Chapter 15
Which correctly describes the process of auditing?
"Auditing" is the process of reviewing accounting records for accuracy
You are holder of a $25,000 bond with a interest rate of 4% paid semiannually. How much interest are you paid in each installment?
$500
If a company has liabilities of $3 million and assets of $ 10 million, what is owners' equity?
$7 million
The Green Zone is a small company that produces environmentally-friendly lighting products._____________
1 year
If owner's equity is 9 million and liabilities are 4 million, what are assets?
13 million
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If a company has current assets of 12 million and current liabilities of 4 million, what is current ratio?
3
Devon works in the finance department of a small manufacturing firm and is currently working on a budgeting plan that includes expanding the current factory and replacing the current outdated manufacturing equipment with sophisticated robotic technology. What type of budget is Devon working on?
A capital budget
Gracie is working on a financial tool for her company that includes all the operating costs for her organization. It also includes sales, purchases, inventory, marketing, manufacturing and operating expenses. What is Gracie preparing?
A master budget
Which of the following is the BEST description of a capital budget?
A process that outlines the anticipated financial needs for purchases such as real estate, manufacturing equipment, plant expansions or technology.
Derek works in the finance department of a small manufacturing firm and is currently working on a budgeting plan of the installation of an ERP system.__________________. What kind of budget is Derek working on?
A project budget
Which of the following shows the exchange of money between a company, its creditors and its customers over a period of time?
A statement of cash flows
Which of the following is the BEST description of a sinking fund?
A type of savings fund into which companies deposit money regularly to ensure that there is sufficient money to pay back bondholders at the end of the loan period.
Using the fundamental accounting equation, which of the following would be classified as an asset?
Accounts receiable
Dara's company has large capital needs and is looking into different financing options.____________. Which of the following does this best describe?
An initial public offering
Bob and Linda are commercial property managers.________________________. What type of budget are bob and Linda working on?
An operating budget
Which of the following is the fundamental accounting equation?
Assets = liabilities + Owners' Equity
Matt is an accounting. He works alongside employees in the accounting department,________________
Auditing
Which of the following financial statement can be thought of as a "snapshot" of a company's financial position at a certain point in time?
Balance sheet
All of the following are disadvantages of debt financing EXCEPT:
Bondholders has no voice or control in how a business is managed.
Graham Manufacturing has had a long-standing relationship with it's bank.____________________. What type of short-term financing does the company use?
Business line of credit
Big bob's Fishing Charters has fallen on hard times during that most recent recession._________________. Which of the following is the most likely source of Bob's loan?
Commercial finance company
Which of the following short-term financing options is unsecured and must be repaid in 270 days or less?
Commercial paper
Based on its working capital, which of the following companies is the most financially efficient?
Company C: current assets of 7.25 million: current liabilities of 4 million
Which of the following companies has the highest earning per share(EPS)?
Company D: net income = $550,000 ; outstanding shares = 100,000
Which of the following equations represents working capital?
Current assets - current liabilities
Which of the following refers to along-term financing option in which a company borrows money that it is legally obligated to repay with interest by a specified time?
Debt financing
Which of the following is a benefit of debt financing?
Debt financing creates leverage, which can improve a company's financial position.
Jen is trying to explain to Patricia the different between debt and equity financing. Which of the following statements is TRUE?
Equity financing occurs when funds are generated by the owners of a company.
It can be risky to take on to much debt, so lenders consider how much debt a company has relative to the amount of equity,___________________________
Equity of $1,125,000; debt of $375,000
Sales are down at Dan's company, and they are dealing with a cash flow gap.________________________. What type of financing arrangement is Dan's company using?
Factoring
Which of the following term refers to the process of selling accounts receivable for cash instead of using them as collateral for a loan?
Factoring
______: is an area of accounting that produces financial documents to aid investors and creditors.
Financial accounting
Which of the following is an example of a circumstance under which a company choose to use equity financing?
Financing long-term general funding and expansion
Which of the following is the BEST description of a demand deposit?
Funds a customer has at a bank or other financial institution that can be withdrawn at any time without prior notice.
Don has recently earned the designation of Certified Management Accountant (CMA). Which of the following is the best description of what he does?
He provides financial information to managers and other corporate decisions makers "inside" a corporation and helps formulate policy and strategic plans.
Janet and Mark are partners in a small company that is considering using equity financing.______________
Issuing stock results in a dilution of ownership
Which of the following is the BEST description of managerial accounting?
It provides information and analysis to managers within an organization so they can make informed business decisions.
Jodie receives a top-of-line SLR camera as a gift and is soon getting lots of compliments on her photos.____________
Jodie's assets equal her owners' equity
Jodie started a photography business with her existing laptop computer and a top-of-the-line SLR camera that she purchase for $700.______________
Jodie's owner's equity is greater then her liabilities.
Suppose you own a shoe store.______________________. Which of the following steps do you take to maximize your business's financial benefit from this transaction?
Keep the cash in the bank for 15 days, the re-pay the shoe manufacturer in full.
