Foundations Test 2
Four basic financial ratios are a) current, turnover, asset, and earnings. b) liquidity, asset management, leverage, and profitability. c) current, inventory, equity, and debt. d) liquidity, leverage, turnover, and debt.
b
_____ is/are the claims owners have against their firm's assets. a) Loans payable b) Owners' equity c) Liabilities d) Assets
b
Hans owns and operates a petroleum refinery and is considering selling gasoline door to door, the way the milk man used to do things. What part of distribution strategy is he dealing with? a. direct channel b. channel intermediaries c. channel distribution d. physical distribution
a
If every piece of inventory in a company's supply chain can be tracked precisely with RFID technology, what is that firm using? a) ERP b) CRT c) FOQ d) CPM
a
ISO 14000 is the newest set of ISO standards and focuses on: a) development of green technologies. b) minimizing harm to the natural environment. c) eliminating the use of paper products. d) process redesign management.
b
In _____, marketers determine price based on what consumers are willing to pay and then subtract desired margins to yield target costs. a. cost-based pricing b. demand-based pricing c. gap-determined pricing d. fixed-margin pricing
b
Breakeven point = fixed costs/ (unit selling price - variable costs)
...
In operations management, quality is defined in terms of: a) the ratio of cost to output. b) how well a product satisfies the preferences of customers. c) the number of defects per thousand units of output. d) the Baldrige Quality Index.
b
Cash flows from _____ show the amount of cash received from the sale of fixed assets such as land and building and other financial assets. a) operating activities b) financing activities c) investing activities d) net cash activities
c
In order to determine market capitalization—the total market value of all shares outstanding for one company, we a) multiply number of shares outstanding by the current market price. b) look at the total assets on the balance sheet of the firm. c) calculate the net worth of the firm. d) multiply the number of shares outstanding by the par value per share.
a
Independent wholesalers fall into two categories: a. merchant wholesalers and agent/brokers. b. distributors and retailers. c. truck jobbers and drop shippers. d. cash and carry wholesalers and credit-based wholesalers.
a
While TQM has several goals, Six Sigma is about ______ a) reducing defects. b) finishing on time. c) finishing on time and with unsurpassable quality. d) lowering costs.
a
The price of a firm's stock in the secondary market is often interpreted as a measure of the success of the firm's _____ in building the value of the corporation. a) investment banker b) shareholders c) management team d) brokers and dealers
c
The supply chain begins with the _____ and ends with _____. a. producer; organizations that represent the final consumer b. full-service wholesaler; multichannel retailer c. suppliers of raw materials; organizations selling to the final consumer d. manufacturer; quality control department
c
You recently considered investing in a publicly traded Texas-based company InnRonn, Inc. You decided not to buy shares in the company after reading the independent auditor's report and discovering the auditor offered a(n) _____ opinion of the company's financial statements. a) qualified b) disinterested c) unqualified d) disparaging
a
_____ aims to price a handful of items temporarily below cost to drive in-store traffic. a. Loss leader pricing b. High/low pricing c. Penetration pricing d. Price discrimination
a
_____ dominate the market by offering a huge variety of one type of product. a. Category killers b. Penetration pricing specialists c. Skimming pricing analysts d. Supply chain managers
a
_____ perform or assist in a wide variety of tasks for the firms in which they work. These tasks include budgeting, cost and asset management, and the preparation of reports for the firm's stakeholders. a) Management accountants b) Public accountants c) Internal auditors d) Government accountants
a
Freshbred delivers fresh cakes, breads, pies, and muffins to several small grocery stores in Central Alabama. In addition to delivering the baked goods, Freshbred's employees help the small store owners keep track of what they need to order, and they even remove outdated baked goods from the shelves. Freshbred is an example of a a. truck jobber. b. drop shipper. c. full-service wholesale merchant. d. product broker.
a
_____ software provides powerful drawing and drafting tools that enable users to create and edit blueprints and design drawings quickly and easily. These programs allow users to create three-dimensional drawings. a) CAD b) CAM c) CAE d) Gantt
a
Gregory O'Neal works for Market4Me, which is a food supplier. His main responsibility is to make tactical decisions involved in the actual movement of goods along his company's supply chains. Gregory is involved in a. logistics. b. vending. c. multichannel distribution. d. modalistics.
a
A _____ instructs the broker to buy or sell a security at the best available current market price. a) market order b) limit order c) broker order d) security order
a
A key objective of the _____ was to restore public faith and trust in the securities markets battered by the stock market crash of 1929. a) Securities Act of 1933 b) Banking Act of 1933 c) Uniform Securities Act of 1930 d) Stock Market Protection Act of 1931
a
A servicescape factor that takes into consideration how easy it is for customers to find what they want as they move through the facility is known as _____ a) functionality. b) ambience. c) sign, symbols and artifacts. d) poka-yokes.
a
Advantages of debt financing include all of the following EXCEPT a) covenants that provide important benefits to the borrower are normally included in debt agreements. b) interest payments on debt are tax-deductible. c) the firm can acquire added funds without requiring current owners to contribute additional funds of their own. d) using debt can increase the return on equity to owners during periods of strong earnings.
a
All of the following statements about channel intermediaries (distributors) are true, EXCEPT a. distributors make distribution channels more complex by increasing the number of transactions required of buyers and sellers. b. distributors normally add value to the distribution process at a lower cost than it would cost for consumers or producers to add that value on their own. c. distributors sometimes deliver utility rather than creating it themselves. d. distributors often create utility that wouldn't otherwise have been present.
