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6. B Regulatory guidelines. Financial institutions are required to follow governmental rules and regulations. Following these regulatory guidelines is the process of compliance. The purpose of compliance is to make the industry safe for consumers and to maintain the stability of the financial system. Compliance does not involve operating within specific territories, organization plans, or different relationships. SOURCE: BL:148 SOURCE: Adshead, A. (2014, May). Principles of compliance in the financial services. Retrieved September 9, 2015, from http://www.computerweekly.com/feature/Principles-of-compliancein-the-financial-services-industry

testfin1123.txt BL:148 6. Compliance in the finance industry involves financial institutions operating within A. specific territories. B. regulatory guidelines. C. organizational plans. D. different relationships.

80. D Planning. A risk analysis takes place in the planning stage of project management. Project managers analyze risk in an effort to prepare to minimize its effects as much as possible. In the initiation phase, the idea for the project is assessed and a statement of work and project charter are drafted. In the execution phase, the work of the project is completed. In the closing phase, project managers deliver the final product and tie up any loose ends. SOURCE: OP:158 SOURCE: LAP-OP-158—Projected To Win (Nature of Project Management)

testfin1184.txt OP:158 80. In which stage of project management does risk analysis take place? A. Closing B. Initiation C. Execution D. Planning

18. D Simple explanations. When providing product information to clients, finance professionals should keep the clients' point of view in mind. Clients may not be familiar with finance industry jargon, technical terms, or acronyms. Therefore, finance professionals should use simple, clear language that clients understand. While standard responses are sometimes helpful to finance professionals, it is usually better to keep individual clients in mind when providing product information since different clients are likely to have different knowledge bases. SOURCE: CR:012 SOURCE: Financial Planning Association. (n.d.). A financial professional's guide to working with older clients. Retrieved September 9, 2015, from http://assets.aarp.org/www.aarp.org_/articles/money/financial_planning/financial_professiona l.pdf

testfin1123.txt CR:012 18. When providing product information to clients, finance professionals should use A. standard responses. B. technical terms. C. financial acronyms. D. simple explanations.

30. D It prevents Maureen from hearing the criticism clearly. Defensiveness raises a barrier between you and the speaker. Most of us feel angry or resentful when we are criticized, especially when the criticism is unjust. However, we cannot afford to exhibit this kind of attitude on the job. If Maureen listened with an open mind to the supervisor, she might learn not only how to correct her mistakes but how to avoid the mistakes in the future. Maureen's attitude indicates immaturity rather than a desire to call attention to herself. SOURCE: EI:003 SOURCE: EI LAP 15—Grin and Bear It (Using Feedback for Personal Growth)

testfin1123.txt EI:003 30. Maureen becomes angry and defensive whenever her supervisor asks Maureen to correct mistakes. Maureen's attitude is not a good response to criticism because A. it indicates that Maureen wants to call attention to herself. B. there is no reason to be angry about criticism. C. Maureen has no right to be angry on the job. D. it prevents Maureen from hearing the criticism clearly.

43. D Corporate bonds and preferred stock. Capital markets buy and sell long-term securities. Corporate bonds, common and preferred stock, and treasury bonds are examples of securities that are sold on capital markets. Treasury bills and certificates of deposit are money market securities, which are shortterm securities. SOURCE: FI:337 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (p. 7). Mason, OH: South-Western Cengage Learning. Test 1123 FINANCE CLUSTER EXAM—KEY 22

testfin1123.txt FI:337 43. If Hannah wants to invest in the capital markets, what types of securities should she purchase? A. Corporate bonds and treasury bills B. Common stock and certificates of deposit C. Treasury bills and certificates of deposit D. Corporate bonds and preferred stock

44. B A financial holding company. Because financial holding companies provide a wide variety of financial services and related products, the Federal Reserve Board supervises their activities. The primary services that an accounting firm provides include accounting, tax preparation, auditing, and bookkeeping services. Some financial holding companies may offer accounting services. Commodities investors invest their funds in goods (futures) such as grains, livestock, raw materials, etc. A central bank is often responsible for determining interest rates, controlling the nation's money supply, and regulating the banking industry. The Federal Reserve is an example of a central bank. SOURCE: FI:573 SOURCE: Investopedia. (2015). Financial holding company (FHC). Retrieved September 10, 2015, from www.investopedia.com/terms/f/financial-holding-company-fhc.asp

testfin1123.txt FI:573 44. Supervised by the Federal Reserve Board, The DAB Company provides investment advisory services, insurance underwriting, securities underwriting, and merchant banking services. What does the DAB Company exemplify? A. An accounting firm B. A financial holding company C. A central bank D. A commodities investor

