BUS 300: Chapters 15, 16, 17, & 18

Levy's Manufacturing has $5 million in inventory, $10 million in current liabilities, and an acid test ratio of 1.00. Determine the firm's total current assets.

$15 million

A firm must generate ________ in sales for every $1 of assets to yield a total asset turnover of 2.5.

$2.50

Cook Corp. supplies and repairs restaurant equipment. Its profits have waned over the past two years, despite higher revenue, because of increased investment in inventory and skilled labor. Senior management wants to hire an accountant to help determine how to restore profit growth. Whom do you predict it will hire? Why?

A cost accountant, because the company needs to determine the most cost-effective way to invest in necessary goods and services.

Romeo is an institutional investor for Elite Insurance. He is willing to consider an investment with less liquidity, but is not willing to work with government owned companies. Although he is not working within a specific time frame, he would like complete the sale sooner rather than later. Which option will work best for Romeo's needs and why?

A private placement because he will receive a higher interest rate in exchange for sacrificing liquidity.

What measurement is useful in determining a firm's ability to make its debt payments as they come due?

Acid-test ratio

Which of the following has resulted in diminished effectiveness of banner advertising?

Ad blockers

Which of the following is the best scenario in which to issue commercial paper to raise short-term funds?

An international trading company that has $10 billion in annual revenue, a strong credit history, and a sound balance sheet

How are mutual funds and pension funds similar?

Both pension funds and mutual funds are portfolios that contain percentages of different investments.

Which of the following best describes the budgeting process in a large company?

Budgeting is a lengthy company-wide process.

Callie, a stay-at-home mom, started making natural soaps to sell at the local farmers market. Her little business expanded seemingly overnight and she now has a legitimate company, but she doesn't have the funds to outsource her accounting. When formulating her budget, how should she compartmentalize cash and credit sales, rent, taxes, and marketing expenses?

Cash and credit sales would go under cash inflow, while rent, taxes, and marketing expenses would be cash outflow.

Camilla is working to manage the financial records at her company. Throughout the year she has made sure to write down all of her transactions, and she has included brief explanations for each. What else does she need to do to process her accounts?

Classify the information and then work to summarize it.

________ are essential to personal and business money management, they are also the largest and most diversified financial institutions in the United States.

Commercial banks

What is the best definition of an electronic data interchange?

Computer-to-computer exchange of invoices, purchase orders, price quotations, and sales information between buyers and sellers.

Which of the following remains a similar threat to credit card information, personal information, health information, and employment data?

Concerns over identify theft.

Which of the following are classified as long-term funds?

Debt and equity

Which of the following financing should Kaitlin use if she needs funds for her company, but doesn't want undue influence from her company's stockholders?

Debt capital

A firm is likely to pay little, if any, of its earnings in _________, if they have numerous investment opportunities and wish to finance some or all of them with equity funding.

Dividends

Which of the following is a firm unlikely to pay of its earnings if it has numerous investment opportunities and wish to finance some or all of them with equity funding?

Dividends

What is the relationship between double-entry bookkeeping and the accounting equation?

Double-entry bookkeeping reduces the possibility of accounting errors being made in the accounting equation.

Samantha is president of her local union and wants to ensure that all members will retire with an adequate pension. When might she utilize accounting information?

During collective bargaining with the school board.

The marketing team has stressed the importance of competing on digital channels. How will you proceed to create multiple touchpoints and build brand loyalty?

Engage customers on social media platforms, through email, and on mobile applications to stay connected to them and make the process effortless for them.

_______ principles encompass the conventions, rules, and procedures for determining acceptable accounting practices at a particular time.

GAAP

Which of these is the best example of a CFO at work?

Gary working with the CEO to certify the accuracy of the company's third-quarter financial statements.

George is an investor, and he has come to you seeking investment advice. He has $50,000 to invest in trades and specific parameters for buying stocks at the lowest possible price. What will you propose to George?

George also needs to consider his limit order to specify the most he will pay for his stocks.

After a series of costly accounting errors at a large financial firm, what would best the BEST step for management to take to prevent such a situation from occurring again?

Hire accountants who are well versed in GAAP and SEC practices.