a
Companies like McDonald's, who place their stores in as many location as possible, are using a strategy called a. intensive distribution. b. selective distribution. c. exclusive distribution. d. wheel of retailing.
a
Dividends to common stockholders are a) a distribution of profits that are paid only if approved by the company's board of directors. b) a legally required payment to the company's shareholders. c) a tax-deductible expense. d) the result of a rise in the market price of the firm's stock in the secondary market.
a
Kyle is the credit manager for Timber Trails, Inc., a local landscaping company. Just recently, his mulch supplier noted on the invoice the terms of 3/15 net 30. What does this mean? a) Timber Trails will get a 3 percent cash discount if the balance owed to the supplier is paid within 15 days; otherwise the entire balance is due in 30 days. b) The entire amount is due in 30 days, but the 3 percent late penalty will only be imposed if payment is more than 15 days late. c) Timber Trails must pay 15 percent of the amount due in 3 days; then the remaining 85 percent is due in 30 days. d) Timber Trails has to pay the invoice within 30 days. Late payment penalties are 3 percent if the bill is paid in less than 60 days, but they rise to 15 percent if payment is not made within 60 days.
a
Lottadoe's liabilities are $130,000, and its owners' equity is $170,000. This means that Lottadoe's: a) total assets are $300,000. b) net income is $40,000. c) net income for the current year was $300,000. d) net cash flow for the current year was $40,000.
a
Reba owns a convertible bond issued by Macrofirm, Inc. The bond has a par value of $1,000, a conversion ratio of 40, a coupon rate of 6 percent, and will mature in 2019. The market price of Macrofirm's common stock has risen steadily over the past three years and is currently $35 per share. Reba a) is likely to find it attractive to convert the bond to common stock. b) should hold the bond until it matures. c) may be forced to sell her bond back to the company, but if she does so she will receive a premium above the par value. d) will be able to redeem the bond as soon as the price of the stock rises above $40 so that it covers the conversion ratio.
a
Rose is a member of the teachers union. She has just inherited a large sum of money and is trying to decide where she should deposit her money in order earn the highest interest rate. In which depository institution should she deposit her money? a) credit union b) commercial bank c) savings and loan d) investment bank
a
Sam's business saw an increase in profits last year and has decided to reinvest their earnings. Sam's retained earnings could be used to a) meet the company's long-term financial needs. b) meet the company's short-term financial needs. c) to pay the owners a dividend. d) determine the amount of cash the firm has.
a
TRV is a small publicly traded corporation with only 430 stockholders and total assets of $8.7 million. Investors who want to buy stock in this company would probably purchase the stock in the a) over-the-counter market. b) under-the-table market. c) margin market. d) bear market.
a
The Sarbanes-Oxley Act created the _____ to protect the interests of investors and further the public interest in the preparation of fair and informative financial statements. a) Public Company Accounting Oversight Board (PCAOB) b) Securities and Exchange Commission (SEC) c) Financial Accounting Standards Board (FASB) d) Forensic Accounting Standards Commission (FASC)
a
The _____ is a broad stock index that includes many of the largest and best-known United States corporations. a) Standard & Poor's 500 b) FTSE 100 c) DAX d) Nikkei 250
a
The _____ is a project management tool illustrating relationships among all activities involved in completing a project, thus enabling managers to identify activities that are most likely to delay the project's completion. a) critical path method b) value stream map c) activity inventory network table d) activity interdependence reference table
a
The _____ is a theory that describes the upscale evolution of many retail firms; however, it does not account for stores that launch at the higher end of the market or for firms that retain their reputation as discount retailers. a. wheel of retailing b. channel intermediaries c. independent wholesaling businesses d. multichannel retailing
a
The _____ is an index based on the adjusted average price of stocks of 30 major corporations picked by editors of The Wall Street Journal. a) Dow Jones Industrial Average b) Standard and Poor's 500 c) NASDAQ Composite Index d) Nikkei 225 Index
a
The financial budget of a firm includes a) both the capital expenditure budget and cash budget. b) the sales budget, marketing budget, and tax budget. c) both the revenue budget and cost budget. d) all of the budget documents developed for a given fiscal period.
a
The goal of a(n)_____ system is to integrate the information flows of all aspects of a business's operations. a) enterprise resource planning b) materials requirement planning c) computer-aided design d) computer-aided manufacturing
a
The process of developing the operating budget begins with the a) sales budget. b) income statement. c) production schedule. d) capital expenditure budget.
a
Tiny Timber Tree Farms has decided to adopt activity-based costing. One likely reason the firm's accountants decided on this approach was to a) provide a more meaningful way to assign overhead costs to specific products. b) simplify the process of assigning costs to specific products. c) base costing on the amount of direct labor used to produce each product. d) move from a system that focuses on assigning costs to goods and services to a system that assigns costs to activities.
a
Tucker Enterprises has $100,000 worth of debt financing and $200,000 in equity financing. This year it paid $8,000 in interest on its debt and paid $8,000 in dividends to stockholders. As the CFO of Tucker Enterprises you are considering raising more capital via debt financing. One reason why debt financing is more attractive than equity financing is that a) interest payments will result in a reduction in its taxes. b) dividend payments will result in a reduction in its taxes. c) interest payments will increase both taxes and retained earnings. d) dividend payments are required to be paid when due.
