Principles of Finance
Which of the following sources provides its clients with detailed research reports about securities and offers them high levels of personal service:
Full-service brokerage firm
Which of the following is often considered one of the safest types of investments:
Government Bonds
What factor might a financial advisor consider when helping clients select investments?
Liquidity
Which of the following web sites is most likely to contain accurate, trustworthy securities information:
Market Watch
Who signs the Report of Management on the Financial Statements?
The CEO and the CFO
In response to increased terrorism, what legislative act provides the U.S. government with the authority to monitor many types of electronic communications, including financial activities?
The USA PATRIOT Act
Which of the following is a fundamental clue that it may be time to sell the stock you hold in a particular company:
The company is involved in questionable accounting practices.
Which of the following is a true statement about industries and sectors:
The economy is divided into sectors.
Which investments, in particular, should an investor sell?
Those with the least potential for the future
Why is it important for a business to budget a certain amount of money to savings?
To avoid financial crisis
What is one of the main purposes of a business's sales budget?
To estimate income
Which of the following is a way that businesses can use financial information:
To identify trends
Which of the following is a reason why businesses usually maintain records of their operating expenses:
To plan for the future
The stock table column that tells you how many shares were traded that day is labeled
VOL.
The price of raw materials used in manufacturing a product was double what had been projected for the year. Which of the following could the business determine by analyzing its financial information:
Variances
Before you invest for the long-term, determine which of the following:
What you want to accomplish
Business managers use accounting information to help them to
allocate their funds
After a business designates categories of expenses in its budget, it
allocates a dollar amount.
One reason businesses conduct a cost/benefit analysis is to evaluate
alternatives
The cash conversion cycle should be
as short as possible.
A business owner applying for a bank loan would probably ask the accounting department to provide records that show the value of the company's total
assets
The two major sections on a balance sheet are
assets and liabilities
Before you invest, you should
conduct thorough research
The overall purpose of accounting is to
control the finances of the business
Return on equity (ROE) measures management's ability to make a profit
from the money that shareholders have invested.
A class of financial ratios that measures the ability of a company to turn assets into cash and to pay its bills is called
liquidity ratios
If you are investing for a goal that you hope to reach within three years, you are investing for a
short-term time horizon.
Businesses use budgets to estimate how they will
spend their money
To get a general idea of the direction of the stock market today, check a
stock market index
The P/E ratio measures
stock price compared to earnings per share
Teresa is a new employee who received training in handling sales and returns for the business. Her supervisor referred to both types of activities as
transactions
When Alana prepares a report so that all of the financial data is clearly disclosed, she is ensuring that the information is
transparent
Ratios are calculated by
dividing one number by another.
A business's liabilities total $87,420. Its assets amount to $105,390. What is the value of the owner's equity?
$17,970
How much money do you need to deposit into a savings account today to have $500 in two years? The interest rate for the savings account is three percent.
$471.30
A pottery and ceramics instructor recently purchased six pottery wheels for her classroom/studio for $492 each. The teacher plans to use the pottery wheels for the next five years. At the end of those five years, she plans to sell the pottery wheels for $85 each. Using the straight-line depreciation method, what is the total depreciation charge that the instructor should take annually?
$488.40
According to a company's most recent statement of cash flows, its cash flow from operations for the most recent year was $1,375,400. The net cash used by investing was an outlay of $690,000. The net cash spent on financing was $140,300. What was the company's free cash flow?
$545,100
A business's revenue is $77,300, its expenses are $54,644, its liabilities equal $37,910, and its owner's equity is $5,759. Use the expanded accounting equation to determine the business's assets
$66,325
The P/E ratio measures
+
Interpret the following stock table to determine the most that was paid for March7912 stock in the past year? 52-Week HI-- 44.00 52-Week LO-- 34.28 STOCK (SYM) MAR7 DIV--1.5 YLD %--6.8 VOL (100s)--781 CLOSE--40.05 NET CHG--1.7
44.00
A pottery and ceramics instructor recently purchased six pottery wheels for her classroom/studio for $492 each. The teacher plans to use the pottery wheels for the next five years. At the end of those five years, she plans to sell the pottery wheels for $85 each. Using the straight-line depreciation method, what is the total depreciation charge that the instructor should take annually?
488.40
According to a company's most recent income statement, its sales last quarter totaled $489,300, and its cost of goods sold was $241,000. What was the company's gross profit margin for the quarter?
