Finance Final
Which of the following is an example of business-related financial information: a. Accounts receivable record b. School-loan document c. Pay stub d. Sales receipt from purchasing a new mattress
Accounts receivable record
What type of accounting method would most likely be used by a large business that has a large number of outstanding loans and customer charge accounts? a. Check method b. Cash method c. COD method d. Accrual method
Accrual method
Useful financial information is understandable to a. anyone who needs to use it. b. accountants and managers. c. anyone with a background in finance. d. everyone.
Anyone who needs to use it
Which of the following is a type of financial statement that accountants prepare for a business: a. Sales invoice b. Balance sheet c. Credit card statement d. Bank-deposit slip
Balance sheet
Which of the following activities is part of accounting: a. Creating financial information b. Developing marketing campaigns based on financial information c. Gathering financial information d. Making decisions based on financial information
Gathering financial information
Which of the following groups of people would be most interested in using financial information for trend identification: a. Auditors b. Customers c. Investors d. Employees
Investors
Which of the following is a requirement for a good accounting system: a. It should be updated annually. b. It should provide needed information quickly. c. It should eliminate the need for an accountant. d. It should be replaced every two or three years.
It should provide needed information quickly.
Which of the following is an example of personal financial information? a. sales invoice b. expense report c. accounts payable record d. pay stub
Pay stub
Two employees used a business's computerized accounting system to change some records. They were able to steal $50,000 from the business because the accounting system lacked which of the following: a. Protection from theft and fraud b. An affordable price c. A manual system as backup d. Printed financial statements
Protection from theft and fraud
Why are accurate accounting records important to a business? a. They prevent any financial losses. b. They show how the business is doing. c. They increase the return on investments. d. They give the business an image of success.
They show how the business is doing.
Which of the following is a reason that managers might look at financial information from another company: a. To determine how to increase sales b. To monitor their company's ongoing business operations c. To manage their company's debt d. To see how their company compares to the competition
To see how their company compares to the competition
A business determines how much it costs to make a product—and then adds a predetermined markup to set its selling price. This is an example of a. cost-based pricing .b. price-based costing. c. economies of scale. d. gross profit.
a
Accounting is distinct from finance because its main focus is on a. recordkeeping activities. b. money management decisions. c. administration of assets. d. acquisition of funds.
a
An order to buy or sell a stock immediately at the best available price is called a __________ order. a. market b. limit c. stop d. trade
a
Assets a company already owns and can use to finance a new venture are called a. equity. b. dividends. c. return on capital. d. accounts payable.
a
Because stocks in pharmaceutical companies hold their value regardless of the state of the economy, they are known as __________ stocks. a. defensive b. cyclical c. speculative d. penny
a
Businesses should deposit cash and checks a. in a timely fashion. b. at a number of different banks. c. when the business is about to be audited. d. when they discover discrepancies in their accounts.
a
Considered together, salaries and sales commissions are a a. semi-fixed expense b. capital expenditure .c. direct production cost. d. type of payroll tax.
a
Dividing investment funds among broad categories of assets like stocks, bonds, and mutual funds is called a. asset allocation. b. investment averaging. c. implementation. d. selection strategy.
a
From the cash flow statement, an investor can determine a. where the firm's money went. b. how much the firm will earn in the future. c. when the firm's liabilities are due. d. why particular accounts receivable are late.
a
How does a bull market affect a stock's price? a. By encouraging product purchases .b. By discouraging product purchases c. By promoting well-performing funds d. By avoiding investment scams
a
How does the finance function relate to company spending? a. It plans and controls spending. b. It produces reports about spending. c. It spends on investments only. d. It does not relate to spending.
a
Most businesses' approach to operating costs is to a. keep them as low as possible. b. spare no expense on quality. c. eliminate them completely. d. focus on variable expenses rather than fixed ones.
a
No single person should oversee the life span of a single financial transaction. This is an internal accounting control known as a. separation of duties. b. access control and authorization. c. documentation. d. physical audits.
a
Of the following ownership investments, which allows access to an "expert" manager: a. Stock mutual funds b. Collectibles c. Real estate d. Stocks
a
On the balance sheet, the property and equipment category includes a. buildings. b. equity. c. cash. d. goodwill.
