bus 100 exam 2
Mrs. Jamieson, a retiree, likes to invest in preferred stocks and bonds as it involves very little risk. She knows that the value of many of these stocks will not increase drastically, but the small returns help supplement her pension. Mrs. Jamieson's approach is an example of the market timing strategy.
false
The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements.
false
Depository Institutions
financial intermediaries that obtain funds by accepting checking and savings deposits from individuals, businesses, and other institutions and then lending those funds to borrowers
Leverage ratios measure the extent to which a firm uses _____.
financial leverage
Balnace Sheet
financial statement that reports the financial position of a firm by identifying and reporting the value of the firms assets, liabilities, and owners equity
Bonds
formal debt instrument issued by corporation or gov entity
business models
franchise(franchisor/franchisee), multi-level marketing, pyramid scheme, Ponzi scheme
franchisor/franchisee
franchisor: business entity in franchise relationship that allows others others to operate its business using resources it supplies in exchange for money franchisee: party in the relationship that pays for the right to use its resources supplied by the franchisor
An advantage of factoring is that:
get money back almost immediately if using firms
For a corporation, direct investment from owners occurs when:
it sells newly issued stock
Starting a business from scratch
key pros: its all you with everything key cons: its all you including pressure, takes time money and effort and harder to get credits
Fred, a financial accountant at a multinational company, is asked by his supervisor to find out the exact income the company earns from the sale of its products over the next five weeks. To do this, for the next five weeks, Fred matches the revenue earned from the sale of the company's products and matches the expenses incurred by the company to the revenue they help produce. In this scenario, which of the following has Fred used to get the required information?
Accrual-basis accounting
pyramid scheme
An illegal form of multi-level marketing in which emphasis is placed on collecting initial fees from as many people as possible
Balance Sheet
Assets = Liabilities + Stockholders' Equity assets= resources owned by company liabilities= resources owed to creditors stock equity= resources owed to stockholders
Balance of trade vs balance of payments
BT: basic measure of nations exports and imports BP: is a measure of the total flow of money in oy=r out of country
Partenership
Business owned by two or more people. More liable to personal loss
merger
Combination of two or more companies into a single firm
EU
European Union
Which of the following explains the preemptive right of common stockholders?
If a corporation issues new stock, existing stockholders can purchase new shares in proportion to their existing holdings before the stock is offered to the other investors.
Which of the following is a true statement about personal investing?
In general, riskier investment strategies offer the potential for higher returns.
mutual fund
Institutional investor that raises funds by selling shares to investors and uses the accumulated funds to buy a portfolio of many different securities
IMF
International Monetary Fund//a United Nations agency to promote trade by increasing the exchange stability of the major currencies
Daniel, the owner of a bookstore, decides to reinvest his personal profits from the current fiscal year toward renovating the store and expanding its inventory. In the context of owners' equity, the profits that Daniel reinvests in the bookstore are called:
retained earnings.
Which of the following statements best describes a money market mutual fund?
It pools funds from many investors and uses these funds to purchase very safe, highly liquid securities.
Buying a Franchise
Pros: usually well known product and low fail rate Cons: less creativity national branding may also fall through
Net Income
Revenues - Expenses
_____ is the profit or loss a firm earns in the time period covered by the financial statement that reports the revenues and expenses.
Net income
Sole Proprietorship, corporations, and partnerships
Sole proprietorships are owned the most while corps are 2nd and partnerships are in last corporations have the most net incomes and revenue while partnerships come in 2nd and SP in last
FTSE 100
Stock prices of 100 of the largest and most actively traded companies listed on the London Stock Exchange
Russell 2000
Stock prices of 2000 relatively small but actively traded U.S. corporations
Nikkei 225
Stock prices of 225 of the largest and most actively traded companies listed on the Tokyo Stock Exchange
SSE Composite
Stock prices of all stocks listed on the Shanghai Stock Exchange
international trade restrictions
Tariffs: taxes on imports Quotas: the limit on the amount of specific products imported Voluntary Export Restrictions: limits on amount of specific products that one nation will export to another nation Embargo: total ban of specific item
VIO is a giant aviation company based in the United Kingdom. It is listed on the London Stock Exchange among the most actively traded companies. Albert has recently invested in the company shares of VIO. Therefore, he wants to keep a track on how the company stocks are performing. In this scenario, which of the following stock price indices would be helpful to Albert?