51%
An investor using a securities table can learn about a stock's volatility by checking the stock's
52-Week HI/LO.
A business uses inventory turnover rates to determine if monthly inventory is too large or too small. What is the turnover rate if the average merchandise inventory is $55,000 and the cost of goods sold is $374,000?
6.8%
A business's revenue is $77,300, its expenses are $54,644, its liabilities equal $37,910, and its owner's equity is $5,759. Use the expanded accounting equation to determine the business's assets
66,325
A business uses inventory turnover rates to determine if monthly inventory is too large or too small. What is the turnover rate if the average merchandise inventory is $55,000 and the cost of goods sold is $374,000?
8.6%
Which of the following probably is the most important piece of information that a cash flow statement provides:
Amount of money expected
Which of the following are the categories that businesses use to summarize information on their balance sheets?
Assets, liabilities and equity
In what way can the general state of the economy affect a stock's price?
By increasing supply or demand
Which of the following is a primary responsibility of a company's financial function:
Cash management
Which of the following offers municipal bonds:
Cities
What type of money is recorded in the cash receipts column of a cash flow statement?
Collected
If you are nearing retirement, which investing approach will you use?
Conservative
Which of the following represents an operating expense for a business:
Cost of utilities
Since Penelope is having difficulty paying the bills for her start-up business, she wants to calculate her current ratio. Which information will she need to do this successfully?
Current assets and current liabilities
Which of the following is an example of current liabilities that a business should include in its balance sheet?
Employees weekly salary
For assessing a security's fundamentals, which of the following is a true statement:
Even investment experts disagree about the most important ratios to consider in fundamental analysis.
A company is trying to determine if it should expand and is conducting a cost/benefit analysis. Which of the following factors are possible costs that the business should consider:
Payroll, insurance, and training
Which of the following electronic internal accounting controls could be used to ensure that items are sold to customers only at prices that management has authorized:
Prerecorded data input
Which of the following elements are needed to determine the future value of money that is placed in a savings account for one year:
Principal amount and interest rate
Which of the following is an example of variable operating expenses:
Sales commisons
Which of the following would be the most effective method to segregate the duties of employees who handle financial transactions:
Sheryl and Will both sign each check, Georgie records the payments in the books, and Karin reconciles the bank statements.
The Sarbanes-Oxley Act of 2002 is legislation that was passed in response to recent
accounting scandals.
Financial managers who are legally responsible for their clients' investments must demonstrate fiduciary responsibility, which involves
acting in the best interests of their clients
Mutual funds that contain both stocks and bonds are known as
balance funds
When Janine wants to know what others are willing to pay for a bond she owns, she looks at the
bid price
Robyn bought $100 worth of stock in a company, and now it's worth $150. This is an illustration of
capital appreciation
When you are told to "consider the cost" before selling an investment, you are being advised to
estimate the effect of commissions and taxes on your purchase.
Certificates of deposit and collectibles are types of
investments
In order for a business to generate a profit, its operating costs must be __________ the gross margin.
less than
Sales growth indicates a company's
level of quality.
Melinda wants to invest in a bond, but her main concern is how soon she'll be able to access the money she's invested. Melinda needs to look at the
liquidity
Pre-tax profit margin is a good measure of management's performance because
managers have control of all of the expenses up to the point of taxes.
A stock exchange functions in a way that is most similar to a(n)
marketplace
The bottom line on a business's income statement indicates
net income
The finance function would definitely be involved in a decision regarding
new business projects and strategies
As opposed to accounting the role of finance in business often involves
obtaining funds.
Because Mia wants to be in charge of her investment portfolio and does not want to pay high commissions to a representative, she should consider obtaining securities information from a(n)
online brokerage firm
It's a good idea for an investor to watch the numbers on a stock table
over a period of time
An important purpose of full-disclosure laws and regulations is to
provide information to investors so they can make informed decisions.
When assessing a stock using fundamental analysis, an investor should consider
qualitative and quantitative factors
When selecting an investment, a chart is most helpful in comparing
quantitative factors.
Of the following investments, which can bring roller-coaster ups and downs
stocks
Which of the following is an example of an ownership investments
stocks
When investors trade securities that have already been issued by a corporation, they are trading on
the secondary market
To be useful to businesses, financial information should be
timely and understandable
A fund that invests in stocks that tend to be undervalued or overlooked is called a
value fund.
Stocks whose prices rise higher than, or fall lower than, the market as a whole are referred to as
volatile