a
Operating costs that fluctuate with changes in production are called __________ expenses. a. variable b. fixed c. capital d. total
a
Pre-tax profit margin is a good measure of management's performance because a. managers have control of all of the expenses up to the point of taxes. b. pre-tax profit margin is calculated by dividing pre-tax profit by sales. c. the percentage can be interpreted as the amount of each sales dollar left before taxes are paid. d. a growth company's sales and EPS grow at a rate greater than that of the market.
a
Publicly-traded companies are required by law to provide a. financial statements. b. stock research. c. company report cards. d. yearly newsletters.
a
Question 4 The purpose of the risk pyramid is to show a comparison of a. one investment to another. b. stocks to stock mutual funds. c. corporate bonds to municipal bonds. d. one stock to another.
a
Sales figures are most helpful to investors when they are used to measure a. long-term sales growth. b. consumer response to promotions. c. one-year increases and decreases. d. a company's share of the market.
a
Sammy received one share of stock in Nike, Inc. as a gift. He wondered how much of the company's profit went to his single share, so he divided net income by the number of outstanding shares of common stock. This common ratio is called a. earnings per share. b. gross profit margin. c. return on equity. d. price-earnings.
a
The Cutting Edge Company is very popular with investors, who keep buying shares even though stock price is increasing. In this case, the company's __________ value is increasing. a. market b. accounting c. intrinsic d. underlying
a
The accounting function includes __________ financial information. a. processing b. creating c. concealing d. rationalizing
a
The finance function is usually responsible for which of the following processes: a. Budgeting .b. Manufacturing c. Operations d. Research
a
The ownership investment with the greatest risk of personal loss is a. entrepreneurship. b. a mutual fund. c. savings account. d. a bond.
a
The price of a mutual fund's shares is determined by a. net asset value. b. investment portfolio value. c. liabilities. d. outstanding shares.
a
What does the "Management Discussion and Analysis" section of the annual report do? a. Reviews the company's results of operations b. Explains what the company sells c. Provides a 10-year summary of financial figures d. Includes the Letter to Shareholders
a
What happens when institutional investors purchase a number of stocks from the same company? a. Individuals purchase stocks from the company. b. Analysts recommend that investors sell their stocks from the company. c. The company introduces a new business model. d. The company introduces a new product.
a
What might a company's higher-than-usual sales volume for a day indicate? a. Investors have reacted to news about the company. b. Investors have received their dividends. c. Investors believe the yield percentage has changed. d. Investors have recalculated the PE.
a
When return on capital is positive, the company is a. growing in value. b. losing value. c. low on cash. d. paying out dividends.
a
When total sales equal total expenses, the business a. has reached its breakeven point. .b. must cut its operating costs. c. increase its price markups. d. has successfully created economies of scale.
a
When you are told to "consider the cost" before selling an investment, you are being advised to a. estimate the effect of commissions and taxes on your purchase b. review the costs you've incurred thus far. c. calculate the costs of prior transactions. d. negotiate for a better deal.
a
Which of the following best describes a marketable bond: a. One that is bought and sold in the open market b. One that becomes a stock at a later time c. One that is issued by a governing body d. One that is paid back before maturity
a
Which of the following can you not learn about a company by reading a stock table: a. What breaking news affected the company that day b. If the stock price is up or down c. What the stock's yearly price range is d. What the day's volume was
a
Which of the following does diversification by cap-size help investors to do: a. Spread out the growth rates of their investments b. Update their investment portfolios c. Protect their investments from a negative event d. Avoid buying too many investments in one category
a
Which of the following is a disadvantage of investing in a savings account: a. The rate of return doesn't keep up with inflation. b. A minimum balance is required to keep the account active. c. You must pay a penalty for withdrawing your money early. d. There is a high potential for loss.
a
Which of the following is an advantage of investing in bonds: a. They are very low risk. b. You can access your money any time. c. They are insured by the FDIC. d. They offer extremely high rates of return.