a
What two pieces of information are arguably the most important to any business? a) cash flow--how and why it changes b) compliance with government regulators and the report of an independent auditor c) retained earnings and disbursements d) financing activities and operating activities
a
Which of the following statements about cost-based pricing is most accurate? Cost-based pricing a. determines price by adding a fixed margin to the per unit cost of the product. b. uses the same approach for setting prices as the demand-based approach. c. is an interesting theoretical approach to pricing, but it is seldom used in the real world. d. is popular among marketers, because the stability of variable costs makes it simple to apply.
a
Harry Trolle is the Chief Financial Officer of a small construction company and has just been presented information from the sales budget and various cost budgets. He is using this information to develop a forecast of the firm's net income for the next year. Harry is reviewing the company's a) cash budget. b) budgeted income statement. c) cash flow budget. d) budgeted balance sheet.
b
108. Common stockholders have all of the following rights EXCEPT a) a preemptive right. b) the right to repayment of the principal. c) voting rights. d) a right to residual claim on assets.
b
A _____ allows investors to track general market conditions. a) stock array b) stock index c) Gantt chart d) securities matrix
b
A _____ is used to predict when a firm will likely experience temporary shortages or surpluses of cash. a) statement of projected revenue flows b) cash budget c) statement of cash flows d) pro forma balance sheet
b
A firm's distribution strategy is concerned with two key elements: a. shipping and warehousing. b. the channel of distribution and physical distribution. c. pricing strategy and credit standards. d. facility location and value stream mapping for product flow.
b
A(n) _____ is a set of activities or steps that combine inputs to create a good or service. a) network b) process c) ERP d) forecast
b
A(n) _____ is issued if the external auditor does not find any problems with the way a firm prepares and reports its financial statements. a) qualified opinion b) unqualified opinion c) adverse opinion d) no opinion
b
A(n)_____ measures how effectively a firm uses its assets to generate revenue. a) liquidity ratio b) asset management ratio c) leverage ratio d) profitability ratio
b
Before going public, a firm must file a registration statement with the a) Internal Revenue Service. b) Securities and Exchange Commission. c) Department of the Treasury. d) Federal Trade Commission.
b
Candidates wishing to become certified public accountants must complete all of the following to reach certification EXCEPT a) must complete 150-semester hours (5 years) of college education with heavy emphasis on accounting and business-related courses b) must complete an accounting-related internship while in college c) must pass a rigorous exam d) must complete one year of direct work experience in the field of accounting
b
Compared to public offerings, one advantage of issuing securities through a private placement is that it a) can raise a lot more money. b) avoids the need to file paperwork with the SEC. c) reaches a lot more potential investors. d) avoids the need to use an investment banker.
b
Corporation GHI has issued bonds in $100,000 increments to raise capital for product development efforts. The bonds contain a provision that allows the bondholders to exchange each bond for 25 shares of common stock. Bonds with this type of arrangement are called a) equity bonds. b) convertible bonds. c) callable bonds. d) debentures.
b
Danielle, the regional manager of CDz music store, is trying to determine if the store should invest in a new computerized inventory tracking system. Using financial analysis, she would decide that the investment was desirable if a) total positive cash flows were greater than total negative cash flows. b) its NPV is equal to or greater than zero. c) its NPV is less than zero. d) the firm has enough cash to make the purchase without having to arrange additional financing.
b
Lottadoe and Bigbux are two companies that are identical in every respect except that Lottadoe uses only equity financing while Bigbux relies heavily on debt financing. Over the past year, the firms had identical net incomes before interest and taxes were taken into account. If net income for both firms was high: a) Lottadoe would pay less in taxes than Bigbux. b) Bigbux would report a higher return on equity than Lottadoe. c) Bigbux would report a lower return on equity than Lottadoe. d) Lottadoe would report a lower net income after taxes than Bigbux.
b
Lottadoe and Bigbux are two companies that are identical in every respect except that Lottadoe uses only equity financing while Bigbux relies heavily on debt financing. Over the past year, the firms had identical net incomes before interest and taxes were taken into account. If the firms faced a rough year with very low earnings: a) Bigbux would report a higher net taxable income than Lottadoe. b) Lottadoe would report a higher return on equity than Bigbux. c) Lottadoe would be required to pay a higher dividend than Bigbux, thus reducing retained earnings. d) Bigbux would be able to skip its interest payments if paying them would cause its net income to be negative.
b
Many insurance companies utilize _____, while _____ often handle real estate and seasonal products. a. merchant wholesalers; retailers b. agents; brokers c. retailers; distributors d. full-service merchants; limited service merchants
b
Most grocery stores now stock only about three days' worth of inventory. If there happened to be a nationwide catastrophic event that crippled logistics, such as the hypothetical EMP (Electro-Magnetic Pulse) warhead--which would completely destroy or disable anything electronic nationwide--it is possible that the American people would face an unprecedented challenge: a national food crisis. This risk is something that _______ theoretically minimizes. a) Value stream mapping b) Lean system theory c) JIT production d) TQM
b
On a financial website such as Yahoo! Finance, you may find all of the following information on a company's stock EXCEPT the a) stock symbol. b) number of stock owners by state. c) annual dividend paid per share. d) day's total number of shares traded.
b
One drawback to ETFs is that investors a) are not able to diversify their investments. b) must pay commissions when making a purchase. c) are forced to pay higher cost and fee as compared to mutual funds. d) can only buy or sell shares after the major stock exchanges are closed.