Reggie and his boss are discussing accounting practices. Reggie does not understand why the company insists on using IFRS in place of GAAP. What is Reggie's boss most likely to give him as an explanation?

IFRS is less complicated, and the current market value for plant, property, and equipment are higher than the historical cost minus depreciation.

What is the relationship between e-commerce and a corporate website?

In order to do business online, a company would need a corporate website.

Economic experts have evaluated sale prices on many consumer products and have determined that consumer prices are rising more rapidly than wages and salaries. Although this has yet to affect sales, the experts predict that eventually it will result in an economic downturn. What should the Fed do to help slow the increase in consumer prices?

Increase the discount rate and sell Treasury securities.

Why have so many countries adopted IFRS?

Increased globalization requires comparability and uniformity in accounting rules.

Which of the following is a characteristic of a virtual private network?

Increased security.

When a particular area of a country is hard hit with claims due to a natural disaster, these claims are paid by the insurance companies through

Increasing premiums on consumers, and the insurance company also uses cash on hand as well as tapping into their corporate investments as necessary.

AutoInsure U paid out more money in claims last year than it charged for premiums. How can AutoInsure U BEST improve their financial position for the following years?

Investigate the underwriting process and make sure they are assigning the correct risk to customers.

Sam has $100,000 saved with a commercial bank and he just read that his bank is going out of business. What will happen to Sam's savings?

It is protected through FDIC insurance.

What is the distinguishing feature of a marketing website?

Its main purpose is to sell goods and services.

Judy shops online frequently. She uses multiple websites and several credit cards online. How should Judy organize her online transactions?

Judy should use an encrypted payment service, an electronic wallet, or a mobile payment app to secure her transactions online.

Which of the following is an example of a short-term fund?

Laguna Spears borrows $250,000 for one year at an interest rate of 2.5 %. The following year, the interest rate increases to 3.75%.

American companies should respect cultural differences. What else should they take care to respect when doing business online?

Local laws

Rhea is a managerial accountant who has a flawless track record. In the last year, she has received multiple emails from competing accounting agencies asking if she'd like to leave her job for higher-paying positions elsewhere. Why is this happening?

Managerial accountants are in high demand due to the reporting requirements created by the Sarbanes-Oxley Act.

Which of the following are expected to be converted to cash within a year?

Marketable securities and accounts receivable

Matthew is the CEO at Mid-West Co., a regional company out of Chicago. He has asked his CFO the best way to take Mid-West Co. public. What will his CFO propose?

Mid-West Co. is well known in Chicago and the Midwest, so an initial public offering should enter through the Chicago exchange to make the best offering.

When Ian's accountant, Ben, deducts operating expenses and taxes from the total revenue of Ian's small construction company, he seems pleased with the end number but knows that he will need to evaluate industry averages to have a better understanding of how Ian's company measures up. What is Ben looking at?

Net profit margin

QuikAccounts, an accounting firm, just finished a financial report for one of its clients. The firm prepared the report according to the generally accepted accounting principles of consistency, comparability, and reliability. Does the report fully comply with GAAP? Why or why not?

No. QuikAccounts did not prepare the report in accordance with GAAP relevance standards.

People can conduct banking transactions from home using ___________ banking, which is an advantage of the Internet. Select answer from the options below.

Online

If the central bank of England decreases interest rates on lending by a quarter of a percent, how will other countries' central banks react?

Other countries will likely decrease their interest rates by a similar amount.

As the director of marketing at ABC, Inc., you are tasked with building online client relations. Which is the most effective method to build an emotional connection with these customers?

Providing an immersive experience with the intention of informing customers while inspiring them

A small public accounting firm staffed by CPAs currently generates most of its revenue by providing tax preparation and planning services. However, the firm wants to grow. Which of these options is it most likely to explore?

Providing auditing services.

What is the process of maximizing the wealth of DynoFibre's shareholders by striking the optimal balance between risk and return?

Risk-return trade-off

The chief regulator of financial markets and the accounting industry in the United States is the

Securities and Exchange Commission.

Serafina is impressed with your electronic trading skills and has come to you for advice. Online trading has been convenient for you, but you know this is an important decision for her to make. Which is the most effective method for Serafina to proceed?

She should research her options and determine the fees each firm charges and how much online support will be given from the competing firms, in order to find a company she trusts.