45. D Gross Domestic Product, unemployment, and inflation. According to most analysts, the three economic indicators that impact the stock market the most (and, therefore, the three that stock mar ket investors and traders should pay the closest attention to) are the Gross Domestic Product, unemployment, and inflation. The Gross Domestic Product (GDP) is the final market value of the total output of all goods and services produced within a country's geographic boundaries during a year's time. The stock market mirrors the GDP—if the GDP goes up, the stock market usually goes up with it. The unemployment rate is the percentage of the workforce that is unemployed. The stock market is inversely related t o the unemployment rate—if the unemployment rate goes up, stock prices usually go down. Inflation is a rapid rise in prices that may occur when demand exceeds supply or when productivity declines and costs of labor go up. If inflation and interest rates both rise, the stock market will suffer. However, if inflation goes up while interest rates stay low, the stock market is likely to benefit. Overhead expenses and bond rates are not economic indicators. SOURCE: FI:574 SOURCE: Levitt, A. (2013, April 3). Economic indicators that affect the U.S. stock market. Retrieved September 10, 2015, from http://www.investopedia.com/articles/investing/031413/economicindicatiors-affect-us-stock-market.asp

testfin1123.txt FI:574 45. According to most analysts, the three economic indicators that stock market investors and traders should pay the closest attention to are A. inflation, unemployment, and bonds rates. B. interest rates, overhead expenses, and inflation. C. Gross Domestic Product, overhead expenses, and unemployment. D. Gross Domestic Product, unemployment, and inflation.

63. D Debt modeling. Some budgeting software applications include a debt modeling tool which allows the user to assess the potential impact of loans and lines of credit. To use the debt mo deling tool, the user would input the terms of the loan or line of credit, including the interest rate, term, principal, etc. Decision trees are a data-mining technique commonly used to classify data and build models. Environmental scanning involves gathering information about the environment surrounding a business, analyzing that information, and determining the future impact of that information on the business. Zero-based budgeting is a method of budgeting that requires a manager to demonstrate the need for every expense instead of relying on figures from a previous period. SOURCE: FM:013 SOURCE: Software Advice. (n.d.). PlanGuru software. Retrieved September 15, 2015, from http://www.softwareadvice.com/accounting/planguru-profile/

testfin1123.txt FM:013 63. Tara knows that for her small business to grow, she must increase her cash flow. She's unsure, though, whether she should take out a loan or a line of credit. Which of the following budgeting software tools could Tara use to assess the potential impact of each source of funding on her business: A. Zero-based modeling B. Decision trees C. Environmental scanning D. Debt modeling

84. C Self-esteem. Self-esteem is the regard or respect that you have for yourself. People who have selfesteem understand themselves and like who they are. Social acceptance involves being accepted by others. Safety is associated with personal security and protection from harm. Self-fulfillment involves personal growth, achievement, and reaching one's fullest potential. SOURCE: PD:013 SOURCE: Ponton, L. (2013). Building self-esteem. Psych Central. Retrieved on September 22, 2015, from http://psychcentral.com/lib/building-self-esteem/

testfin1123.txt PD:013 84. Recognizing your strengths and weaknesses helps you to accept yourself, which is one of the foundations of A. safety. B. social acceptance. C. self-esteem. D. self-fulfillment.

88. C Stakeholders'. Corporate governance is the system of rules and practices that control the company. Corporate governance revolves around balancing the desires of the stakeholders in a company. Corporate governance is not just concerned with the CEO's or vendors' desires; instead, it focuses on the desires of all stakeholders, including customers, financiers, the community, the government, and managers. Corporate governance is not necessarily concerned with a company's competitors' desires. SOURCE: PD:213 SOURCE: Investopedia. (2015). Corporate governance. Retrieved September 10, 2015, from http://www.investopedia.com/terms/c/corporategovernance.asp Test 1123 FINANCE CLUSTER EXAM—KEY 31

testfin1123.txt PD:213 88. Corporate governance is primarily concerned with __________ desires. A. vendors' B. CEO's C. stakeholders' D. competitors'

89. A It encourages transparency. Corporate governance creates a more transparent business environment, which can increase investor confidence, create a defined brand, and minimize corruption. SOURCE: PD:213 SOURCE: Management Study Guide. (2013). Corporate governance-Definition, scope, benefits. Retrieved September 10, 2015, from http://www.managementstudyguide.com/corporategovernance.htm

testfin1123.txt PD:213 89. Which of the following is a benefit of corporate governance: A. It encourages transparency. B. It decreases investor confidence. C. It creates a less definable brand. D. It maximizes corruption.

