Chapter 16

10. Laws, regulations, and the requirements of GAAP require that _____ value be used for financial reporting and income tax purposes. A. book B. fair market C. replacement D. disposal

A

6. In practice, managers of small businesses tend to use which of these when it comes to inventory? A. Heuristic B. EOQ C. Statistical analysis D. JIT analysis

A

Having worked in the door installation industry for about six years, Harry has started his own company called "A-One Garage Doors". The company assembles, installs, provides services and repairs for both residential and industrial garage doors. Like any other business when it comes to residential accounts Harry's conditions are cash but for industrial accounts he thinks he should offer credit. Furthermore, he is contemplating what level of inventory he should keep to meet the demand. 17. Harry needs to know that when it comes to providing credit, this is true. A. It reduces the cost of selling. B. It forces all customers to pay. C. It usually results in lower sales revenues. D. It accelerates the receipt of cash.

A

1. _____ is money that is owed to your business by your customers. A. Inventory B. Accounts receivable C. Factor receivables D. Accounts payable

B

20. If Harry adopts the practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer, it would be referred to as a(n) _____ inventory system. A. point-of-sale B. JIT C. EOQ D. periodic

B

7. . _____ comprises both hardware and software to integrate inventory management directly into your accounting system. A. Microinventory B. Point-of-sale system C. Periodic inventory D. Perpetual inventory

B

11. Potential buyers and investors are most interested in _____ value of your assets. A. book B. fair market C. replacement D. disposal

C

12. _____ refers to the process of deciding among various investment opportunities to create a specific spending plan. A. ROI B. Payback period C. Capital budgeting D. Return on asset

C

15. All of the following are the disadvantages to rental EXCEPT: A. it requires that you make regular payments. B. the number of dollars paid in rent usually exceeds the number of dollars you would spend to own the asset. C. by renting capital equipment you incur ongoing costs if business conditions change. D. you do not have an ownership position.

C

19. If Harry were to use EOQ, it would help him in terms of: A. borrowing cost and buying cost. B. lost sales cost and shelf-life cost. C. ordering cost and carrying cost. D. buying and selling.

C

3. Pledging receivables will get you about _____ of the amount that can be collected, where as, factoring can get you _____ percent of the amount due. A. one-fourth; 90-95 B. one-fifth; 40-45 C. one-half; 75-80 D. three-fourth; 20-25

C

5. Just-in-Time (JIT) inventory system attempts to reduce inventory levels to the absolute minimum by all of the following EXCEPT: A. accepting inventory only as it is sold. B. assembling product in the absolute minimum time possible. C. keeping safety stock in case sales might be greater than forecast. D. shipping product to the customer immediately upon completion.

C

8. Assets that are expected to provide economic benefits for periods of time greater than one year are called: A. accounts receivable. B. short-term investments. C. capital assets. D. cash and cash equivalent assets.

C

13. The two most commonly used financial ratios for comparing investment alternatives are: A. current and quick ratios. B. return on sales and return on investment. C. operating profit margin and net profit margin. D. payback period and ROI.

D

14. Renting capital assets provides all of these advantages EXCEPT: A. it requires little or no cash investment. B. it does not require extensive paperwork. C. it protects you from unexpected repairs. D. it usually results in higher sales revenues due to repeat business.

D

16. Which of the following is not a benefit of leasing? A. You can usually obtain a very low down payment. B. The process of negotiating and closing a lease is usually less complicated and expensive than making a purchase and obtaining borrowed funds. C. It is usually much easier for you to replace leased assets than it is to replace assets you own. D. Leased assets have less number of restrictions on how they may be used, maintained, and disposed of.

D

18. Harry should be made aware that all of these are negative effects of extending credit to his customers EXCEPT: A. he may end up borrowing money to fill the gap. B. sometimes customers who use credit will not pay. C. it delays the receipt of cash. D. it increases the cost of selling.

D

2. All of these are negative effects of extending credit to customers EXCEPT: A. it delays the receipt of cash. B. it creates a borrowing situation for the owners of the business providing credit. C. some customers with credit will not pay. D. it increases the cost of selling.

D

21. If Harry adopts a perpetual inventory system, _____ is one method that can be used to reduce the cost. A. periodic inventory B. JIT C. microinventory D. bar coding

D

4. The _____ is the amount of inventory that results in the minimum cost, considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory. A. microinventory B. periodic inventory C. EOQ D. optimum stocking level

D

9. Depreciation is based on all of the following assumptions EXCEPT A. that the asset has a fixed, determinable period of utility. B. that the asset has a fixed, determinable value that will exist when the depreciation process is complete. C. that the value of the asset will decline in a continuous and predictable manner over the period of utility. D. that it is the cost incurred to replace one asset with an identical asset.

D