b
Out-of-pocket costs are also referred to as a) implicit costs. b) explicit costs. c) direct costs. d) indirect costs.
b
Preferred stockholders enjoy a preference over common stockholders with respect to a) voting rights. b) dividends. c) capital gains. d) management of the company.
b
Radcliffe McCoy is the financial manager for his company. He is comparing income statements from the past three years to see the trend (if any) in cost of goods sold and other expenses. He is using: a) vertical analysis. b) horizontal analysis. c) ratio analysis. d) managerial analysis.
b
Stockholders would most likely use accounting information provided by their firm to a) make capital budgeting decisions. b) gauge whether the firm is generating a satisfactory return on their investment. c) determine whether the firm can repay them for their stock. d) obtain information needed to fill out their individual tax returns.
b
Summer Luddite works for iRobot as a software designer. iRobot specializes in producing customized solar powered motors individualized for customers at a rather low cost. The system used at iRobot is highly automated. iRobot is utilizing _____ a) computer-aided manufacturing. b) computer-integrated manufacturing. c) integrated-computer customization. d) computer-aided production.
b
The Deming Chain Reaction claimed that: a) lean manufacturing should be the number one concern of all firms, because attention to ideas that keep inventories lean will increase revenues more than any other strategy. b) a focus on quality would have a positive effect on several aspects of the business, including an increase in market share and an increase in jobs. c) mistakes in the production line would have a chain reaction; in other words, a mistake at one stage in a production process would create problems leading to additional mistakes at later stages of the process. d) a supply chain is only as strong as its weakest link.
b
The Dodd-Frank Act requires large firms in the financial sector to a) hold more debt and less equity. b) participate in deleveraging. c) rely on high financial leverage. d) increase their debt-to-equity ratio.
b
The _____ created the Federal Reserve System, with its primary responsibility being to oversee our nation's banking system. a) Banking Act of 1933 b) Federal Reserve Act of 1913 c) Glass-Steagall Act d) Securities Act of 1933
b
The _____ is a network of national standards institutes in over 160 nations that develop global standards for industries. a) IOSC b) ISO c) IOS d) IOSB
b
The _____ is sometimes called the total stock market index, because it includes virtually all major publicly traded United States corporations. a) Dow Jones Industrial Average b) Wilshire 5000 c) NASDAQ Composite Index d) Kennedy-Spears Full Range Index
b
The average grocery store carriers _____ different products. a. over 50,000 b. about 50,000 c. less than 50,000 d. approximately 10,000
b
The exact date when the issuing firm must repay the principal to a bondholder is known as the bond's _____ date. a) coupon b) maturity c) ex officio d) conversion
b
The goal of one of the newest set of ISO standards, known as _____, focuses on environmental management. It encourages firms to minimize harm to the natural environment and improve environmental practices. a) ISO 9000 b) ISO 14000 c) ISO 2000:2005 d) ISO 14900
b
The stocks of firms that don't meet listing requirements for stock exchanges are traded on the _____ market. a) under-the-table b) over-the-counter c) private equity d) limited offer
b
Customers who write a bad check (or 'float' a purchase without sufficient funds on their debit card) at Jerry's Corner Shop, will receive a bill from Bonneville, a collection agency. What relationship does Bonneville have with Jerry's? a) trade credit. b) revolving credit agreement. c) factoring. d) short-term bank loans.
c
Two firms in the same industry are the same size and have very similar real-world financial results. The profitability ratios of these firms a) should be very similar because both firms must use exactly the same mathematical formulas to calculate their ratios. b) could be quite different if they use different GAAP-approved methods to construct their financial statements. c) could be very different because ratios are based on projections of future performance rather than on actual real-world performance. d) should be identical because GAAP requires all firms in the same industry to use the same accounting methods to construct their financial statements and compute their key financial ratios.
b
What do Mary Kay Cosmetics, The Pampered Chef, and Tupperware have in common? a. They are intensive distribution, nonstore retailers. b. They are multilevel marketers. c. They earn the majority of their revenue from direct response marketing. d. They are a part of the wheel of retailing.
b
What is an example of Six Sigma? a) An organization-wide focus on quality. b) Defects at no more than 3.4 per million opportunities. c) Prevention rather than correction. d) A long-term focus on continuous quality improvement.
b
When comparing the advantages of trucks and rail as modes of transportation, a key advantage of trucks is that they _____, while an advantage of railroads is that they _____. a. are less costly; offer the greatest flexibility in handling b. offer faster and more frequent shipments; offer lower shipping costs c. offer more flexibility in handling; offer greater dependability d. are the fastest mode of transportation; are the most readily available mode of transportation
b
Which cash equivalent raises funds by selling shares to large numbers of investors and then pools these funds to purchase short-term, liquid securities? a) M2 index funds b) money market mutual funds c) T-bills d) exchange funds
b
Which of the following statements about traditional retail stores and nonstore retailing is most accurate? a. Led by a surge in online selling of items such as music, DVDs, books, and electronics, nonstore retailers recently surpassed store retailers in the total volume of sales. b. Although nonstore retailers are growing, they are growing at a slower pace than they did in the early part of the decade. c. Store retailing still holds a modest lead in total sales over nonstore retailing, but the gap is closing rapidly. d. Store retailing and nonstore retailing are now almost equal in size, but store retailing has been growing more rapidly in recent years. This is because a significant number of consumers are concerned about the lack of privacy and security when buying online.