a
Which of the following is another name for operating costs: a. Overhead b. Capital expenditures c. Fixed expenses d. Variable expenses
a
Which of the following is not an example of an external stock information resource: a. A company's annual report b. The ValueLine Investment Survey c. Brokerage firm research d. A financial web site portal
a
Which of the following is not an important variable of a bond fund: a. The amount of time you spend researching the bonds in the fund b. The rate at which your money grows c. The average maturity of the bonds in the fund d. The credibility ratings of the bonds in the fund
a
Which of the following is the best place to buy shares in a mutual fund: a. Fidelity Investments b. Main Street Local Bank c. Good Hands Insurance d. Mike Jones, Financial Planner
a
Which of the following most accurately describes the relationship between risk and return: a. For the potential of a high return, you usually accept a high risk. b. For the potential of a low return, you usually accept a high risk. c. For the potential of a high return, you usually accept a low risk. d. For the potential of a low return, you usually accept no risk.
a
Which of the following represents one way assessing a mutual fund is different from assessing a stock: a. Combined value is important, not individual value. b. Minimum investment requirements are low. c. The market reflects the company's growth potential. d. Investors' goals are important, not their abilities.
a
Without the notes, the financial statements are considered a. incomplete. b. inaccurate. c. unusable. d. unenlightening.
a
GAAP is a system that provides accountants with a. the newest technology. b. acceptable procedures. c. networking opportunities. d. professional development.
acceptable procedures
A creditor is most likely to examine a business's financial accounting records if the business is a. applying for a bank loan. b. selecting a new market. c. using cash accounting. d. complying with regulations.
applying for a bank loan
A bank denies a business owner's application for credit saying, "We feel that you would be unable to make the monthly payments because of your other debts." What financial report did the bank review? a. Budget b. Balance sheet c. Income statement d. Operating budget
b
A business has increased its production as a way to "spread out" its fixed operating costs. The business has created a(n) a. capital expenditure. b. economy of scale. .c. gross profit. d. breakeven point.
b
A company's current balance of assets and liabilities falls under the focus of a. return on capital. b. working capital management. c. capital investment decisions. d. the cash conversion cycle.
b
A general rule about investment risk says that the greater risk you are willing to take, the greater your potential gains and your potential a. taxes. b. losses. c. time horizon. d. need for liquidity.
b
An employee's motivation to commit fraud a. can be eliminated by the business. b. may be financial or non-financial. .c. can make the fraud justifiable. d. is always personal.
b
Decisions about financing refer to the a. accounts receivable .b. acquisition of funds. c. administration of assets. d. accounting department.
b
Form 10-K is most like a. Form 10-Q. b. the annual report. c. the bottom line. d. the cash flow statement.
b
How should you begin researching an investment you might select? a. Compare the company's strengths and weaknesses. b. Read the company's profile and annual report. c. Purchase a product the company produces. d. Visit the company's headquarters.
b
In investing, buy and sell orders that are placed online a. take place immediately. b. must go through a broker. c. are directly tied to the securities markets .d. are not subject to fees.
b
In investing, legal lending or owning agreements between individuals, businesses, or governments are known as a. bonds. b. securities. c. contracts. d. guarantees.
b
Investing in growth stocks is a strategy that builds wealth through a. a regular fixed income. b. capital appreciation. c. paid dividends. d. buying low and selling high.
b
Jamie owned 300 shares of stock in a certain company, worth $10 per share. Then, the company announced that his 300 shares would become 600 shares, worth $5 per share. This is an illustration of a. a stock exchange. b. a stock split. c. capital appreciation. d. dividends.
b
Maggie wants to buy stock in Pepsico, but only when the price drops to a certain amount. She is interested in placing a __________ order. a. market b. limit c. stop d. trade
b
Non-profit organizations often pool and invest donated money in a. certificates of deposit. b. endowment funds. c. savings accounts. d. money market accounts.
b
Of the following ownership investments, which involves owning items that gain or lose value over time: a. Stock mutual funds b. Collectibles c. Real estate d. Stocks
b
On a stock table, net change shows you the difference between a. last year's average price and this year's average price. b. the day's closing price and the previous day's price. c. the highest and lowest prices for the day. d. the highest and lowest prices for the year.
b
Ownership investments are ideal for investors who are a. just beginning to invest. b. risk-tolerant. c. risk-averse. d. close to retirement.
b
Regarding stock investments, which of the following primarily drives investors' actions: a. Performance b. Expectations c. Recommendations d. Information
b
The numbers listed in a stock table's 52-week high and low column tell you a. if the stock price is overvalued. b. the range of prices for the year. c. the best prices for the stock. d. the range of where the stock price should be.
b
The sum of the operating and direct expenses required to make a product is its a. price markup. b. total cost. c. gross cost. d. breakeven point.