91. A Chief executive officer. The board of directors is the group of people chosen to govern the activities of a corporation. The board members are elected by the corporation's shareholders. The corporation's chief executive officer (CEO) reports directly to the board of directors. The vice president of operations is most likely to report to the CEO. The accounting manager and director of marketing are mid -level managers. The accounting manager is most likely to report to the vice president of finance, and the director of sales is most likely to report to the vice president of marketing. SOURCE: PD:302 SOURCE: Investopedia. (2015). The basics of corporate structure. Retrieved March 10, 2015, from http://www.investopedia.com/articles/basics/03/022803.asp

testfin1123.txt PD:302 91. Which employee reports directly to a corporation's board of directors? A. Chief executive officer B. Accounting manager C. Vice president of operations D. Director of sales Test 1123 FINANCE CLUSTER EXAM—KEY 12

97. A Reduces tax due on the captive's premiums. Even if it is not associated with an insurance company, an individual company, industry, or association may create a captive insurance company to spe cifically protect its parent group(s). The captive insurer aids its parent group(s) by reducing premium expenses, freeing up capital, and covering risks not commonly addressed by the greater insurance company. In addition, forming a captive insurance company can reduce, eliminate, or defer federal taxes due on the corporation's insurance premiums. A captive insurer typically decreases the tax due on a company's loss reserves. Forming a captive insurance company does not typically increase the corporation's sales tax liabilities, nor does it eliminate the corporation's state tax liabilities. SOURCE: RM:043 SOURCE: Bertucelli, R.E. (2013, March 1). The benefits of captive insurance companies. Retrieved September 15, 2015, from http://www.journalofaccountancy.com/Issues/2013/Mar/20126102.htm

testfin1123.txt RM:043 97. How does forming a captive insurance company typically impact a corporation's federal tax liability? A. Reduces tax due on the captive's premiums B. Increases tax due on the captive's loss reserves C. Increases the corporation's sales tax liabilities D. Eliminates the corporation's state tax liabilities

99. A Most risks are predictable and manageable. Enterprise risk management is important and helpful because most business risks are predictable and manageable. If a company can plan for risks, it can minimize its losses. Although some risks are surprises, most of them are not. Not managing risks can cause loss of shareholder value. ERM should reduce business costs in the long run by helping a business avoid or manage risks that could lose money. SOURCE: RM:062 SOURCE: Thomson Reuters. (n.d.). Practical guidance: Seven steps for effective enterprise risk management. Retrieved September 10, 2015, from https://web.actuaries.ie/sites/default/files/ermresources/233_Seven_Steps_to_Enterprise_Risk_Management.pdf

testfin1123.txt RM:062 99. It is important for companies to practice enterprise risk management (ERM) because A. most risks are predictable and manageable. B. it leads to loss of shareholder value. C. most risks are unexpected. D. it increases business costs in the long run. Test 1123 FINANCE CLUSTER EXAM—KEY 13

16. C What are the client's expectations? To provide the level of service that their clients desire, finance professionals need to understand and know the level of service and communication that their clients expect. To build long-term client relationships, finance professionals should participate in ongoing communication with clients, which includes following up with clients to answer questionsand resolve problems. Answering questions about personal career goals and personal financial returns are not directly related to providing the appropriate levels of service to clients. SOURCE: CR:012 SOURCE: Jarrell, M. (2015, August 4).7 questions all financial advisors need to ask. Retrieved September 15, 2017, from http://www.investopedia.com/articles/financial-advisors/080415/7-questions-all-financial-advisors-need-ask.asp

testfin1163.txt CR:012 16. What question should finance professionals ask to provide the appropriate types and levels of service to their clients? A. How can I maximize my returns? B. Should I follow up with the clients? C. What are the client's expectations? D. Are my goals realistic and attainable?

