers, and cut flowers would not make good mediums of exchange because they lack the key characteristic of:

durability

Which of the following services would you expect a depository institution to offer?

electronic funds transfer

_____ deals with reporting to outsiders. _____ accounting deals with the internal operations of the firm.

financial accounting; managerial accounting

Financial intermediation is the process in which:

financial institutions act as intermediaries between the suppliers and demanders of funds

Financial institutions act as intermediaries between suppliers and demanders of funds. They accept savers' deposits and invest them in such things as business loans or mortgages. This process is called:

financial intermediation

Dakota Mining Company pays its bills and employees with checks drawn on a bank from another part of the country. Checks usually take about three days to clear the firm's account. _____ is the advantage gained during the check-clearing time.

float

_____ benefits the check writer by allowing it to retain the funds until the funds are actually withdrawn from its account.

float

The Federal Deposit Insurance Corporation (FDIC):

oversees the National Credit Union Share Insurance Fund; insures deposits in commercial banks and thrift institutions up to a ceiling of $250000 per account; is an independent, quasi-public corporation; and is backed by the full faith and credit of the United States government

Which of the following is NOT one of the key characteristics required in order for money to be an acceptable medium of exchange?

profitability

_____ involves calculating and interpreting financial ratios taken from the firm's financial statements in order to assess its condition and performance.

ratio anaylsis

Insurance policyholders make premium payments to buy financial protection. Insurance companies invest the premiums in:

real estate; stocks; business loans; and bonds

Which of the following is an example of an asset that might be owned by a minor league baseball team?

reputation as a winning team

Weeds, sand, and paper clips would not make good mediums of exchange because they lack the key characteristic of:

scarcity

_____ are investment certificates that represent either ownership of a corporation or a loan to the corporation.

securities

Financial managers focus on _____, the inflow and outflow of cash.

cash flows

The _____ is a law that requires full disclosure of information on new issues and registration statements of financial information.

securities act of 1933

The cost of inventory to the firm includes all of the following EXCEPT:

selling costs

Money is used as:

a means of payment; a store of value; a standard of value; a medium of exchange

Managerial accounting provides information that would probably be most beneficial to:

a middle manager of the company

Which of the following is an example of an intangible asset for a manufacturer of padlocks?

a patent on titanium lock mechanism

Savings banks:

are a type of thrift institution

Things of value owned by a firm are called its:

assets

Organized stock exchanges operate like a(n):

auction company

ATMs let customers of banks make deposits and withdrawals while in a shopping center or supermarket 24 hours a day. The letters ATM stand for:

automated teller machine

Adam Hassib works for the Federal Deposit Insurance Corporation. He arrives unannounced at member banks where he conducts audits of managerial and financial practices. Hassib is a:

bank examiner

An accountant who has a bachelor's degree, passes a test prepared by the professional organization AICPA, and has a certain number of years of on-the-job training becomes a:

certified public accountant

Finance companies make loans to people who could not get credit anywhere else. To compensate for taking this extra risk, finance companies:

charge higher interest rates than commercial banks do

When Hadley Jones wanted to buy a truck so he could get to and from his job in a nearby community, his credit rating was poor. Jones found that the only place he could get a loan was from a(n) _____ finance company.

consumer

The U.S. money supply is composed of:

currency, demand deposits, and time deposits

Financial institutions can be divided into two broad categories. These are ______ institutions.

depository and nondepository

Thrift institutions were formed specifically to make home mortgage loans and to:

encourage household savings

Which federal agency is responsible for processing and clearing checks between financial institutions?

federal reserve

The _____ is an independent, quasi-public corporation backed by the full faith and credit of the U.S. government that insures deposits in commercial banks and thrift institutions for up to a ceiling of $250,000 per account.

federated deposit investment corporation (FDIC)

A _____ makes short-term loans for which the borrower puts up tangible assets (such as an automobile, inventory, machinery, or property) as security.

finance company

_____ management is the art and science used to determine the most effective ways to acquire and use funds to achieve the firm's goals.

financial

Competing against foreign banks can be difficult for U.S. banks because:

foreign banks are subject to fewer regulations than U.S. banks

Which of the following statements about international banking is true?

