Chapter 3 Business

Which of the following is an example of rationalization that might be used in finance:

"Everyone else is doing it."

The tendency to respond to situations depending on how those situations are posed or viewed is known as

Framing

Which of the following is a capital investment decision:

How to finance investments

When Penny started her job, she believed that lying was completely wrong. However, after two years, she has started to exaggerate financial projections and now believes that lies are only wrong when they cause direct harm. This is an example of

Incrementalism

To keep communication flowing with other departments, the finance function depends on

Information systems

How does the finance function relate to company spending?

It plans and controls spending

Finance is the business function that involves managing

Money

When unethical decisions come from the top of an organization, it is difficult to go against them. This is an example of

Obedience to authority

Which of the following is a key component of managing working capital:

cash conversion cycle

What does it mean to play the devil's advocate?

Arguing against a position to validate that argument

Ethical principles can help people who work in finance to

Avoid unethical pitfalls

When approaching someone about his/her unethical behavior, finance professionals should avoid

Being accusatory

The finance function is usually responsible for which of the following process?

Budgeting

Dean always keeps financial information private and secret unless absolutely necessary. He is practicing

Confidentiality

The tendency to behave in the same way that everyone else does is __________, whereas __________ occurs when people make decisions together in a way that discourages individual responsibility or creativity.

Conformity;groupthink

Which of the following is an example of loss aversion:

Covering up decisions that cost you money

Which of the following is a task that might be undertaken by a finance professional:

Determining whether a new product line will be profitable

Which of the following is an ethical principle that gives finance professionals the ability to make judgments without favoritism or self-interest

Fairness

It is difficult to make decisions that can cause you harm, which is why financial professionals often act unethically due to

Self-interest

Rita knows she will get a bonus if she pushes for her company to go through with a merger, but she knows that in the long term, this merger might threaten her job. If Rita supports the merger, she is likely motivated by

Short term gratification

Collin's company just broke ground on a new plant, but after analyzing economic trends, Collin knows that they will likely lose money on the investment. He tries to convince himself and others that the plant will be profitable anyway. This demonstrates the effects of

Sunk costs

Evelyn tried to talk to Lin about his unethical behavior, but Lin brushed her off. What should Evelyn do?

Take her concerns to a higher level executive

Angelica has determined that many of her colleagues are acting unethically. Whom should she talk to first?

The colleagues involved

Why do finance professionals continue to act unethically, despite the consequences?

The finance field is full of temptations and pressures to be unethical.

Why are ethics especially important to those who work in finance?

Unethical behavior in finance leads to catastrophic results.

Money the business owes is

accounts payable

Money owed to the business is known as

accounts receivable

Decisions about financing refer to the

acquisition of funds

The cash conversion cycle should be

as short as possible

Determining which projects a business should invest in is known as

capital budgeting

Assets a company already owns and can use to finance a new venture are called

equity

When return on capital is positive, the company is

growing in value

The finance function ensures that the company's financial goals are

in line with organizational priorities

The administration of assets refers to decisions about

investments

The finance function would definitely be involved in a decision regarding

new business projects and strategies

Nico knows he would never do anything unethical, but he is sure that all of his coworkers are tempted at one point or another. Nico is demonstrating

over-optimism and overconfidence.

Accounting is distinct from finance because its main focus is on

record keeping activities

The goals of the finance function are to ensure profitability and to

reduce risks

which of the following is a measure of how well a business generates cash flow:

return on capital

A company's current balance of assets and liabilities falls under the focus of

working capital management