The FTSE 100
primary securities market
The market where newly issued securities are traded. The primary market is where the firms that issue securities raise additional financial capital.
exchange rate
The measure of how much one currency is worth in relation to another.
Income Statement
A financial statement showing the revenue and expenses for a fiscal period.
WTO
World Trade Organization
preffered stock
a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock
Average Collection Period Ratio
accounts receivable/(annual credit sales/365)
NASDAQ Composite
all of the domestic and foreign common stocks traded on the NASDAQ exchange
In the context of the various strategies for investing in securities, a buy-and-hold approach works only if a person makes frequent trades.
false
revenue
income
Sole Proprietorship
one owner responsible for own debt
Which of the following statements is true of credit unions?
they are open to individuals who belong to a specific field of membership
Corporations
(articles of incorporation) legal document filled with a state government to establish the existence. (bylaws) represents the rules of corp (board of directors) elected by stockholders rep'd by interest
Return on Equity Ratio
(net income-preferred dividend)/average common stockholders equity
Statement of Cash Flows
A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.
limited partnership
A partnership with one or more general partners and one or more limited partners.
absolute advantage vs comparative advantage
Absolute advantage: ability of a country to perform particular economic activities more efficiently than another Comparative advantage: ability of a nation to produce a good at a lower opportunity cost relative to the same products in another country
Accounting Equation
Assets = Liabilities + Owner's Equity
NFTA
North American Free Trade Agreement
Buying an existing business
Pros: concept, organization, and operations are already set up Cons: working with someone else's ideas
Ponzi Scheme
a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
business plan
a formal written document that describes the nature of a business and how it will operate
Logic behind accounting equation
based on fact that firms must finance the purchase of their assets, and owners and non-owners are the only two sources of funding.
Entrepreneurship outside of US
based on per capita income, opportunity costs, cultural/political environments. typically beneficial to economies
In the context of balance sheets, the accounting equation tells us that the value of a firm's assets must be:
equal to the amount of financing provided by owners plus the amount provided by creditors to purchase those assets.
financial accounting
intended to provide info to external stakeholders, such as stockholders, creditors, and government regulators. provided to public.
The _____ is an asset management ratio that measures how quickly a firm sells its stock to generate revenue.
inventory turnover ratio
Colbert Blanc is a financial intermediary that helps firms raise their capital by facilitating the firms in issuing new securities and making sure that the securities are sold out in the market. In this scenario, Colbert Blanc is a(n) _____.
investment bank
In the context of budgeting, a flexible budget:
is designed to show the appropriate budgeted level of costs for each different level of sales
What is accounting?
planning, recording, analyzing, and interpreting financial information
managerial accounting
primarily intended to provide information to internal stakeholders, such as the managers of specific divisions of departments. info isn't available to public.
When conflicts arise between the long-term interests of owners and those of other stakeholders, the fiduciary duty required of financial managers generally leads them to make decisions that are most consistent with the interests of ownership.
true
Entrepreneurial characteristics
vision, self-reliance, energy, confidence, tolerance of uncertainty, tolerance of failure
The current liabilities of a company are reflected in the:
wages owed to the workers for work that they have already completed.
joint venture
when two or more companies join forces sharing resources, risks, and profits but not actaully merging
New Business Survival Rate
year 1 100% y2 78% Y3 66% Y4 56% Y5 50%
fixed costs
Costs that do not vary with the quantity of output produced
emerging economies
Developing countries that over the past two or three decades have begun to develop a strong industrial base, such as Singapore and Hong Kong.