80. A Wikis. Project management can benefit greatly from user-generated, user-updated websitescalled wikis. Encyclopedias, forums, and flash drives are not names of commonly used technologies for project management. SOURCE: OP:158 SOURCE: LAP-OP-006—Projected to Win (Nature of Project Management) Test 1163 FINANCE CLUSTER EXAM—KEY 29

testfin1163.txt OP:158 80. Project management can benefit greatly from user-generated, user-updated websites called A. wikis. B. forums. C. encyclopedias. D. flash drives.

17. B Customer life. The basic steps of the customer life cycle involve attracting current customers, acquiring new customers, serving the customers, and retaining the customers. The accounting cycle begins when a sale is made and ends when the books are closed in accounting. Business cycles are the rise and fall in economic activity that businesses experience. Customer complaint cycle is a fictitious term. SOURCE: CR:024 SOURCE: CRMsolution.com. (n.d.). CRM software strategy: Sample CRM objectives.Retrieved September 15, 2017, from http://www.crmsolution.com/crm-strategy.html

testfin1163.txt CR:024 17. Customer Relationship Management (CRM) processes should support the basic steps of the __________ cycle. A. accounting B. customer life C. customer complaint D. business Test 1163 FINANCE CLUSTER EXAM 3

41. C Short-term debt securities. Investors who put their funds into a money market are typically looking for a source of additional capital that will mature in a short period of time, usually less than one year. Examples of short-term debt securities include Treasury bills and certificates of deposit. Short-term debt securities often carry less risk than long-term debt and equity securities, which are bought and sold on capital markets. SOURCE: FI:337 SOURCE: Maverick, J.B. (2015, May 13). What's the difference between short-term investments and marketable securities?Retrieved September 15, 2017, from http://www.investopedia.com/ask/answers/051315/whats-difference-between-shortterminvestments-and-marketable-securities.asp

testfin1163.txt FI:337 41. Which of the following securities is most likely to be bought and sold on a money market: A. Short-term equity securities B. Long-term debt securities C. Short-term debt securities D. Long-term equity securities

42. C One-stop shopping environment for consumers. Convergence, which is the merging of financial providers from different financial sectors, and consolidation, which is the merging of financial providers within the same institutional category, have created a one-stop shopping environment for consumers. Rather than having to go to different financial providers for different financial products and services, customers can find all of the financial products that they need—banking services, insurance policies, brokerage services, etc.—in one place, from one company. Rather than creating a highly compartmentalized finance industry, convergence and consolidation have created finance companies that want to be everything to everybody. Rather than specializing in any one service, many of today's financial firms offer a vast array of products and services. As financial firms merge and grow in size, it becomes more difficult for financial experts and the government to get an accurate picture of the firms' current financial condition. As finance corporations expand their product offerings to encompass several financial sectors, it becomes increasingly difficult to determine which agency should oversee the companies. There is no single supervisory agencyto regulate the entire finance industry. SOURCE: FI:573 SOURCE: MBA Research and Curriculum Center. Introduction to finance course guide (pp. 4-49—4-51). Columbus, OH: Author.

testfin1163.txt FI:573 42. Convergence and consolidation in the finance industry have resulted in a(n) A. more accurate picture of financial firms' financial condition. B. highly compartmentalized finance industry. C. one-stop shopping environment for consumers. D. single supervisory agency to regulate the finance industry.

43. A Healthcare. Healthcare, food, drink, and tobacco are generally considered to be non-cyclical industries, meaning that they are not greatly impacted by changes in the business cycle. The demand for such products and their stocks remains fairly steady regardless of the stage of the business cycle. Stocks in industry sectors such as energy, technology, and capital goods, on the other hand, often change in response to changes in the business cycle. The energy sector is affected by supply anddemand of energy around the world, and political unrest can impact the industry considerably. Energystocks seem to perform best late in the business cycle. Technology stocks are also affected by the business cycle, often in direct relation to the demand for capital goods. Technology stocks and capital goods stocksdo well during business cycle expansion. SOURCE: FI:574 SOURCE: Moffatt, M. (2016, May 12). A beginner's guide to economic indicators.Retrieved September 18, 2017, from http://economics.about.com/cs/businesscycles/a/economic_ind.htm Test 1163 FINANCE CLUSTER EXAM—KEY 21

testfin1163.txt FI:574 43. Stocks in which of the following industry sectors are least likely to be affected by changes in the business cycle: A. Healthcare B. Energy C. Technology D. Capital goods