b
Why have door-to-door sales had a recent resurgance in our high-tech society? a. Door-to-door sales is less expensive than using technology for sales. b. The National Do Not Call list has diminished telemarketing as an option for direct selling. c. Door-to-door purchases have no sales tax. d. There hasn't been a resurgance in door-to-door sales.
b
You are 24 years old and a recent college graduate. Having landed your first job, you also know that it is never too early to begin investing for your future needs. At your age, which of the following investment strategies would be most likely to help you accumulate significant wealth over the long haul? a) Invest mainly in a broad group of corporate bonds. b) Invest mainly in a diversified set of common stocks. c) Invest in the preferred stocks of a few well-established corporations. d) Put all of your money into a government insured savings account with a bank.
b
_____ aims to increase traffic in retail stores using special sales on a limited number of products and higher everyday prices on others. a. Loss leader pricing b. High/low pricing c. Penetration pricing d. Everyday-low pricing
b
_____ are companies that provide short-term financing to firms by purchasing accounts receivable at a discount. a) Investment bankers b) Factors c) Credit agents d) Commercial paper houses
b
_____ are consumed when and where they are produced, and they often require the customer to be actively involved in their production. a) Goods b) Services c) Products d) Processes
b
_____ involves hiring independent contractors to sell products within personal networks and recruit salespeople in return for a percentage of commissions. a. Penetration pricing b. Multilevel marketing c. Profit margin d. Supply chain management
b
_____ pricing is the most popular method of fixed margin pricing. a. Skimming b. Cost-based c. Demand-based d. Breakeven
b
_____ software takes the electronic design for a product and creates the programmed instructions that robots must follow to produce a product as efficiently as possible. a) CAD b) CAM c) CAE d) Gantt
b
hat best explains the time value of money? a) The concept is another way to explain how inflation works. b) It just means that it's best to have money today, so it can be put to work sooner to make even more money. c) This is just a banking term. It's insider jargon for compound interest. d) It means that, as time goes by, a dollar buys more today than it will tomorrow because of inflation. Of course, in a deflationary economy the process is inverse.
b
A percentage of the bond's par value, the _____ is the interest paid to bondholders. a) dividend b) P/E ratio c) coupon rate d) funding rate
c
A(n) _____ is a financial intermediary that assists corporations when they issue new securities. a) accredited investor b) stock broker c) investment bank d) securities dealer
c
A(n) _____ is a hybrid investment that is traded in securities markets like a stock but actually represents ownership in a "market basket" of many different securities. a) mutual fund b) government bond c) exchange traded fund d) preferred stock
c
Activity-based costing is a(n) a) three-stage process dealing with direct costs. b) "one size fits all" process. c) two-stage process dealing with indirect costs. d) systematic examination of how direct costs relate to individual goods.
c
An auditor issuing a(n) _____ has uncovered serious and widespread problems with the preparation of a firm's financial statements. a) qualified opinion b) unqualified opinion c) adverse opinion d) untenured opinion
c
CDz, your local music and video store, consistently offers its videos and CDs at a lower price than competitors. The pricing tactic CDz is using is a. loss-leader pricing. b. penetration pricing. c. everyday-low pricing. d. high/low pricing.
c
David is starting up a small business. He has secured a small amount—$5,000 from a group of investors in the form of 24-month term loans to the company. He sweetened the pot by depositing another $5,000 of his own money in his new corporate account at the bank. Which of the following is true? a) Using the current ratio, David's new business is a very handsome prospect indeed, in regard to liquidity. b) The firm's ROE shows solid performance. c) The debt-to-equity ratio shows he is leveraged at 100%. d) David's firm's current ratio is sitting well above 3.
c
Fashion trend setters such as Gucci who establish one retail outlet in a given area are utilizing a(n) ______ distribution strategy. a. intensive b. selective c. exclusive d. multichannel
c
Firms that _____ may find that they can achieve their objective by developing a relationship with a firm that offers factoring services. a) need to establish a source of long-term financing, which avoids fees and commissions b) have larger than necessary cash balances and want to find a safe way to invest the excess cash c) rely heavily on credit sales and want to speed up their receipt of cash d) plan to issue large sums of commercial paper in the near future
c
George's Car Repair Shop buys parts from a local parts distributor. The distributor delivers the parts promptly under terms stated on the invoice: 3/15 net 30. George has always paid the bill in 30 days and has never really worried about these invoice terms. Your advice to George is: a) He is smart to wait until the 30th day before making payment because this gives him the use of cash for the maximum possible amount of time. b) These terms mean that the payment is due in 30 days, but that as long as he is not more than 15 days late, he can avoid the 3 percent late penalty. Thus, George could actually delay payment until the 45th day without incurring a penalty. c) If possible, it is smart to pay the bill within 15 days after receipt of the parts because then he will receive a 3 percent discount. If he does a lot of business with this firm, this will result in a sizeable savings for George by year's end. d) George should not react to these payment terms, because they are a tactic used by many distributors to get customers to pay early, with little or no benefit to George.
c
In order to access stock information for a particular corporation on a financial website, you normally type in the corporation's a) complete official name as registered with the SEC. b) ISBN number. c) stock symbol. d) SEC registration number.