foreign outsourcing vs importing
FO: contracting with foreign suppliers to produce products, usually at the fraction of cost of domestic production FI: buying products from overseas that have already been produced, rather than contracting with overseas manufacturers to produce special orders
GATT
General Agreement on Tariffs and Trade
acquisition
a corporate restructuring in which one firm buys another
stock index
a statistic that tracks how the prices of a specific set of stocks have changed
Reasons for International Trade
access to factors of production, reduced risk, inflow of innovation
Machvile Corporation, a robotics company, decides to acquire Chancera Inc., a start-up company that operates within the same industry. To better assess its decision, the management of Machvile Corporation needs to find out the value of Chancera Inc.'s total assets. The management has information regarding Chancera Inc.'s liabilities and stockholders' equity. In this scenario, the management should most likely use the _____ to get the required information.
accounting equation
Bon Suede, a shoe manufacturing company, produces ten thousand units of shoes of a distinct design. In 2015, the company was able to sell all the units within six months of manufacture, prompting the company to produce an additional ten thousand units. Which of the following financial ratios has most likely been analyzed in the given scenario?
asset management ratios
The _____ of a firm uses information from the sales budget and various cost budgets to develop a forecast of net earnings for the planning period.
budgeted income statements
Jack receives a considerable sum of money by selling his property. He decides to invest this sum in a diversified set of securities. He plans to invest in these securities and retain them for a long time. He is optimistic that eventually the overall market conditions will rise, thus giving him a high return sometime in the future. Jack is using the _____ investment strategy.
buy and hold
_____ are safe and highly liquid assets that many firms list with their cash holdings on their balance sheet.
cash equivalents
is too much cash a problem?
cash is used to pay workers, suppliers, creditors, and takes. if too much money is there it should be used for unexpected contingency's and invested in more profitable assets.
Which of the following is a difference between common stockholders and preferred stockholders?
common stockholders are assured a greater capital gain than preferred stockholders when a company experiences strong earnings
financial ratio analysis
computing ratios that compare values of key accounts listed on a firm's financial statements
Westbro Inc., a home appliances company, wants to invest in marketing new products. In order to generate funds for the process, it issues its own formal IOUs and sells them to its investors. Which of the following sources of long-term funds is being used by Westbro Inc. in the given scenario?
corporate bonds
Inventory Turnover Ratio
cost of goods sold/average inventory
variable costs
costs that vary with the quantity of output produced
Current Ratio: type = liquidity: measures ability to pay short term liabilities as they come due
current assets/ liabilites
Which of the following is the most commonly used liquidity ratio?
current ratio
market development options
direct investment: high risk more control exporting: low risk less control licensing and franchise are inbetween
Long-Term Funding Options
direct investments from owners, long term debt, term loans, corporate bonds.
C Corporation
double taxation, easy to sell, venture capital friendly
A factor is a restriction lenders impose on borrowers as a condition of providing long-term debt financing.
false
The Securities and Exchange Commission hires Tim to procure and analyze data on the state's tax revenues and expenditures to ensure that they are recorded and reported in accordance with regulations and requirements. In this case, Tim is most likely a(n) _____.
government accountant
David, a financial accountant at a multinational company, is asked to study the comparative financial statements of a prospective partner firm. He uses comparative income statements to determine the changes in the assets and liabilities of the firm and whether the net income of the firm has increased or decreased over the past five years. In this scenario, David is most likely using _____.
horizontal analysis
The first stage in activity-based costing is to:
identify specific activities that create indirect costs and determine the factors that drive the costs of these activities.
Unlike the debt in a firm's capital structure, the equity in a firm's capital structure:
imposes no required payments
revenue - expenses = net income
income statement
Nondepository Financial Institutions
institutional investors, securities brokers, securities dealers, investment banks
Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must:
let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements.