62. D Digital microfilm scanner. Businesses must keep a variety of financial informationfor a certain length of time, often for several years. Many businesses have saved their archived financial information on microfilm. Microfilm is a type of film that stores photographed images and text in a condensed format for easy storage. A digital microfilm scanner can take existing microfilm, which is older technology, and convert it into a digital format. The advantage to switching microfilm records to a digital format is that businesses can easily view the data on computers and share information quickly through the Internet. Direct-response software is a computer program that helps businesses automate their direct-marketing efforts. Electronic data interchange (EDI) is a network of computers that allows businessesto share information. Businesses use web-development programs to develop and maintain web sites. SOURCE: FM:011 SOURCE: Tomas, L. (n.d.).How to convert mircrofilm with personal scanner. Retrieved September 15, 2017, from https://ourpastimes.com/scan-microfilm-personal-scanner-7470174.html Test 1163 FINANCE CLUSTER EXAM—KEY 25

testfin1163.txt FM:011 62. Which of the following is a technological tool that businesses use to archive their financial records: A. Web-development programs B. Direct-response software C. Electronic data interchange D. Digital microfilm scanner

63. A Revenue recognition. The primary function of budgeting software is to help a business forecast and monitor income and expenses for all of its functions, including sales, promotion, production, payroll, etc. Advanced software can generate different types of reports by integrating financial data from a variety of sources (e.g., cash flows) to help the business make decisions about how to best manage its money. Because an important aspect of budgeting involves knowing how much money the business has at any given time, revenue recognition applications help the business track various sources of revenue. Analyzing the amount of revenue available helps the business determine how to allocate funds to cover its various cash outflows, such as capital expenses, inventory purchases, and operating (e.g., workflow) expenses. SOURCE: FM:013 SOURCE: Centage Corporation. (2001-2014). Compare Budget Maestro budgeting software products. Retrieved September 15, 2017, from http://centage.com/Products/Editions/Budget-MaestroCompare.asp

testfin1163.txt FM:013 63. Which of the following budgeting software applications tracks a business's cash, interest, and dividends: A. Revenue recognition B. Workflow management C. Inventory planning D. Capital expenses

91. D Independent thinking. It is important for members of a corporation's board of directors to be able to think independently. This involves questioning current policies and proposed actions so that the board as a whole acts in the best interests of the corporation and its shareholders. Board members should also be open-minded and willing to listen to suggestions and different opinions so they can make informed, thoughtful decisions. Conformity often involves following or agreeing with others to"fit in" with the group. Conformity can lead to decision-making practices that do not look out for the best interests of the corporation and its shareholders. SOURCE: PD:214 SOURCE: Hoban, M. (2013, March 8). Outstanding directors: The five essential traits for great directors. Retrieved September 18, 2017, from http://www.bizjournals.com/baltimore/printedition/2013/03/08/outstanding-directors-the-five.html

testfin1163.txt PD:214 91. Which of the following is a positive characteristic for the members of a corporation'sboard of directors to possess: A. Single-minded attitude B. Conformity C. Indecisiveness D. Independent thinking

98. B Loss reduction. Loss reduction is a form of risk control. Risk control methods are used to reduce or minimize loss. Loss reduction lessens the impact of a loss after it occurs. For instance, although the automatic sprinklers won't prevent a fire from starting, they will lessen the impact that the fire has on the company's buildings. Companies utilize loss avoidance when they choose not to take part in risky activity. Loss prevention focuses on stopping certain losses from occurring. Companies transfer riskby purchasing insurance and entering into contracts that transfer the risk to others. SOURCE: RM:058 SOURCE: Burrow, J.L. (2012) Marketing(3rd ed.) [pp. 533-549]. Mason, OH: Thomson/South-Western. Test 1163 FINANCE CLUSTER EXAM—KEY 33

testfin1163.txt RM:058 98. A company installs automatic sprinklers in all of its facilities. Which of the following techniques is the company using to combat the internal threat of fire: A. Loss avoidance B. Loss reduction C. Loss prevention D. Risk transfer