c
Jasmine started a small business two years ago. The business is just now seeing some success, and Jasmine notes that she has a few thousand dollars more in her bank account than she currently needs to pay her bills. However, because of the uncertainty of cash flows in her new business, she is concerned that she may need access to these funds on fairly short notice in the future. Given this situation, Jasmine should a) invest the funds in common stocks. b) keep all of these funds in her checking account. c) put some of her excess cash into money market mutual funds. d) use her excess cash to buy intangible assets.
c
Joanne works in the marketing department for a toy manufacturer. Her company will be introducing a new type of toy and wants to obtain a dominant market share while discouraging competitors from offering similar toys. The best strategy for achieving this goal would be a. prestige pricing. b. everyday-low pricing. c. penetration pricing. d. price leadership.
c
One of the purposes of the Sarbanes-Oxley Act of 2002 was to a) ban firms from using the same CPA firm as a competitor firm. b) develop new asset management techniques. c) prevent relationships that created conflicts of interest between CPA firms and the firms they audit. d) encourage relationships between CPA firms and the firms they audit that included strategic consulting to improve financial performance.
c
Reginald is a man who wants steady income. He has a lifestyle that includes lengthy trips to exotic locales so that he may collect racy insects that his highbrow neighbors do not have and cannot imagine. As he sits down with his stock broker, which strategy do they decide is best for Reginald? a) They'll want to focus sharply on market timing so as to maximize short-term gains. b) Reggie should buy and hold. c) Reggie's portfolio should include common stock in large or well-established firms, as well as bonds. d) Reginald and his stock broker know, without a doubt, that they should be investing for growth.
c
Sally Snooks recently completed this class. While attending her company's holiday party, she heard one of the executives mention that the company is highly leveraged. Sally, who recently bought 300 shares in the company's stock, is very interested in this bit of information because she knows that leverage a) will protect her return on investment if the company experiences a downturn in sales. b) will increase the amount of taxes she will have to pay on her dividends. c) means that the firm is financed with a sizeable amount of debt, which can increase the return on her equity investment in good times, but can lead to lower returns when times are bad. d) is a time-proven way to both improve the expected return on equity and reduce the financial risk to stockholders. This is because reliance on debt means creditors are assuming most of the risk while stockholders are entitled to most of the profits.
c
The _____ budget deals with the firm's plans for investing in major fixed assets and long-term projects a) strategic b) long-term c) capital expenditure d) operating
c
The _____ summarizes a firm's financial position at a specific point in time (i.e., a specific quarter or year). a) statement of cash flows b) income statement c) balance sheet d) investment income statement
c
The degree of uncertainty related to the actual outcome of a decision is referred to as a) loss. b) rate of return. c) risk. d) debt consequence.
c
The external audit process includes all of the following EXCEPT: a) make sure accounting and booking staff have a clear understanding of GAAP. b) review sales receipts an invoices. c) check the accuracy of every transaction. d) count the supplies in inventory.
c
The goal behind penetration pricing strategy is to a. develop the firm's products into prestigious brands. b. develop differentiation between one firm's products and its competitors' products. c. become profitable from the shear volume of sales. d. keep manufacturing costs at a minimum.
c
The main distinction among members of a channel of distribution is whether they are a. agents or brokers. b. producers or sellers. c. wholesalers or retailers. d. shippers or warehousers.
c
The three basic types of securities corporations issue to raise long-term financial capital are a) stocks, commercial paper, and debentures. b) cash, debentures, and accounts receivables. c) common stock, preferred stock, and bonds. d) dividends, interest, and capital gains.
c
Two-thirds of all wholesale trade members are a. merchant wholesalers. b. agents or brokers. c. independent wholesalers. d. truck jobbers.
c
W. Edwards Deming and other quality experts had their greatest initial impact on companies located in: a) the United States. b) China. c) Japan. d) Germany.
c
Walmart and Costco achieve long-term profitability through volume sales. Each uses the a. prestige pricing strategy. b. high/low pricing strategy. c. everyday-low pricing strategy. d. loss-leader pricing strategy.
c
Walmart is a company that doesn't mess around--with suppliers or unions--and they have a reputation for toughness. When VISA changed the terms of use and raised its rates for its transactions with every retailer, including Walmart, the company responded by refusing to accept VISA cards until terms satisfactory to Walmart had been agreed upon. Walmart is strict with a lot of its business partners; it's the Walton Way. In an indirect way, this scenario is both illustrative and instructive. When a firm does these kinds of things, expanding the umbrella of its control of the supply chain, it is called: a) Outsourcing b) ERP c) Vertical integration d) Critical Path Method (CPM)
c
Warren Buffet is considered by many to be the world's most famous value investor. As a value investor Warren Buffet favors a) timing the market in order to predict when prices of specific stocks are likely to rise and fall. b) companies that have the potential to grow much faster than average over a period of time. c) finding stocks that are priced in the market below the intrinsic worth of the company. d) buying preferred stocks and bonds in order to generate a steady, predictable flow of income.