b
To keep communication flowing with other departments, the finance function depends on a. accounts receivable. b. information systems. c. marketing. d. production.
b
To make the balance sheet "balance," assets must equal a. liabilities. b. liabilities plus equity. c. equity plus income. d. income.
b
What does the term "unqualified opinion" mean? a. The auditor concludes that the company's financial statements were not presented fairly. b. The auditor concludes that the company's financial statements were presented fairly. c. The auditor concludes that the financial statements were not prepared in accordance with GAAP. d. The auditor is not expressing an opinion about the financial statements.
b
What type of order restriction lets a broker know the order will be canceled if not filled immediately? a. All or none b. Fill or kill c. Day order d. Good 'til canceled
b
When Paula examines the income statement, she sees the company's a. branding. b. profitability. c. assets. d. equity.
b
When assessing a mutual fund, which of the following factors is the least important: a. The fund manager's track record b. How the fund has performed in the last week c. The fund's stated objective d. Any built-in costs to the fund
b
Which financial activity is the most susceptible to fraud and errors? a. Payments b. Cash c. Checks d. Deposits
b
Which of the following best describes the relationship between bonds and the stock market: a. Straight b. Inverse c. Liquid d. Beneficial
b
Which of the following controls is designed to keep physical assets safe: a. Standardizing financial forms b. Using lockable, fireproof storage c. Using password-protected software systems d. Documenting all financial information
b
Which of the following financial reports provides estimates of when, where, and how much money will come into and out of a business next year: a. Balance sheet b. Cash flow statement c. Income statement d. Bank statement
b
Which of the following internal accounting controls is designed to help a business back up a claim if needed: a. Approval authority b. Documentation c. Trial balances d. Reconciliations
b
Which of the following is a true statement regarding operating costs: a. They are fixed expenses. b. They are not directly related to production. c. They occur once or twice a year. d. Only some businesses have them.
b
Which of the following is an advantage of a money market account over a savings account: a. Money market accounts provide corporate ownership rights. b. You can often write checks from a money market account. c. The rate of return is significantly better. d. Money market accounts are insured by the FDIC.
b
Which of the following is an appropriate investment objective for a mutual fund with a buy-and-hold approach: a. Selecting stocks with superior growth potential b. Seeking long-term capital appreciation c. Investing primarily in a diversified portfolio d. Covering a broad range of industries
b
Which of the following is an ideal investment if you have a need for liquidity: a. 401(k) b. Money market account c. Bond d. CD
b
Which of the following is not a primary function of an annual report: a. Present an overview of the company's year b. Provide competitive analysis of products and services c. Comply with SEC regulations d. Report the company's financial performance
b
Which of the following is not a standard financial statement: a. Balance sheet b. Shareholder sheet c. Income statement d. Cash flow statement
b
Which of the following is not likely to cause a stock's price to fluctuate: a. A well-known analyst's recommendation to buy b. Addition to individual investor's portfolio c. A fund manager's sale of stock d. Removal from the S&P 500
b
Managers use financial information to create and adjust a. accounting standards. b. mission statements. c. budgets. d. trends.
budgets
"Spiders" and "cubes" are types of a. bond funds. b. hybrid funds. c. exchange-traded funds. d. international funds.
c
A class of financial ratios that compares what it owns to what it owes is called a. asset management ratios. b. liquidity ratios. c. debt ratios. d. profitability.
c
Accounting is distinct from finance because its main focus is on a. accounting. b. spending. c. investments. d. financing.
c
An employer-sponsored, tax-deferred retirement plan is known as a(n) a. DRIP .b. DSP. c. 401(k). d. IRA.
c
An internal accounting control that is designed to catch mistakes or fraud after they've occurred is known as a(n) __________ control. a. authoritative b. standard c. detective d. preventative
c
Businesses usually invest in a. stocks. b. real estate. c. themselves. d. bonds.
c
Each of the following is an example of corporate governance except: a. Adding non-executives to the board of directors b. Properly disclosing financial information c. Ignoring shareholders' rights d. Controlling executives' salaries
c
For fraud to take place, an employee must have a. unlimited access. b. no morals. c. rationalization. d. money.
c
Fundamental analysis estimates the value of a stock primarily so that investors can tell if it is a. a short-term or long-term investment. b. competitive or noncompetitive. c. undervalued or overvalued. d. run by effective managers.
