BA 101 Midterm 2 Practice Questions

In using the accounting equation, if assets = $40,000 and liabilities = $30,000, then owner's equity is equal to ______. $10,000 $70,000 $80,000 $20,000

$10,000

What are four main types of financial ratios used in ratio analysis? Income ratios Tax ratios Debt ratios Profitability ratios Liquidity ratios Activity ratios

-Debt ratios -Profitability ratios -Liquidity ratios -Activity ratios

Generally speaking, commercial banks grant loans based on ______. -a borrower's creditworthiness -the interest a borrower is willing to pay -the length of time the borrower has been employed -the time needed by the borrower to repay the loan

-a borrower's creditworthiness

A major problem during the Great Depression created by a weak banking system was ______. -very high inflation -the shortage of capital goods -the stock market crash of 1929 -a run on and closure of many banks

-a run on and closure of many banks

Which of the following best describes electronic funds transfer (EFT)? -a way to pay for a bank computer -used in the place of credit cards in most department stores -rarely used in the United States -a way to send funds from one computer to another

-a way to send funds from one computer to another

he Federal Reserve banks serve as the national ________ for checks. -collection center -savings account -depository -clearinghouses

-clearinghouses

The World Bank is responsible for financing ______. -monetary policy -fiscal policy -economic development -government development

-economic development

The amount of goods and services you can buy with a dollar in the global market ______. -increases with a falling dollar value -is not affected by the value of a dollar -Increases during a period of inflation -increases with a rising dollar value

-increases with a rising dollar value

Compared to a bank, the interest on commercial paper is ______. -higher -lower -the same -fluctuating

-lower

What are the three most common reasons firms fail financially? -inaccurate sales forecasts -too many customers -poor control over cash flow -inadequate expense control -undercapitalization

-poor control over cash flow -inadequate expense control -undercapitalization

Accepting credit cards can be useful to small businesses by: (CHECK ALL) -providing ease of payment for customers -providing a low interest rate. -requiring repayment of loans immediately -providing the business with payment more quickly

-providing ease of payment for customers -providing the business with payment more quickly

Financial control is a process through which a firm periodically compares its budget to which of the following? (Select all that apply) -revenues -market share -costs -stock price -expenses

-revenues -costs -expenses

Short-term financing is more important to a small business than long-term financing because ______. -long-term funds are impossible to obtain for small business -inventory needs are long-term and critical for small business -only corporations can obtain long-term funds -small businesses are more concerned with funding day to day operations

-small businesses are more concerned with funding day to day operations

Which are considered to be the working areas of accounting? (Select all that apply) tax accounting auditing financial accounting managerial accounting government and not-for-profit accounting bank accounting

-tax accounting -auditing -financial accounting -managerial accounting -government and not-for-profit accounting

Credit unions are owned by ______. -the state government in which it operates -an appointed board of governors -the credit union's members -commercial banks

-the credit union's members

3 steps in inventory

1) raw materials 2) finished goods in inventory 3) sold goods

what are the steps of the accounting cycle?

1. analyze transactions 2. make journal entries 3. post to accounts (to ledger) 4. prepare a trial balance 6. prepare financial statements 7. analyze financial statements

Place the three steps in the financial planning process in order from beginning to end with the first step at the top. developing budgets, establishing financial controls, forecasting the firms financial needs

1. forecasting the firms financial needs 2. developing budgets 3. establishing financial controls

What are some of the benefits of technological advances such as CAD-CAM? Select all that apply. Check All That Apply A. It allows manufacturers to make small changes quickly without having to completely redo a production process. B. It makes it possible for companies to customize even the smallest orders. C. It allows companies to design machinery that can produce multiple product variations at any time. D. It reduces the need to rely on outsourcing. E. It encourages creativity in the production process.

A,B,C

What impact does lack of inventory control have on a firm's efficiency and profitability? A. Supplies and materials sitting idle cost the company money. B. Overall product quality may fail. C. The firm will need to reconsider its access to resources. D. It causes delays in manufacturing. E. It increases the need for higher quality control.

A. Supplies and materials sitting idle cost the company money

At which point in the production process do companies today conduct quality control? A. throughout the process B. in the middle of the process C. at the end of the process D. at the beginning of the process E. before the process begins

A. Throughout the Process

examples of assets...

Assets include productive, tangible items such as equipment, buildings, land, furniture, and motor vehicles that help generate income, as well as intangible items with value like patents, trademarks, copyrights, and goodwil

Providing information and analysis to managers inside the organization to assist them in decision making is function of: A. Financial Accounting B. Managerial Accounting C. Both Financial and Managerial Accounting D. Neither

B. Managerial Accounting

What is the inventory turnover ratio? What does it tell us?

COGS/Average Inventory It is demonstrating how many times a company sells its inventory of merchandise each year or over a given period of time. Higher # is better.