What do state banking regulators do?

State regulators investigate each banking institution, review their operating reports, and audit their financial statements. When banks fail to comply with state regulations, state regulators impose penalties on the institutions.

Which of the following is an example of a nondepository institution?

TIAA-CREF, a company that manages retirement plans for non-profit workers.

Your web consulting firm has recognized your talent for web start-ups. What do you propose to these new businesses that has made you so successful?

The Internet holds the future for new businesses, which may be limited by reliance on local commerce. Preparing a global strategy enables them to reach markets at home and abroad.

What is the difference between the click-through rate and the conversion rate?

The click-through rate reveals how many people clicked on an ad, while the conversion rate reveals how many people made purchases.

Which ratio can MOST accurately show if a company is overly borrowing to finance its operations?

The leverage ratio

For discount brokerage firm Charles Schwab, what is the first question in the website development process that needs to be answered and what would the answer be for Charles Schwab in particular?

The question for all companies is: What is the company's goal for its website? The primary objective of Charles Schwab is to sign up new customers.

What will happen if managers undertaking a capital investment analysis overestimate the costs of a replacement decision?

The replacement will be more profitable than anticipated.

The Fed is generating two different money supply reports. The first report provides calculations and summaries related to M1 money, and the second report provides calculations and summaries related to M2 money. What is the main difference between these two reports?

The second report includes money in savings accounts and money market mutual funds, and the first report does not.

Millie owns a small company that makes a decent overall profit. Recently she has been approached by an organization asking her to invest in their new business proposal. Millie would like to invest, but she is not sure she has enough funds to do so. What document should she look at to determine this?

The statement of cash flows.

What is the purpose of an e-procurement system?

To improve the efficiency of the procurement process.

Sheila runs a flooring wholesale business. She is reviewing her cash budget for the quarter. Because most clients purchase on credit, cash comes in at different times. She is trying to see how much money is expected to come in this month. What line will give her the information she wants?

Total cash inflows,

Which of the following is the BEST example of a finance company?

Toyota Motor Credit, a subsidiary of Toyota that finances customers wishing to purchase a new vehicle.

Jennifer lives on a large farm. She and her husband own a tractor supply company. Because Jennifer doesn't get to town often and wants to save banking fees, she is seriously considering doing all of her banking from home. Which of these would be the best solution to meet her needs?

Transfer her business to a direct bank.

When formulating a budget for the coming year, Dalen, the accountant for a relatively new construction company, builds in excess funds for heavy equipment taxes and then adds the outflow to the company's budget. What might be the cause for this?

When formulating the budget last year, equipment taxes were overlooked, causing a major financial upset and restructure of the budget halfway through the year.

Where do the world's 20 largest banks operate?

Worldwide.

Yan's business budget is based on a template she found online. Yan was doing well until this month when she got a bill for her property taxes. Because she thought they were included in her loan payments, she was unprepared and had to pay them from her emergency fund. How can Yan fix this situation?

Yan should double the amount of her taxes, divide it by twelve to get a monthly figure, and then add the outflow to her monthly budget.

The teacher's union has a cooperative financial institution that lends teachers money for homes and automobiles. This situation is an example of

a credit union.

The New York Times experienced a downturn in newspaper sales, but its online subscriptions increased. The increase in online subscriptions is a result of

a paywall.

It is February, and Ace Swimwear is ready to prepare its inventory for the spring and summer rush. In order to pay for enough swimwear to fill the store, the company meets with a local bank. The bank agrees to allow Ace Swimwear to borrow enough to finance this investment with the agreement that it will be repaid within a year, with interest. This situation is an example of

a short-term loan.

Roger writes a blog about his cat and the funny things cats do. Roger's blog is an example of

a story readers will want to follow.

The board of an international shipping company finds out that an activist group has been combing through its financial records. Why will the board accept this behavior?

because the records are publicly available

When Justin, a recent college graduate, decides to invest in both radio and print advertisements to promote his growing lawn care business, his dad suggests that he formulates a detailed ________ in order to determine available cash outflow.

budget

Tony is preparing to sell his dry cleaning chain to a foreign investor. He wants to make sure he is reporting the true value of the business's assets, so he is using the

current market value.