foreign banks are subject to fewer regulations than U.S. banks; international banking is a high-risk business; U.S. banks play an important role in global business by providing loans to foreign governments and businesses; some governments protect their banks against foreign competitors; and competing against foreign banks can be difficult for U.S. banks because the U.S. banks are subject to many more regulations

To ensure accuracy and consistency in the way financial information is reported, accountants follow rules known as:

generally accepted accounting principles

Toys "R" Us was founded in 1948. The iconic mascot Geoffrey the Giraffe was introduced in February 1960. Geoffrey used in all ads and promotions used by the retail toy chain is an example of a(n) _____ because it does not have a physical existence.

intangible asset

A bank charter:

is an operating license for a commercial bank

For which of the following assets would a wholesale company use depreciation?

its warehouses

The primary goal of the financial manager is to:

maximize the value of the firm to its owners

For a college student who needs to buy an $80 textbook, the money she received from her parents for the purchase of school supplies would be used as a:

medium of exchange

The most important function of the Federal Reserve System is carrying out ______ policy.

monetary

______ is anything (regardless of form) that is acceptable as payment for goods and services.

money

A(n) _____ loan is a long-term loan using real estate or other assets as collateral.

mortgage

National banks:

must carry insurance on their deposits from the federal deposit insurance corporation; are more closely regulated than state charted banks; are chartered by the comptroller of the currency; and must belong to the federal reserve system

A bank chartered by the Comptroller of Currency, a branch of the U.S. Treasury Department, is called a _____ bank.

national

After all expenses have been subtracted from revenues on an income statement, the final figure or bottom line is called the _____ when it is a negative number.

net loss

Accounting provides a framework for looking at:

past performance; current financial health; possible future performance

Which of the following is NOT one of the six steps in the accounting cycle?

paying accounts payable

Dividends are:

payments to the shareholders from company earnings

One of the major financial burdens for many companies is the need to provide and maintain funds to provide benefits needed by former employees. One of the ways that Delta Airline tried to avoid bankruptcy was by reducing the payout from this fund because returns on investments were not keeping pace with the number of retirees and their benefit demands. This example reflects a problem with:

pension funds

_____ are large pools of money set aside by corporations, unions, and governments for later use in paying retirement benefits to their employees or members.

pension funds

When bank examiners conclude that a bank has serious financial problems, the FDIC can:

recommend that the bank merge with a stronger bank; provide the bank with extra equity capital; require the bank to use new management practices or replace its managers; and lend money to the bank

The Banking Act of 1933 gave the Federal Reserve System the authority to:

regulate interest rates on time deposits; tell banks how much reserve to maintain; ban interest on demand deposits; keep banks from investing in specific securities; and ban interest on demand deposits

What is the name of the SEC regulation that requires public companies to share information with all investors at the same time?

regulation FD

The Securities Act of 1933:

requires full disclosure of information about new securities issues

The three principal tools of the Federal Reserve System are:

reserve requirements, discount rate, and open market operations

_____ are two types of thrift institutions.

savings banks and savings and loan associations

Items that groups of people use as money must be _____ to be acceptable mediums of exchange.

scarce, divisible, portable, and durable

The power the Federal Reserve has to control credit terms on some loans made by banks and other lending institutions is called ______ controls.

selective credit

Ruth Hu recently inherited $200,000. She has invested the inherited money in real estate and government securities. Hu is using her money as a:

store of value

Which of the following statements about the Federal Deposit Insurance Corporation (FDIC) is true?

the ceiling on the size account insured by the FCID is $250000; all member banks in the Federal Reserve must be insured by the FDIC; the FDIC reviews the financial records and management practices of banks it insures at least once a year; and each bank insured by the FDIC pays a fixed percentage of the bank's domestic deposit as it premium

Money market deposit accounts and certificates of deposit are officially called ______ deposits.

time

_____ are deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand without penalty.

time deposits

The three main types of unsecured short-term loans are:

trade credit, bank loans, and commercial paper

Tracy Lefteroff is the global managing partner for PricewaterhouseCoopers. She said that her company is eager to invest in newly created biotech companies because the U.S. has an aging population that will need new medications and treatments. What kind of equity capital would Lefteroff be likely to provide?

venture capital

_____ invest in new businesses in return for part of the ownership, sometimes as much as 60 percent.

venture capitalists