c
Glenn has committed to investing $100 each month to buying shares of his favorite stock, Microsoft. Last month, when the stock price was $22, he bought 4.54 shares. This month the stock price is $25, so he bought just four shares. This strategy is called a. diversification. b. growth investing. c. dollar cost averaging. d. buy-and-hold.
c
Implementing internal accounting controls benefits a business by a. eliminating the possibility of fraud. b. guaranteeing that the business can hire capable employees .c. allowing managers to make sound financial decisions. d. increasing the business's profit margins.
c
Internal accounting controls can be described as __________ of financial information. a. proofs b. reconciliations c. safeguards d. audits
c
Kent wants to learn as much as possible about the mutual fund he's thinking of investing in. Which of the following is the best place he could go for detailed information: a. The newspaper b. A trade magazine c. The fund's prospectus d. The fund's web site
c
Money the business owes is known as a. equity. b. assets. c. accounts payable. d. accounts receivable.
c
On the cash flow statement, incoming cash is "counted" when it a. is promised. b. is consolidated. c. arrives. d. leaves.
c
On the income statement, which of the following represents the overall excess or shortage for the year: a. Income tax b. Earnings per share c. Net income d. Pre-tax profit
c
One significant purpose of the notes to the financial statements is to a. account for earnings. b. influence the earnings per share. c. disclose information. d. reveal levels of compensation.
c
Operating costs that are fixed until the business reaches a certain level of production and then become variable are known as __________ expenses. a. fluctuating b. unfixed c. semi-variable d. capital
c
Operating costs that do not increase or decrease with changes in production are called __________ expenses. a. mixed b. semi-variable c. fixed d. variable
c
Return on equity (ROE) measures management's ability to make a profit a. from the money generated by sales. b. by becoming more efficient in operations. c. from the money that shareholders have invested. d. by becoming shareholders of smaller firms.
c
Since John wants to know the bond's interest rate, he needs to look at the bond's a. issuer. b. maturity. c. coupon. d. par value.
c
The Coca-Cola Company's brand, which is valuable and known world-wide, is not reflected in book value because it is a. a hard asset. b. part of stockholders' equity. c. an intangible asset. d. property and equipment.
c
The finance function would definitely be involved in a decision regarding a. public relations and publicity. b. personal selling. c. new business projects and strategies. d. hiring.
c
The section of the SEC web site that houses companies' filings is called a. EDWIN. b. EDMUND. c. EDGAR. d. EDWARD.
c
What a bond brings you over a period of time at a particular price is called the bond's a. bid price. b. liquidity. c. yield. d. maturity.
c
What accounting record would summarize a business's profit or loss for a previous year? a. Bank statement b. Inventory record c. Income statement d. Balance sheet
c
What does an income statement show about a company over a period of time? a. Reliability b. Equity c. Profitability d. Liabilities
c
What is a common criticism of many annual reports' Letters to the Shareholders? a. They're too long. b. They're too short. c. They're vague and full of jargon. d. They contain too much financial information.
c
What is the difference between a stock's ask price and buy price? a. The ask price and buy price are usually equal. b. The ask price is usually higher than the buy price. c. The ask price is the sell price, while the buy price is the bid price. d. The buy price is the sell price, while the ask price is the bid price.
c
What type of order restriction lets a broker know the order will expire at the end of the trading day? a.. All or none b. Fill or kill c. Day order d. Good 'til canceled
c
When attempting to reduce costs, most businesses will first cut __________ costs. a. variable b. production c. operating d. fixed
c
Which of the following internal accounting controls can give a business an early warning that its finances are out of order: a. Separation of duties b. Access control and authorization c. Trial balances d. Approval authority
c
Which of the following is a capital investment decision: a. How to manage cash flow b. How to handle accounts payable c. How to finance investments d. How to manage inventory
c
Which of the following is a key component of managing working capital: a. Financing b. Capital budgeting c. Cash conversion cycle d. Capital structure
c
Which of the following is a true statement about financial ratios? a. Financial ratios have limited use for anyone besides financial managers and investors. b. A line-by-line analysis of a company's financial statements is the best way to understand the value of its stock. c. Investors can rely on reputable, independent sources for analysis of financial statements.This is the correct answer. d. Earnings are reported according to such a strict set of rules that it is easy to compare them from year to year and from company to company.
