Finance part 3

A company's new accountant must calculate the compound interest rate on the company's investment. What information will she need to make this calculation? (Select all that apply.)

Interest is compounded daily. The investment fund is labeled as a Moderate Risk. The investment began on 3/31/14.

You invest $1,000 now and earn 10 percent annual interest. According to Net Present Value (NPV), _____. (Select all that apply.)

$1,000 now is the same as $1,100 next year $1,210 in 2 years is the same as $1,000 now

A company's financial statement lists $3 million in equity. That amount is most likely considered to be _____.

capital

A company has long owned a large and empty warehouse building in an industrial part of a city. Two similar-sized buildings in the area have been assessed at $610,000 and $575,000. The company's building is most likely listed on their books as a(n) _____ of $600,000.

capital asset

Ike works for a few different companies, although his office is in none of them. Instead, he considers himself an independent advisor. Most likely, Ike is a(n) _____.

accountant

A caller is looking for information about a bill he sent to the Smith Paper Company. It has not been paid and he is wondering now whether it was ever received. It is likely his call will be forwarded to the large company's _____.

accounts payable clerk

The ABC Corporation has declared a dividend. Nora is a preferred stockholder. She would be paid her dividend _____. (Select all that apply.)

after bondholders, before bondholders

An owner of a small appliance company is studying a month-end statement. She is trying to make sure all of her funds have been allocated correctly. It is most likely she is looking at a(n) _____.

not balance sheet

Most investors will look for _____.

the greatest return on an investment with the lowest risk

When a company invests a portion of its revenue, it is electing to forego _____.

the present value of the funds used to make those investments

Bob's Baking Company has a net worth ratio of 13 percent. Their assets include a building worth $250,000 and cash of $10,000. The company's liabilities must be _____.

$20,000

A small bakery has assets of $300,000 and liabilities of $30,000. The bakery's net worth is _____.

$270,000

An accountant is looking at the financial information for the first quarter of this year for the ABC Corporation. He sees the company has revenue of $75,000, expenses of $4,000, assets (a building) of $250,000, and liabilities of $15,000. The accountant does a cash-flow analysis to forecast income for this year and estimates it to be _____.

$300,000

The Little Maid Doll Company has assets of $50,000 and liabilities of $2,000. Revenues this quarter were $15,000, with expenses of $7,000. The company's net worth would be expressed as: _____.

$50,000/$2,000

EFG Company has a quite a bit of borrowed money on their books. The loan considered short term is _____.

250,000

A small company has assets of $100,000; cash on hand at $5,000; and two loans: one at $25,000 and one at $10,000. The company's debt to equity ratio would be _____.

3%

An accounts receivable clerk at a company has a unique job. Explain what this person does, mentioning at least three specific facts about this position.

An accounts receivable clerk prepares bills and invoices for sales, collects on accounts by sending bill reminders, and records payments by entering them into a leger.

Ted is investing some money he inherited. All of the investment opportunities he sees are offering the same interest rate. To make the most return on this investment, he should find an account or instrument where the interest is _____.

DAILY

True facts about preferred stock include which of the following? (Select all that apply.)

It is always more expensive per share than the corporation's common stock. It can be in different classes: Preferred A, Preferred B.

Jack invests $1,000 at 6 percent interest compounded daily. Tuan invests the same amount at the same rate, but his money is compounded annually. After one year, _____.

Jack has about $18.00 more than Tuan

Pension funds were once very popular as negotiated by strong labor unions. At one time all retired employees who had been with a company for a period of time could expect to receive a pension. Briefly discuss pension plans today.

Pension plans today is pretty much a retirement plan that requires an employer to make contributions into a pool of funds that is set aside for that worker's future benefit

XYZ Corporation is publicly traded and pays out a quarterly dividend. Why does the company pay that dividend? (Select all that apply.)

The dividends entice investors. Dividends are a way to manage corporate earnings. The dividends are an incentive for corporate workers.

Large and small businesses borrow money and their reasons for doing so are varied. Cite two major reasons a company would need or want to borrow money.