16. D Lack of communication. Although a poor investment return, high commission fees, or the geographic location of the financial advisor's office may influence a client's decision to leave the advisor, the most common reason given for firing a financial advisor is a lack of communication. Above all else, financial clients expect—and need—their advisors to communicate on a regular basis. This means returning the clients' phone calls as soon as possible, replying quickly to their emails, and contacting them regularly to discuss their accounts and answer any questions that they might have. SOURCE: CR:012 SOURCE: O'Connell, B. (n.d.). Why clients fire financial advisors. Retrieved September 14, 2018, from https://www.investopedia.com/articles/professionals/071113/why-clients-fire-financialadvisors.asp

testfin1184.txt CR:012 16. What is the most common reason for a client to leave or fire his/her financial advisor? A. Location of the office B. Poor investment return C. High commission fees D. Lack of communication

30. C Negative. A person who is defensive is easily angered or upset by criticism or suggestions perceived as criticism. His/Her defensive response is usually irritating to the person offering the criticism or suggestions, which may trigger an unsympathetic, unpleasant, or uncooperative reaction from the speaker. SOURCE: EI:003 SOURCE: LAP-EI-015—Grin and Bear It (Using Feedback for Personal Growth)

testfin1184.txt EI:003 30. When you react defensively to criticism, the result is likely to be A. pleasant. B. sympathetic. C. negative. D. cooperative.

52. A Examining the relevant costs of advertising options. Managerial accountants can use techniques such as relevant cost analysis to assist marketers in making decisions regarding advertising options. They can determine which will have the lowest and highest costs. Determining whether to buy or make a component is not necessarily a marketing decision. Developing a target market analysis would generally not be a task for a managerial accountant. Creating a budget for hiring increases is not directly related to marketing products. SOURCE: FI:660 SOURCE: Freedman, J. (2018, June 27). Why management accounting is important in decisionmaking. Retrieved September 14, 2018, from http://smallbusiness.chron.com/managementaccounting-important-decisionmaking-53947.html

testfin1184.txt FI:660 52. A managerial accountant can help a company market its products by A. examining the relevant costs of advertising options. B. determining whether to make or buy a component. C. developing a target market analysis. D. creating a budget for hiring increases.

53. B Purchase price. A variance is the difference between an established standard and the actual outcome. It is important for a business to monitor variances in the price of raw materials because they affect its bottom line. When a vendor increases the prices that it charges for raw materials, it costs the business (manufacturer) more money to produce an item. The business may need to find a vendor that charges less for the materials or parts, or it may need to increase its selling price—the amount that the business charges its customers for the finished good. Fixed overhead costs are expenses that do not change in relation to changes in sales volume and include things such as rent and employee salaries. Material yield analysis involves analyzing variances in the number of materials/products that are supposed to be used/sold with the actual number of materials/products that have been used/sold in a certain timeframe. SOURCE: FI:661 SOURCE: Bragg, S. (2017, August 30). Variance analysis. Retrieved September 14, 2018, from https://www.accountingtools.com/articles/what-is-variance-analysis.html

testfin1184.txt FI:661 53. What type of variance analysis involves determining the difference between the standard costs and the actual costs of raw materials used for production? A. Selling price B. Purchase price C. Material yield D. Fixed overhead

63. B Automated data transfer. Businesses typically use different software programs to accommodate their various needs. To quickly and efficiently obtain the financial information stored in other programs, some budgeting software programs have applications that automatically transfer data from other programs (e.g., ERP and CRM) to facilitate budget development and report generation. The cross-reference function in a spreadsheet program enables computer users to locate related data or information in other worksheets, spreadsheets, etc. The group function in a spreadsheet program enables computer users to group different cells of data. In spreadsheet applications, the data validation function ensures that computer users input correct values into specific spreadsheet cells. SOURCE: FM:013 SOURCE: Centage Corporation. (2018). ERP system data integration with your accounting or g/l system. Retrieved September 14, 2018, from http://centage.com/Products/Editions/LinkMaestro.asp

testfin1184.txt FM:013 63. What computer application enables a business to access information from its enterprise resource planning (ERP) software program for use in its budgeting software program? A. Cross-reference B. Automated data transfer C. Group D. Data-validation

90. C Corporate governance aligns the interests of individuals, corporations, and society. Corporate governance aligns the interests of all stakeholders and emphasizes group goals. It makes a firm's managers accountable to the shareholders and protects the interests of all stakeholders. SOURCE: PD:213 SOURCE: Klazema, A. (2014, May 14). The importance of corporate governance. Retrieved September 13, 2018, from https://blog.udemy.com/importance-of-corporate-governance/

testfin1184.txt PD:213 90. Which of the following statements regarding corporate governance is true: A. Corporate governance makes a firm's shareholders accountable to its managers. B. Corporate governance emphasizes individual goals over group goals. C. Corporate governance aligns the interests of individuals, corporations, and society. D. Corporate governance is only used to protect the interests of the shareholders.