c
Which of the following is a true statement about industries and sectors: a. Industries are divided into sectors. b. Industries are divided into general categories. c. The economy is divided into sectors. d. The economy is divided into industries.
c
Which of the following is a true statement about stock information resources: a. There are very few stock information resources. b. Only wealthy investors have access to stock information. c. It has never been easier to find stock information. d. It is very difficult to find stock information.
c
Which of the following is a true statement about ticker symbols: a. They tell you what kind of stock it is. b. They are made up of the first three letters of a company's name. c. They uniquely identify a company.. d. They are only given to companies on the New York Stock Exchange.
c
Which of the following is a true statement regarding operating costs: a. Purchasing a piece of equipment is an operating cost. b. They are usually divided into selling expenses and manufacturing expenses. c. Some may be considered either fixed or variable. d. Businesses spend more on operating costs than production costs.
c
Which of the following is an example of a real estate investment: a. A certificate of deposit b. A corporate bond c. Land to be developed in the future d. Partial ownership of a corporation
c
Which of the following is an important business factor to consider when choosing an investment: a. Time horizon b. Minimization of taxes c. Company's comparison to competition d. Risk tolerance
c
Which of the following is an internal accounting control that a business might apply to handling checks: a. Protect with a password. b. Conduct an hourly inventory. c. Require two signatures. d. Avoid counting in public view.
c
Which of the following is not a good way to find companies in which to invest: a. Read reputable investment magazines and newspapers. b. Investigate the companies behind the products and services you enjoy. c. Follow suggestions in unsolicited e-mails and phone calls. d. Discuss investment opportunities with family and friends.
c
Which of the following is not true about Form 8-K: a. Companies are required to file it within 15 days of a significant event. b. The form describes changes in management, products, acquisitions, or legal actions. c. Companies are required to file it for the first three quarters of the fiscal year. d. The form is important because it alerts investors to events that might affect a company's fundamental value.
c
Which of the following makes comparisons of the financial conditions at multiple organizations possible: a. Bookkeeping b. Source documents c. Accounting standards d. Trial balance
c
Which of the following presents the first three steps in the accounting cycle in the correct order: a. Post, analyze, and journalize b. Analyze, post, and journalize c. Analyze, journalize, and post d. Post, journalize, and analyze
c
Which type of stock is considered a "bargain"? a. Income b. Domestic c. Value d. Growth
c
Who makes decisions about a company's dividend policies? a. Shareholders b. The president and CEO c. Board of directors. d. SEC
c
With a lending investment, investors do which of the following: a. Hire a financial advisor b. Maintain a minimum amount of money in the investment c. Allow borrowers to use their money for a price d. Avoid taking any risk
c
What type of accounting method would most likely be used by a small business owner who does not offer credit? a. Check method b. Accrual method c. COD method d. Cash method
cash method
For financial information to be reliable, it must also be a. understandable. b. relevant. c. complete. d. biased.
complete
For financial information to be comparable, it must also be a. current. b. consistent. c. private. d. digital.
consistent
A PE ratio of 20 means that a. the stock price is approximately $20 dollars more than it should be. b. investors earn $20 for every dollar they invest. c. the company has a profit margin of 20%. d. investors are willing to pay $20 for every dollar of earnings.
d
A Roth IRA differs from a regular IRA in that it is a. ideal for people with higher incomes. b. employer-sponsored. c. tax-deferred. d. non-tax-deferred.
d
A business has determined that customers are willing to pay $25 for its product. Managers attempt to make the product for $15, so the business can make a $10 profit. This is an example of a. gross profit. b. economies of scale. c. cost-based pricing. d. price-based costing.
d
A business's rent or mortgage is a __________ expense a. variable b. semi-variable c. semi-fixed d. fixed
d
A company that Marcus invested in has earned a profit, and now Marcus is receiving a cash payment. This is an illustration of a. a stock exchange. b. a stock split. c. capital appreciation. d. dividends.
d
A mutual fund that has no limit on the number of shares it can issue or the amount of money it can hold is called a(n) a. growth fund. b. stock fund. c. closed-end fund. d. open-end fund.
d
A price markup is the difference between how much it costs to make a product and a. how much employees make. b. what was estimated in the budget. c. the company's gross profit. d. its selling price.