They would need to borrow money if they were to expand their business or if they were to purchase new equipmen

Andy wants to pass his CPA test. After he does that, he will be most directly qualified to be _____. (Select all that apply.)

a controller an accountant

balance sheet a company's statement of assets, liabilities, and net worth cash flow the movement or flow of cash to and from the business as it conducts its business; cash to the business will be in the form of cash sales and cash from receivables; and cash out from the business will be in the form of debt payments and salaries paid financial analysis the process of reviewing financial data from prepared statements to provide vital statistics to and for management's use in its decision making financial statement a statement of the company's financial situation covering a period in its operations, such as a month, a quarter, or a fiscal period profit and loss statement a financial statement for a specific period of time listing revenue and expenses incurred resulting in a profit or loss; also called income statement or P&L

annuity an insurance product set up to provide the investor with a cash payout at regular intervals for a fixed rate of time or until the investor dies compound interest the mechanism of interest rate accrual, where the rate of return adds to the principal, thereby compounding or increasing the return operating capital funds that are needed to run the business in the short term; less than 1 year's time perpetuity a type of annuity that pays a fixed payout at regular intervals forever

Anderson Company took out a $2 million bank loan to purchase a building last month. This loan will be listed on the balance sheet as a(n)_____. (Select all that apply.)

asset and liability

The S & P 500 is determined by _____.

b

Warren Buffett is best known for _____.

berkshire hathaway

A company president is acquiring property to expand a furniture business. To optimize financial return, it is certain the company's president should first look at these three most important considerations: _____. (Select all that apply.)

contract terms negotiated price value of the acquisition

The CFO and executive team of Quick Convenience Stores find they are not able to achieve financial goals and successfully run the business. It is most likely that the _____.

corporate cash is not well managed

ABC Furniture Company is not able to sell any new furniture in the town of Oxford, since many of the town's people were recently laid off from the town's biggest employer. Rumors persist that the employees will be called back to work, and also that a huge corporation will be buying a large empty building in town and converting it into a factory. For this reason, ABC Furniture has decided to ride out this downturn. If the company has been managed well, they should be able to operate in the short term using their ____.

corporate reserves

A company borrows $250,000 to produce a hooded towel for teens, a product that seems as though it will become popular quickly. The company is trying to taking advantage of _____.

critical timing

To generate the most money with an initial investment, look for a situation where interest is compounded _____.

daily

The ABC corporation is has a capital investment of $200,000 on their financial statements. Their accountant knows they can take advantage of _____. (Select all that apply.)

depreciation deductions, interest deductions

A company invests a large amount of its assets in a somewhat risky stock. The two most likely reasons for this investment are to _____. (Select all that apply.)

enerate income to stay in business own part of a competitive company

Financial statements for the Collins Corporation are presently being developed. After they are completed, the corporate executives can expect to look at which two main parts of the corporation's finances? (Select all that apply.)

equity statement income statement

A company has principal of $50,000 in a bank savings instrument. At the end of each quarter, they withdraw the interest and place it into another account, bringing the principal back to $50,000. It sounds as though they are taking advantage of the features of compound interest.

false

A company with sufficient funds, a product or service that is priced right and in demand, and strong leadership is unlikely to need to borrow additional funds.

false

A shareholder holds 100 shares of common stock in a sporting good company. Another shareholder holds 100 shares of preferred stock in the same company. A dividend is declared. Both shareholders are entitled to a dividend check.

false

Angelo owns 1,000 shares of common stock in the Gilbert Corporation He will certainly be entitled to a dividend within the next six months.

false

Critical timing means bringing a new product to market at a cost lower than a competitor.

false

For most large corporations, there are more direct than indirect costs.

false

Interest that is compounded daily ultimately generates the same amount of money as interest compounded quarterly.

false

Marketable securities are not securities that may be sold on a public exchange.

false

Most corporations structure debt in a similar way, and business practices do not change much within and between types of industry.

false

Operating capital is most often invested in a fund that keeps it safe, as it typically won't be used for a year.