Which of the following refers to the amount of debts used to finance a firm's assets with intent that the rate of return on the assets is greater than the cost of the debt?
Leverage
Which of the following term refers to credit that a company can access at any time up to an amount agreed on between the bank and the company?
Line of credit
What is one reason companies need long-term financing?
Long-tern financing allows for long-term planning when a project will take more than one year to complete.
Kate is an accounting. Much of her work involves preparing short-term reports to help managers with day-to-day,_______________
Managerial accounting
The Small Business Administration (SBA) facilitates a program in which small business can obtain loans of up to $50,000._______________. What type of short-term financing is this?
Microloan
Petra has trouble getting funding for her small business through traditional sources.____________. What financing source is Petra taking advantage of?
Peer-to-peer lending
Which of the following is the BEST description of financial accounting?
Prospective and current investors and creditors rely on the information provided to help them evaluate the company's performance and profittability
Suppose you are part-owner in a company that is planning a long-term._____________________.What is the one statement you can make to demonstrate that stocks offer a financial safety benefit to your company?
Stockholders do not have to be repaid if the company go bankrupt
Which of the following is the BEST description of trade credit?
The ability to purchase inventory or supplies on credit without interest.
Deidre is telling her friend about the financing she was able to secure for her small business._____________. Which of the following statement is TRUE?
The loan is repaid through Prosper.com with automatic debits from Deidre's bank account.
Which of the following is the BEST example of leverage?
The rate of return on a business expansion is expected to exceed 10%, so the company issues bonds at 7% to fund this expansion.
Coldwing Inc. is investigating the need for long-term financing. Which of the following statement regarding long-term financing is TRUE?
To fund large capital-intensive projects or general expansion, business owners can use securities.
Martha's company has a long-standing relationship with the company that prints its catalogs, flyer, etc.________________. What short-term financing is Martha's company using?
Trade credit
Which of the following is the most likely example of an expenditure that would be financed by short-term funding?
Weekly payroll
You're trying to explain to your friend why companies issue bonds. Which of the following is the BEST analogy to help you accomplish this?
You take out a mortgage to buy a house
A type of saving fund into which companies deposit money regularly to ensure that funds are available to repay a bond upon its maturity date is known as:
a sinking fund
The company you work for has experienced several financial losses recently. Which of the following causes for these losses would an audit of the company's books be likely to turn up?
accounting errors that recorded incorrect amounts the company owes to bondholders
Which business need is covered by long-term financing?
adding renovations or additions to existing building
Suppose that you want to start a snow-shoveling business.____________
as assets and as owner's equity you put into the business
The fundamental accounting equation combines owners' equity and liabilities on one side of the equation and balance them against:___: on the other.
assets
The area of accounting that is responsible for reviewing and evaluating that accuracy of financial reports is known as:
auditing
Suppose you are a part-owner of a popular Internet social media company.__________________. Which of the following tools might she accept as a long-term financing solution
bonds
The:___: considers a company's long-range plans and outlines the expected financial needs for significant capital purchases.
capital budget
Bill needs $65,000 for his small business, but his bank won't give him a loan.________________. Which of the following is the most likely source of Bill's loan?
commercial finance company
A:___: uses information from the overall corporate strategic plan, the financial statement and the external financial environment to identify the amounts and types of capital needed to meet short-term and long-term goals.
financial plan
Double entry bookkeeping recognizes that:
for every transaction that affects an asset, an equal transaction must also affect either a liabilities or owners' equity
Equity financing occurs when:
funds are generated by the owners of the company rather than being borrowed from an outline lender.
Alma is involves in an examination of the financial reports issued by a company in order to determine,_______________
independent auditor
At the end of a grocery store's first year in business, the owner realizes that the business has a regular cash flow problem. Which of the following financial management skills should the owner use to find and solve the problem?
monitoring cash flow
At the end of a grocery store's first year in business, the owner realizes that the business has regular cash flow problem. Which of the following financial management skills should the owner use to find and solve the problem?
monitoring cash flow
A financial manager would likely be responsible for performing all of the following functions for an organization EXCEPT:
monitoring manpower of the company to ensure that obligations are met in a timely and efficient manner
A Statement of cash flows organizes and reports cash generated in there business components:
operating activities, investing activities, financing activities
The overhead costs incurred with running a business, such as rent, salaries, wages, utilities, depreciation and insurance are considered:
operating expenses
Which of the following tasks does NOT fall under the responsibility of a financial manager?
performing "damage control" when a problem hurts the company's public image.
A first-time investor is excited at the chance to buy stock in one of her favorite companies. ________________. Which of the following is a method that could help her?
ratio analysis
Which document is a financial statement that shows the exchange of money between a company and everyone else it deals with over period of time?
statement of cash flows
The first number in trade credit term signifies:
the discount if the borrower pays within the discounted period
All of the factors influence a company's financing decisions in terms of debt versus equity EXCEPT:
the profile of the existing shareholders
The process of bookkeeping centers on the fundamental concept that:
what a company owns (assets) must equal what it owes to creditors (liabilities) plus what it owners (owners' equity)