d
A stock with a price of $1 or less is known as a __________ stock. a. defensive b. cyclical c. value d. penny
d
Accounting records for a business show that the week's total sales revenues were $125,000. Cash sales accounted for $50,000 and credit sales, $75,000. This is an example of a. classifying financial information. b. the cash accounting method. c. an income statement. d. the accrual method of accounting.
d
Darron is investigating a few corporate bonds for investment. He wants to know how likely it is that the corporations will pay back what they've borrowed. Darron needs to look at the a. liquidity. b. issuer. c. coupon rate. d. bond rating.
d
Determining which projects a business should invest in is known as a. return on capital. b. the cash conversion cycle. c. capital structuring. d. capital budgeting.
d
Each of the following describes outside board members except: a. They are not associated with the company. b. They are chosen for their business abilities. c. They have a variety of expertise, such as accounting or law. d. They are major stockholders.
d
For the sake of security, businesses should make their payments a. in person. b. daily. c. in cash. d. by check or credit card.
d
How much a stock sells for depends directly on which of the following: a. How volatile the stock is b. The popularity of the company's new product c. How high the company's earnings are d. What buyers are willing to pay for the stock
d
In 2004, Amazon.com had net earnings of $588,451, assets of $3,248,508 and 405,926 outstanding shares of common stock (numbers are in thousands). Based on these figures, what is the company's 2004 EPS? a. .18 b. 5.5 c. .69 d. 1.45
d
Internal accounting controls should help ensure a business's a. financial success. b. good reputation. c. protection from robbery. d. compliance.
d
Investors take a risk for the potential of receiving which of the following: a. Prize b. Recognition c. Bonus d. Return
d
Jack tells his broker he wants to purchase 50 shares of ABC stock. Jack is placing a __________ order. a. stop b. limit c. sell d. buy
d
Jill bought stock directly from Coca-Cola for a very low fee. She is participating in a. a securities exchange. b. the over-the-counter-market. c. direct trading. d. a direct stock purchase plan.
d
Money owed to the business is known as a. equity. b. assets. c. accounts payable. d. accounts receivable.
d
Operating costs are the opposite of a. utilities. b. variable expenses. c. fixed expenses. d. capital expenditures.
d
Physical audits are useful for a. conducting trial balances. b. reconciling bank accounts. c. approving financial transactions. d. checking against electronic records.
d
Ratios in financial analysis are not used to measure a company's a. profitability. b. efficiency. c. level of debt. d. brand management.
d
Return on equity (ROE) measures which of the following: a. How much equity shareholders have in the company b. How much investors are willing to pay for each dollar of earnings c. How far the company's sales growth will rise d. How well management turns equity into profit
d
Sales commissions are a __________ expense. a. one-time b. capital c. fixed d. variable
d
Teri decided to invest in a few different mutual funds rather than put all her investment dollars into one or two individual stocks. A stock in one of her mutual funds went bust, but since her money was spread out, Teri wasn't significantly affected. What advantage of mutual funds does Teri's situation illustrate? a. Liquidity b. Professional money management c. Convenience d. Diversification
d
The biggest risk to a real estate investment is a. not being FDIC-insured. b. inability to write checks. c. low rate of return. d. depreciation.
d
The finance function ensures that the company's financial goals are a. acceptable to the marketing department. b. related to product development. c. easy to accomplish. d. in line with organizational priorities.
d
The goals of the finance function are to ensure profitability and to a. advertise products. b. manufacture raw materials. c. give out information. d. reduce risks.
d
Too much diversification in a financial portfolio can a. cause other investors to avoid a particular stock. b. keep fund managers from doing their jobs. c. prevent a stock from growing in value. d. dilute the value of big gains on an individual stock.
d
What might a dividend payout tell you about a company? a. It's trying to rid itself of cash. b. It's reinvesting its profits back into the business. c. It's paying back a loan. d. It's a well-established company.
d
When Jack examines the balance sheet of a company, he sees a "picture" of the company's a. accounting method. b. income statement. c. pre-tax profit. d. financial situation.