false

Preferred stock is paid out before common stock, is more expensive upfront than common stock, and is not subject to risk.

false

Tim is the CFO of the ABC Corporation. The corporation has not paid out a dividend in the past three quarters. At the annual shareholder meeting, Tim works hard to convince potential investors that ABC is an excellent investment. This is considered a form of fraud.

false

XYZ Company is traded on the New York Stock Exchange. When the company has been trading for at least a year, it will need to file financial statements with the Securities and Exchange Commission.

false

An employee most likely to report to the corporation's chief financial officer is a _____.

financial analyst

A small fruit juice company has developed a product that they believe will be a huge hit: The container is actually edible. The snack-size juice boxes will be sold nationwide if the company can get a lender to believe in them. It sounds as though the company needs _____.

financial leverage

Corporate finance has three main areas. These areas are _____. (Select all that apply.)

financial reporting capital budgeting balancing debt

A financial manager suggests to the president of a small company that she should be making investments with money presently in the bank. Before any investing is done, the financial manager will need to know _____. (Select all that apply.)

how long the company is willing to go without the money whether the company is willing to accept risk for a higher return

In the world of finance, GAAP is used mainly because it _____.

is a way to standardize accounting procedures

In accounting, the acronym LIFO stands for _____.

last in, first out

Capital budgeting is a financial activity that most directly involves _____. (Select all that apply.)

managing cash flows reporting on a business's financial activities obtaining the funds to operate a business optimally

Eddie works for the Starr Battery Company, as part of their business operations. What are the most likely positions he would hold? (Select all that apply.)

manufacturing the batteries distributing the batteries

The three financial activities occurring in a corporate setting are _____. (Select all that apply.)

monitoring operations financing activities to develop the business investing revenues over the short and long term

To calculate the net present value of obtaining funds, the future value is divided by _____.

not (1 + the number of years) multiplied by the interest rate

One reason the Dodd-Frank Wall Street Reform and Consumer Protection Act was created and passed was _____.

not SEC or Berkshire Hathaway's stock price

Company A takes on debt to invest in a small catering business they believe will do well. After a year, the catering business asks for an additional investment from Company A. At this point, Company A must decide whether it wants additional _____.

not capital assets

A restaurant in a beach community has experienced a downturn in business, mainly because the area was hit by a hurricane last month. Even though the restaurant and most of the community weren't damaged, many people changed their vacation plans, making August a slow month for the restaurant. Since the restaurant has been successfully in business for over 12 years, they are able to continue to do business, most directly because they have _____.

not cash flow

Twenty-five years ago, a well-run company making film for cameras would probably not have problems getting a loan for equipment. Today, a loan to that company for the same purpose would not be probable, mainly because of _____.

not critical timing or regulatory burdens

An accountant is figuring out the rate of return on a compound interest rate investment. He has converted the interest rate into a compounding factor, so his next step is to multiply this by the _____.

not daily yeild

A corporation's executive officers are reviewing all pertinent financial data before they decide whether to buy a new warehouse building. It sounds as though they are most likely doing a _____.

not equity analysis

Angelo is a corporate financial officer for ZeeTeck, a software company. He is trying to get favorable terms for $50,000 loan for his company to purchase new equipment. He will need to pay close attention to the _____.

not loan payback period

A mid-sized business has $100,000 in its corporate reserves. They will most likely use this money to _____.

not pay monthly operating costs

A new corporate employee is reviewing the company's most recent financial statement. She sees a large sum in the "Other" category. She knows this probably means _____.

not there is an error within the statement

Short-term capital is best described as capital that can be turned into liquid - usable - funds in less than ____.

one year

The president of Clean Machine Office and Home Maid Service is considering taking out a loan to buy two company cars and hiring drivers to drop staff at certain jobs. The bank is looking at what the small business is worth before extending a line of credit. To determine Clean Machine's worth, they will mainly pay attention to the value of its _____.

outstanding stock

Two financial techniques used in planning and forecasting the use of corporate money are _____. (Select all that apply.)