c
What was the act that overturned the section of the Banking Act of 1933 that prohibited commercial banks from selling insurance or performing the functions of investment banks? a) the Glass-Steagall Act b) the Securities and Exchange Act of 1934 c) the Financial Services Modernization Act of 1999 d) the Securities Act of 1933
c
When Apple introduced the iPod, the company used _____, with the purpose of maximizing profitability by offering new products at a premium price. a. everyday-low pricing b. penetration pricing c. skimming pricing d. matching the competition
c
_____ allow(s) investors to buy and sell only at the end of the day, but _____ can be bought and sold any time of the day. a) Common stock; preferred stock b) Exchange traded funds; mutual funds c) Mutual funds; exchange traded funds d) Preferred stock; common stock
c
_____ are short-term IOUs issued by the U.S. government that mature in 4, 13, or 26 weeks. a) Debentures b) Money market mutual funds c) T-bills d) Treasury bonds
c
_____ is a subset of supply chain management that focuses on tactics rather than on strategy. a. Network implementation b. Nodal shipping c. Logistics d. Order processing
c
_____ is granted by suppliers when they ship materials, parts, or goods to a firm without requiring immediate payment. a) A revolving credit agreement b) Debenture financing c) Trade credit d) Commercial paper
c
_____ is the set of strategies and practices to eliminate waste. a) Lean management b) Lean investment c) Lean production d) Lean manufacturing
c
_____ software enables users to test, analyze, and optimize designs. These programs allow users to find and correct design flaws before production. a) CAD b) CAM c) CAE d) Gantt
c
_____ takes legal possession of the goods being distributed, while _____ do not take title of the goods. a. Supply chain management; supply chains b. An ownership utility; service utilities c. A merchant wholesaler; agents/brokers d. A channel of distribution; direct channels
c
bond's coupon rate a) varies with market conditions b) fluctuates with the interest rate on long-term investments c) always stays the same. d) will fluctuate according to what the investor is willing to pay for the bond.
c
When designing a retail facility, the operations managers should be mindful of the _____, which defines where the consumer and the service providers interact. a) cell layout b) floor experience c) flow process d) servicescape.
d
173. Capital _____ is the process a firm uses to evaluate long-term investment proposals. a) accounting b) forecasting c) mapping d) budgeting
d
176. Jasmine is an investment broker for a large firm. Understanding overall market conditions helps her advise her clients who invest in stocks. Which of the following are indices that are commonly used to describe the price movement of securities in the U.S. market? a) Fortune 500 and the Turbo 900. b) the Nikkei 225 Index and the Boston Big Index. c) the FTSE 100 and the Rittnauer Index. d) the DJIA and the S&P 500.
d
Alison has $5,000 to invest and is trying to decide between two investment opportunities. One investment offers her future cash flows of $2,000 for each of the next five years. Another investment offers her future cash flows of $5,000 in year five and $7,500 in year six. You tell her that in order for her to compare these two investments, she will need to calculate the _____ of the future cash flows. a) common payout value b) average annual payout c) annuity value d) net present value
d
Billybob is looking at the NAV for his investments on an hourly basis because he is obsessed with it. What investments does Billybob own? a) Billybob is invested in Crazytown preferred stock. b) He owns Crazytown common stock. c) He owns preferred stock. d) He owns shares in Crazytown Mutual Fund.
d
Carter Glass is the CEO of GreenHouse Gas Partners a company that facilitates shipments of coal from the mine shaft to the end user. The company takes legal title of the merchandise, but never physically processes it. GreenHouse Gas Partners is an example of a a. truck jobber. b. cash and carry wholesaler. c. broker. d. drop shipper.
d
Depository institutions accept deposits from a) commercial banks. b) credit unions. c) savings and loans. d) businesses.
d
Disadvantages of debt financing include all of the following EXCEPT a) the requirement to make fixed payments. b) creditors often impose covenants on the borrower. c) higher risk than equity financing. d) double taxation of interest payments.
d
Eck-Witty Corporation is working with an investment bank to issue some new stock. The bank has agreed to help the company develop a pricing strategy and to help find buyers for the stock, but it will not guarantee that all shares will be sold at the desired price. Eck-Witty's investment banker is offering a(n) _____ approach to raising funds. a) under subscription b) preemptive c) firm commitment d) best efforts
d
Financial managers use _____ to assess the financial strengths and weaknesses of their firm. a) CAD/CAM b) value stream mapping c) capital budgeting d) ratio analysis
d
For the past several decades, the _____ and _____ were the two largest securities exchanges in the United States. a) American Exchange (AMEX); NASDAQ b) Pacific and Mountain Exchange (PAM); New England Exchange (NEE) c) NASDAQ; OTC d) New York Stock Exchange (NYSE); NASDAQ
d
Harry owns long-term investments in a public company. These investments pay him every year, by law, and expire ten years after the purchase date. They have an additional feature that allows a conversion ratio of 50. What does he own? a) common stock b) preferred stock c) callable bonds d) convertible bonds
d
If stockholders have a preemptive right, they can a) exchange bonds for shares of stock from the same firm. b) receive a guaranteed reimbursement for losses if the firm goes bankrupt. c) fire the CEO without the approval of the board of directors. d) purchase shares of a new stock being issued by a firm in which they already own shares.
d
In evaluating companies across industries, financial managers will often read the _____ as a means of interpreting the statements correctly. a) balance sheet b) income statement c) retained earnings statement d) independent auditor's report
d
In recent years, more specialized ETFs that focus on narrower market baskets of assets have appeared on the market. Like ______, ETFs are traded just like stocks. a) bonds b) IPOs c) open-end mutual funds d) closed-end mutual funds
d
In the last fifty years there have been key changes in operations management. Which of the key changes resulted in an organizational shift from a cost perspective to a value perspective? a) Mass production to mass customization b) Local competition to global competition c) Exploiting the environment to protecting the environment d) Simple supply chains to complex value chains
d
Individual investors are not permitted to directly trade stocks on NYSE or NASDAQ. Therefore, individuals must seek the help of a(n) a) underwriter. b) banker. c) investment banker. d) broker.