Using an Internet-focused strategy, operations managers are outsourcing design, production, and shipping to other firms. This process is called a(n): a. inter-firm process b. mass production process c. intra-firm process d. one firm process

a. inter-firm process

Uses of sensors to control manufacturing processes include: (Select All) a. the measurement of the thickness of material b. measuring humidity c. framing a house d. handcrafting a pair of shoes

a. the measurement of the thickness of material b. measuring humidity

_______ ratios tell us how effectively management is turning over inventory.

activity

3D printing is a production process also known as __________ manufacturing.

additive

The methods the Federal Reserve uses to manage the economy include all except ______. a) control open-market operations b) control the federal budget c) control reserve requirements d) change the discount rate

b) control the federal budget

Choose the correct order of steps in the production process. a. Outputs, production control, outputs b. Inputs, production control, outputs c. Inputs, production control, throughputs d. Outputs, production control, inputs

b. Inputs, production control, outputs

Because they indicate a firm's financial health and stability, the use of ______ are key factors in management decision making. a. ledger entries b. financial statements c. annual reports d. tax returns

b. financial statements

Name examples of financial statements...

balance sheet, income statement, statement of cash flows

When a company allocates the use of specific resources throughout the firm based on a financial plan indicating management's expectations, then the company is using a(n) __________ as the basis for making decisions.

budget

The discount rate is the ______. a) amount that bonds are discounted on open market activities b) percentage of deposits that banks must hold in reserve c) interest rate that the Federal Reserve charges for loans to member banks d) tax savings granted to large commercial banks for offering loans to government agencies

c) interest rate that the Federal Reserve charges for loans to member banks

Mass production focuses on producing: a. customized products b. many products in small amounts c. a limited variety of products d. a wide variety of products

c. a limited variety of products

What type of ratios measure the degree to which a firm relies on borrowed funds in its operations? a. liquidity b. performance c. leverage d. activity

c. leverage

on a cash flow statement, plant improvement is the same thing as...

capacity

on a cash flow statement, bonds are the same thing as...

cash from long-term debt issued

An independent agency of the U.S. government that insures bank deposits is the _________. a) SBA b) IRS c) SEC d) FDIC

d) FDIC (Federal Deposit Insurance Committee)

An accountant's time is freed up to do more important tasks such as financial analysis due to the assistance provided by using ______. a. double-entry accounting b. a trial balance c. the accounting cycle d. computerized accounting programs

d. computerized accounting programs

A type of problem that operations management planning helps to solve as it relates to manufacturing is: a. budget planning b. marketing strategy development c. human resource issues d. facility layout

d. facility layout

When machines are programmed to do multiple tasks in order to produce a variety of products, a firm is said to be employing ________________.

flexible manufacturing

Where is the depreciation of assets shown?

income statement

___________ manufacturing refers to the production of goods using less of everything.

lean

if total debt = $5M and total owners equity = $1M then what is leverage?

leverage = 5 debt/owners equity

Accountants list assets on the firm's balance sheet in order of their __________.

liquidity

Assets are listed on the balance sheet in order of their

liquidity

Industrial robots can work 24 hours a day, seven days a week with great _________.

precision

ISO is a worldwide nongovernmental federation of national _________ bodies.

standards

what's the purpose of accounting?

to help managers make well-informed decisions

which indicates lower proportional debt? -when leverage = 5 -when leverage = 0.83

when leverage = 0.83

S&Ls were originally set up to ______. =encourage purchase of automobiles -fund operations for the federal government -promote home ownership -help pay for college

-promote home ownership

What effect has robotics had on manufacturing? A. increased costs B. introduced technical challenges C. increased customization D. improved efficiency E. reduced flexible manufacturing

D. improved efficiency

True or false: Gross profit is what a company shows on their income statement as the bottom line figure.

False, they show net income

How is Information Technology (IT) helping companies?

It is giving firms and employees increased flexibility to choose locations while staying competitive

what's the use of net present value?

It's used to analyze the current value of an investment or project that will produce future revenue.

Which statements about commercial banks are true? (Select all that apply) a) Commercial banks are equally responsible to their depositors and borrowers. b) Commercial banks are owned and controlled by its depositors. c) Commercial banks make loans from the deposits of its customers. d) Commercial banks do not seek to earn a profit.

a and c

Assets, liabilities, and owners' equity are the major accounts listed on ______. a. a profit and loss statement b. an income statement c. a balance sheet d. a statement of cash flows

a balance sheet

Finance is the function of acquiring and management of ______. a) funds b) securities c) inventory d) loans

a) funds

What are the three major categories on the balance sheet? liabilities owners' equity cash balance assets retained earnings

assets, liabilities, equity

The goal of operations management is to: (Select all) a. advertise the product b. create a good experience for the customer c. create a domestic organization d. keep operations running efficiently

b and d

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called ______. a. the current ratio b. return on equity c. return on sales d. earnings per share

b. return on equity

Ordering a new suit that will be made specifically for you by a tailor is an example of which process?

customization

stockholders are entitled to... a) repayment of stock value. b) a position in the company. c) interest. d) vote(s) for the board of directors. e) profit sharing.

d) vote(s) for the board of directors.

The income statement shows ______. a. inflows and outflows of cash b. the basic accounting equation c. a firm's assets, liabilities, and stockholders equity d. a firm's profit (or loss) after costs, expenses, and taxes

d. a firm's profit (or loss) after costs, expenses, and taxes

Companies sometimes spend millions to move location: a. at a supplier's request b. for pleasant scenery c. to be near vacation spots d. for proximity to customers

d. for proximity to customers

The formula for the costs of goods sold is ______. a. purchase price -returns-freight and storage charges b. purchase price + freight charges + taxes c. purchase price + returns - allowances d. purchase price + freight charges + storage costs

d. purchase price + freight charges + storage costs

__ is the monetary value of what a company received for goods sold, services rendered, and all other payments to the firm. a. Interest b. Rent c. Sales d. revenue

d. revenue

_____________ and nonprofit accounting supports organizations whose purpose is not generating a profit, but serving ratepayers, taxpayers, and others according to a duly approved budget.

government

The creation of finished goods and services using the factors land, labor, capital, entrepreneurship, and knowledge is:

production

The percentage of commercial banks' checking and savings accounts that must be kept in the bank is referred to as ______.

reserve requirement (rr)