present value, compound interest

A small shoe company is acquiring a warehouse to store materials, some equipment, and tools. To optimize financial return, key criteria of the investment that need to be considered are _____. (Select all that apply.)

purchase price less the down payment, original asset value of the property

Tanya has 100 shares of ABC Corporation's publicly traded common stock. The quickest way for her to make money from the stock is _____.

selling it at a profit

A large company puts their investment funds in two accounts, each totaling $200,000. They most likely used two accounts because _____.

the FDIC insures funds up to $250,000

What is true about the cost of capital? (Select all that apply.)

the terms of the loan the environmental risks of acting or not acting on an initiative the opportunity cost of making an investment compared with using the capital in another way

Which of the following might be considered business risks to a small software development firm? (Select all that apply.)

the transition from installed software to cloud-based, inexpensive apps they do not engineer the introduction of a new generation of software as a service from a well-funded startup venture

A bond's discount has to do with its amount of risk.

true

A business is buying a large piece of equipment. Terms of the purchase price would include the down payment (or purchase price) and the present value consideration.

true

A company is hoping to secure a $300,000 bank line of credit. It is likely the bank will first do an acid test ratio to see whether the company seems to be a good candidate for such a line.

true

A company's bank statement is reconciled each month, making it possible to compare banking activities to ensure all funds are allocated correctly.

true

A company's profitability is found by dividing the total expenses into the total income.

true

A corporate finance officer is including a $100,000 equipment loan on the company's financial statements. He correctly lists it twice: the debt is a liability on the balance sheet and the interest is an expense on the profit and loss statement.

true

A financial statement should be viewed as a continuously changing document rather than one that is complete as shown.

true

A small pizza company is hoping to get a bank loan to expand the take-out portion of their business. Although most of their financial accounting and bill paying is done in-house, a bank will still expect to see and analyze a financial statement as they consider the loan.

true

An analyst is assessing a corporation's debt level by comparing it to the industry average. This is a legitimate method of assessment.

true

Andy is the chief financial officer for Arrow Canoes. One part of his job is to negotiate the most favorable loan terms he can for the corporation.

true

Artshow, a technology company, has developed a way to shrink huge files without losing clarity, something portions of the market have been eagerly waiting for. That means they can set their price at whatever they want.

true

Cost of capital refers to more than the terms of the loan and includes the environmental risks of acting or not acting on an initiative.

true

Jill is a bookkeeper at a small trucking company with 100 employees. It is likely she has more authority to make decisions in her job than her friend, April, who is a bookkeeper in a large furniture company with 1,000 employees.

true

Long-term shareholders may provide funding to a company by foregoing their quarterly dividend payout.

true

Teck Technology Company is ready to make an initial public offer of their stock. They must have had investment analysts review their financial performance before the offering.

true

The XYZ Corporation has funds earmarked for a possible addition to their factory that would add a new shipping area and connect the factory with the warehouse. These funds would be listed as a separate line item on a balance sheet.

true

The bookkeeper for the ABC Company is recording every business transaction made by ABC. She adds operating expenses, loan costs, and investing information. It sounds as though the bookkeeper is doing the job correctly.

true

The interest paid on a loan is deductible as a business expense.

true

The value of preferred stock is similar to that of an AAA bond

true

Zee Company has a $250,000 line of credit with Capital Financial Bank. This would be listed as a capital liability on Zee Company's financial statements.

true

An elderly business owner is still listed as president of a large company although he does not physically work there anymore. He does still make important business decisions, although his daughter is wondering whether this is a good idea. This is most likely because she is considering his _____.

valuable consideration

A new food store in town sells approximately the same inventory as another store a mile away. Their prices are a bit higher than the other store, and the store's operating costs are also a bit higher, mainly because their cash registers use a powerful computer system to provide the manager with up-to-the-minute inventory, sales, and other information. This company _____. (Select all that apply.)

will not make money because their prices are higher than their competitor will not make money because their operating costs are higher than their competitor