d
Investors who employ the "buy and hold" investment approach a) perform a sophisticated analysis to locate stocks with the greatest long-term potential for growth. b) choose a single sector of the economy and invest in several leading companies in this sector for the long term. c) invest primarily in bonds and preferred stocks that have very low risk. d) hold a diversified portfolio of securities and are willing to ride out short-term downturns in the market.
d
Kellen likes to dabble in the markets, but doesn't want to gain enough rope to hang himself—he wants to play around without too much risk. What would you recommend to him, if you were his financial planner? a) Open up an account on e-Trade. b) Buy into a mutual fund. c) Buy bonds. d) Buy into an ETF.
d
Michael wants to invest in a gourmet restaurant chain in his area. Michael needs some help with the market research and financial planning for the venture. Michael should contact his a) securities dealer. b) investment bank. c) institutional investor. d) securities broker.
d
One advantage of many mutual funds is that they a) offer a guaranteed rate of return. b) are bought and sold just like stocks. c) always offer a higher return than individual stocks. d) offer investors professional management and liquidity.
d
Private placements can only be offered to a) market specialists. b) venture capital firms. c) licensed brokers. d) accredited investors.
d
Six Sigma has a single unifying measure to reduce defects: a) to no more than 1 per 1,000,000 opportunities. b) to a level not to exceed 7 per 2,500 opportunities. c) to a minimum. d) to a level of no more than 3.4 per million opportunities
d
The Chief Financial Officer of Dorf Motors, Inc. recently mentioned in an interview that a dollar received today is worth more than a dollar received in the future because the sooner you receive a sum of money, the quicker you can put that money to work. The Chief Financial Officer was speaking about the a) present value of money. b) future value of money. c) net present value of money. d) time value of money.
d
The SEC has delegated the FASB with the task of establishing generally accepted accounting principles (GAAP). Which of the following statements is NOT true? a) The GAAP must be relevant, reliable, consistent, and comparable. b) Many observers view the GAAP as cumbersome, in need of an overhaul. c) The FASB consists of five FAF-appointed board members that serve a five-year term. d) Bucking the SEC, the FASB has made a strong push in recent years to overhaul the GAAP.
d
The Securities Exchange Act of 1934 requires all publicly traded firms with at least _____ and _____ in assets to file quarterly and annual financial reports with the SEC. a) 100 shareholders: $10 million b) 200 shareholders; $20 million c) 250 shareholders; $15 million d) 500 shareholders; $10 million
d
The ____ price indicates how much the market maker will pay per share to buy a stated quantity of the stock, while the ____ price indicates the price per share at which it will sell the same stock. a) ask; bid b) say on pay; spread c) spread; say on pay d) bid; ask
d
The _____ forecasts the types and amounts of assets a firm will need to implement its future plans as well as the amount of additional financing the firm must arrange in order to acquire those assets. a) pro forma balance sheet b) cash budget c) statement of cash flows d) budgeted balance sheet
d
The _____ was established by Congress to encourage American firms to focus on quality improvement in order to improve their global competitiveness. a) U.S. National Quality Improvement Program b) Forbes Quality Program Achievement c) Reagan-Carter TQM Award d) Baldrige National Quality Program
d
The assumed rate of interest that affects the future present value of a cash flow is known as the a) increase rate. b) risk-return tradeoff. c) risk. d) discount rate.
d
The purpose of _____ is to protect creditors by preventing borrowers from pursuing policies that might undermine its ability to repay the loan. a) factors b) debts c) discounts d) covenants
d
The purpose of just-in-time production is to: a) sell more goods over time. b) improve the quality of the products and services being produced. c) satisfy management's need to keep labor costs at a minimum. d) keep inventories at a minimum.
d
Veronica customizes frosted cupcakes in her shop for her customers while they wait. Veronica provides _____ utility by providing fast, friendly, and personalized service. a. time b. place c. ownership d. service
d
Which statement about Enterprise Resource Planning (ERP) is false? a) ERP software requires employees to learn new ways of integrating data. b) ERP systems can be customized to meet the specific needs of an organization, but doing so adds to the complexity and cost of its installation. c) ERP makes it easier for departments to share information. d) A key advantage of ERP systems is that compared to older systems, they are relatively inexpensive to implement and easy to establish.
d
You recently inherited $1,000 from your deceased great uncle. After considering several investments, you settled on purchasing stock in Bat-n-Ball Sporting Goods, Inc. One reason why you decided to invest in this company is the yield of 5.5%. This yield represents the a) rate of return an investor can expect to receive if the stock is held to maturity. b) interest rate the investor is guaranteed to receive each quarter c) growth rate of the company's earnings per share or EPS. d) dividend rate the company has paid over the past 12 months.
d
_____ compares information contained in a firm's financial statements over a period of two or more years. a) Profitability analysis b) Ratio analysis c) Vertical analysis d) Horizontal analysis
d
_____ offer goods to business customers. These business customers are too small to merit a sales call from the distributor's representative. a. "Five and dime" wholesalers b. Merchant wholesalers c. Truck jobbers d. Cash and carry wholesalers
d
_____ production emphasizes production of goods to meet actual current demand, therefore minimizing the need to hold inventories of finished goods and work-in-process. a) ERP b) MRP c) PERT d) Just-in-time (JIT)
d