d
When should an investor sell his/her investments? a. When the investments lose in the short term b. When the investor feels like making a change c. Frequently d. Not very often
d
Which element of fraud can businesses control? a. Prosecution b. Rationalization c. Motivation d. Opportunity
d
Which internal accounting control involves comparing internal financial records to external financial records? a. Approval authority b. Separation of duties c. Documentation d. Reconciliation
d
Which of the following is a company-specific influence on a stock's price: a. Investor action b. Government action c. Change in supply or demand d. Change in management
d
Which of the following is a disadvantage of owning stock: a. Potential for loss of time and effort b. Penalty for early withdrawal c. Low potential for return d. High degree of risk
d
Which of the following is a factor that determines how much investment risk a person can handle: a. Social status b. Banking institution c. Income d. Goals
d
Which of the following is a measure of how well a business generates cash flow: a. Accounts receivable b. Capital structure c. Accounts payable d. Return on capital
d
Which of the following is a true statement about certificates of deposit: a. The riskiest investment is a certificate of deposit. b. Certificates of deposit may depreciate in value. c. Certificates of deposit are issued by corporations or governments. d. You must pay a penalty for withdrawing your money early.
d
Which of the following is a true statement: a. Bookkeeping is the same as accounting. b. Bookkeeping does not use computers. c. Bookkeeping is limited to information on sales. d. Bookkeeping records business transactions.
d
Which of the following is not a benefit of investing in bonds: a. Performing well when the economy is poor b. Offering unmatched reliability c. Helping you meet long-term goals d. Bringing you high returns
d
Which of the following is not a loan to a governing body: a. Savings bond b. Treasury bond c. Municipal bond d. Corporate bond
d
Which of the following is not a way to invest regularly: a. Dollar cost averaging b. Dividend reinvesting c. Making a habit of investing d. Buying growth stocks
d
Which of the following is not an advantage of a buy-and-hold strategy: a. The ability to ignore price fluctuations b. Tax benefits c. Stocks need only passive management. d. Stocks must be carefully selected.
d
Which of the following is not an expense represented on the income statement: a. Interest b. Operations c. Cost of goods sold d. Revenues
d
Which of the following operating costs is most likely to be considered fixed by one business and variable by another business: a. Employee benefits b. Depreciation c. Travel expenses d. Pest control
d
With an ownership investment, investors do which of the following: a. Buy a home to live in b. Collect popular items c. Invest in multiple corporations d. Pay for the right to own something
d
Question 11 There may be more than one acceptable way to record and organize a piece of financial information, but it's important to a. keep all paper copies of receipts. b. create your own set of accounting standards. c. make sure competitors don't find out about it. d. do it the same way every time
do it the same way every time
A business's managers sign a legal agreement to provide services to another business. Before signing, they go over financial information to ensure the payment terms are acceptable. This is an example of using financial information to a. enter into contracts. b. increase sales. c. boost profitability. d. make purchases.
enter into contracts
Riley is an employee of the federal government who studies the financial reports of major businesses in a specific industry. The government's purpose in assigning this task to Riley is to a. determine creditworthiness. b. search for profitable investments. c. decide if funds are available for pay raises. d. identify trends in the industry.
identify trends in the industry
A manager looks at financial information to see if the company can afford to purchase a popular new item it wants to add to its shelves. This is an example of using financial information to a. manage debt. b. check up on the competition. c. increase sales. d. reduce expenses.
increase sales
A business's managers decide to use some surplus cash to pay off a loan early. This is an example of using financial information to a. manage debt. b. increase sales. c. make purchases. d. create budgets.
manage debt
Question 12 In business, the most important application of financial information is a. getting to know the target market. b. determining salaries. c. trend identification. d. managerial decision making.
managerial decision making
If an accountant wants to prepare reliable financial reports, s/he must be a. neutral. b. partial. c. certified. d. supervised.
neutral
A manager looks at financial information and sees that the company could save money by switching to a different Internet provider. This is an example of using financial information to a. reduce expenses. b. increase sales. c. create a budget. d. plan business expansion.
reduce expenses
Checks, receipts, invoices, and purchase orders are examples of a. financial statements. b. department ledgers. c. source documents. d. accounting standards.
source documents
For financial information to be relevant, it must also be a. certified by an auditor. b. digital. c. timely. d. perfect.
timely
A business's managers expected to reduce expenses by four percent last quarter. The financial information, however, shows that expenses were actually reduced by two percent. This is an example of a. profitability. b. variance. c. acquisition. d. a trend.
variance