Initiatium, a software development firm, utilized $2 million to create a new software. Half of the total budget was acquired from loans from different sponsors while the rest was funded by the firm. The debt ratio amounts to 0.5. The given scenario illustrates the analysis of _____.
leverage ratios
Dominic and Matherson, a finance management company, lends money to Ebok, a fast food chain, in order to help Ebok market its new product. Dominic and Matherson provides financial support in the form of bonds. Which of the following financing options is being used by Ebok in the given scenario?
long term debt
Davis frequently trades on the NASDAQ exchange. He has made a commitment to constantly buy and sell the stocks of Ossani & Gautier, an automobile manufacturing company that is listed on the exchange. He competes for customer order flow by quoting the bid price and the ask price for a number of shares. The information given in the scenario indicates that Davis is a(n) _____.
market maker
opportunities and threats for small business's
market niches, personal customers services, lower overhead costs, and technology are opportunity. threats are high risk of failure, lack of knowledge and experience, too little money, bigger regulatory burden, and higher health insurance costs.
The price at which shares of an open-end mutual fund are issued and redeemed is based on the fund's _____.
net asset value per share
earnings per share
net income - preferred dividends / weighted average common shares outstanding
Multi-level marketing
network marketing= direct selling legal. involves non-salaried independent distributors who participate with the chance to make own business successful through a business opportunity.
The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the purchase of new machinery that would double the production. In the given scenario, the management is in the process of planning the _____ of the company.
operating budget
(LLC) limited liability company
owners are not personally liable for claims for claims against it, flexible tax treatment, meant to last limited duration
Elliot holds a bond in a health care company that matures after a period of ten years. Taken together with the interest on the principal amount, on maturity, Elliot will receive a sum of $55,000, which is the bond's _____.
par valie
General Partnership
partnership in which partners share equally in both responsibility and liability
funding options for small businesses
personal resources, loans, crowdfunding, angel investors, venture capital firms
_____ is a guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement.
revolving credit agreement
An online food delivery service goes out of business owing to stiff competition. The company has long overdue taxes because of which its stockholders do not receive the proceeds of the company after its dissolution. In this case, the company is not able to fulfill the _____ of its stockholders.
rights to residual claim on assets
The preparation of operating budgets begins with the development of a(n) _____.
sales budget
In private placements, _____.
securities that haven't been registered with the Securities and Exchange Commission can only be sold to other accredited investors
Exchange Traded Funds
shares traded on securities markets that represent the legal right of ownership over part of a basket of individual stock certificates or other securities
trade surplus/deficit
situation where a nation either buys more goods than it sells (deficit) OR sells more goods than it buys (surplus)
S coporation
special IRS taxes avoids double taxation, have up to 100 share holders
Willshire 5000
stock prices of all US corporations with actively traded stock. Despite the 5,000 in its name its actually 6,000 stocks
Tania, a management accountant in a cosmetics company, is asked by her manager to calculate the profit or loss earned by the company in a given time period . To get the required data, Tania is most likely to:
subtract the company's expenses from its revenues.
Ashley, a manager at a toy manufacturing company, needs to create a financial document for the company that would show how the company's operating, investing, and financing activities are expected to affect the asset, liability, and owners' equity accounts. To prepare this document, Ashley needs to collect data from:
the budgeted income statement, the capital expenditure budget, and the cash budget
As the recession of 2007-2008 loomed over both large and small businesses, many firms looked for ways to deleverage. The term deleveraging implies that:
the firms replaced much of the debt in their capital structure with equity.
secondary securities market
the market where previously issued securities are traded
common stock
the most basic form of ownership, including voting rights on major issues, in a company
time value of money
the principle that a dollar received today is worth more than a dollar received in the future
risk-return trade-off
the principle that the greater the risk a lender takes in making a loan, the higher the interest rate required
Net Present Value
the sum of the present values of expected future cash flows from an investment, minus the cost of that investment.
free trade
the unrestricted movement of goods and services across international borders
financial leverage
the use of debt to meet a firms financing needs
in the context of choosing a broker, which of the following statements is true of robo advisors?
they help people set and track their financial goals
debt to assets ratio
total liabilities/total assets
Short-Term Funding Options
trade credit, factoting, short-term bank loans, commercial paper
Commercial paper, which is sometimes issued for as little as two days, can be issued for up to 270 days.
true
The chief financial officer of NoveauNoir Production Company requests his accountant, Felipe, to prepare a customized report of the cost overruns at the company's production facility in Los Angeles. In this scenario, Felipe is a managerial accountant.
true