Noble Textiles is selling its factories that produce sports uniforms and athletic apparel since changes in the fabric technology make it less compatible with their other lines. The athletic lines will now be a separate company called Noble Sports. This is an example of which of the following?

divestiture

Equip Now is a nationwide heavy machinery retailer. While they make a profit from the individual sales, they make more money through a subsidiary that lends companies the funds they need to purchase equipment. That subsidiary is a(n)

finance company.

Before going on a vacation to a foreign country, the exchange rate is the most useful information for knowing

how much local currency travelers will receive when they trade their own.

Priscilla opened a local insurance company last year. At the end of her first fiscal year, she met with her accountant and discovered that the company is paying out so much in claims that it is losing money. To make a profit, Priscilla will need to Choose your answer here increase/decrease premiums.

increase

You've done the research and developed a business plan, and you've finally decided to open a small, privately owned business that will manufacture fine furniture. You are putting the executive team in place, and you want to hire an accountant. What information will you need the accountant to provide?

information on financing activities and the competitive economic environment.

Facebook offered stock for sale to the general public for the first time on May 18th, 2012. This is known as a(n)

initial public offering (IPO).

Whether or not a trader has access to privileged knowledge distinguishes

insider trading from legal trading.

An investor looking for a high rate of return on investment, who is willing to accept risk and act as a creditor will likely invest in

investment-grade bonds

Management's flexibility in future financing decisions is decreased the more _________ is/are increased.

leverage

The more ___________ is/are increased, the less flexibility management has in future financing decisions.

leverage

Ruth started a small business but quickly ran out of money. The business showed promise, so her uncle loaned her $20,000 to help keep the company going. With this money, Ruth purchased new equipment and a small company truck. Both of these purchases are

liabilities.

Bobbie is the financial manager for a fast food chain. When she creates plans for the business she has to forecast sales and then project

long term profits.

Rico and Olivia are accountants for the same company. Rico determines the costs of goods and helps set their prices. Olivia examines the firm's financial practices to make sure that its records include accurate data. Rico and Olivia are both

management accountants.

Sargent Crop Protection and Nature's Best Seed Company joined forces to provide full service of plant protection to farmers from disease resistant seeds to topical fungicides. The new company Symbio Seeds and Crops can now compete with much larger companies. This is an example of which of the following?

merger

Interest rates on short-term funds

move up and down frequently.

A _______ acts as a financial intermediary that raises money from investors by selling shares, making it the most significant type of financial institution today.

mutual fund

A __________ creates a pool of money for investing by selling shares in itself.

mutual fund

Matt is in charge of the investment portfolio for his company's retirement fund. While people can take out loans against their accounts, they cannot arbitrarily access funds from their accounts. He works for a

nondepository institution.

At one time an estimated quarter of all the common stocks were held by _________ in investments for people's retirements.

pension funds

As the financial manager for Empire State Fabrication, Grace decides to raise additional funds for the company by raising equity capital. She might do so by

persuading existing owners to contribute additional funds.

As part of its efforts to raise capital and pursue the goals of its business, a company might sell a bond or stock issue to the investing public through the ________ market.

primary

Bentley Outdoor Company's stock rates are consistently rising. The company wants to expand inventory to prepare for the upcoming spring gardening season. It offers partial ownership in the company in the form of stocks. This effectively helps the company gain the needed cash flow in a timely manner. This situation is an example of

public sale.

Which two processes are contrasted by assets being sold to an outside buyer versus current shareholders retaining control of assets?

sell-off and spin-off

The two types of B2C websites are

shopping sites and informational sites.

Projections involving financial plans with longer time horizon, perhaps up to 5 or 10 years are known as ___________ plans.

strategic

Yolanda started selling her beach glass jewelry creations online last month. She has decided to manage her own accounting using Quickbooks, and must now begin recording transactions. Her dad loaned her $1,000, and she put in $2,000 of her own money. She puts her financing omn the right sife because

that is where liabilities and owners' equity appear.

Gabriela is developing a sales forecast for the next two years. This is an example of

the first step of preparing a financial plan.

Logan started a new business three years ago. He believes he is doing well, but he wants to see if his profits have grown over the years, and he wants to know by how much they have grown. What could Logan look at in order to determine this?

the statement of owners' equity for the past few years