97. A Captive insurance companies; transfer. Organizations (i.e., corporations, industry/professional/trade associations) often form their own insurance companies, which are known as captive insurance companies. The founding organizations control their captive insurance companies' underwriting processes, premium rates, and claims-processing policies. This is an advantage to the founding companies because a primary reason they form their own insurance companies is they often carry risks that commercial insurance companies do not cover. For example, mining companies tend to carry more risk due to the dangerous nature of the mining process. When businesses purchase insurance, they are minimizing risks by transferring them to another entity; therefore, in these situations, businesses are not avoiding or assuming risks. Organizations do not form insurance rating companies, insurance brokerage firms, or independent life insurance agencies to transfer unusual types of risks. SOURCE: RM:043 SOURCE: Wallace, O., & Foster, N. (2014, November 6). What is captive insurance? Retrieved September 13, 2018, from http://www.wisegeek.com/what-is-captive-insurance.htm

testfin1184.txt RM:043 97. When businesses in a particular industry carry risks that commercial insurance companies typically do not cover, they often form __________ to __________ risk. A. captive insurance companies; transfer B. insurance rating companies; avoid C. insurance brokerage firms; assume D. independent life insurance agencies; minimize

98. B It determines the minimum reserve requirements in financial trading. Different measures can result in a lower or higher minimum reserve requirement, which results in a lower or higher profit for the financial institution. Although it does not designate the audience that will receive the resulting financial reports, some financial measures should be used for internal purposes while other measures are more appropriate for external audiences. The number of clients to serve and the types of risks to be encountered are not aspects of selecting a risk measure. SOURCE: RM:058 SOURCE: Ingram, D. (n.d.). External and internal factors of financial risk. Retrieved September 18, 2018, from http://smallbusiness.chron.com/external-internal-factors-financial-risk-4563.html

testfin1184.txt RM:058 98. Why is the choice of a risk measure for internal and external risk of great practical importance? A. It determines the maximum number of clients that can be served effectively by a financial institution. B. It determines the minimum reserve requirements in financial trading. C. It identifies the types of risks that the financial institution will encounter. D. It designates the audience that will receive the resulting financial reports.

40. D Derivatives. Derivatives, including options, futures, and swaps, are complex financial instruments whose value depends upon the value of other financial instruments (e.g., currencies, securities, commodities, etc.) or a market index. Derivatives are often used on a global scale to help reduce the impact of significant fluctuations in currency exchange rates, the prices of specific commodities, etc. Stocks, bonds, and real estate are not commonly used in this manner. Stocks are shares of ownership in a corporation. Bonds are lending investments in which individuals lend money to a government, municipality, or corporation to earn a set rate of interest for a specified time period. Real estate is an ownership investment in which individuals purchase property in buildings and land. SOURCE: FI:575 SOURCE: Investopedia. (2018). Derivative. Retrieved October 23, 2018, from http://www.investopedia.com/terms/d/derivative.asp

testfin1194.txt FI:575 40. Which of the following securities is commonly used to help reduce the impact of significant fluctuations in exchange rates and commodities: A. Real estate B. Stocks C. Bonds D. Derivatives

52. C Conducting a cost analysis and explaining the findings to management. Managerial accountants conduct many types of financial analyses. A cost analysis involves measuring direct expenses such as materials and labor and indirect expenses such as overhead costs in order to estimate the total cost of a project. Managerial accountants are responsible for explaining the findings of their analyses to management so that management can make informed financial decisions. Managerial accountants are strictly internal accountants, meaning their work is not typically released to the public. Managerial accountants do not make management decisions regarding planning, pricing, and sales—they simply inform and advise management on company finances. Managerial accountants do not train employees or management on personal financial literacy. SOURCE: FI:660 SOURCE: All Business Schools. (2018). Role of the management accountant. Retrieved October 23, 2018, from http://www.allbusinessschools.com/accounting/common-questions/role-of-themanagement-accountant/

testfin1194.txt FI:660 52. Which of the following is a responsibility of a managerial accountant: A. Making managerial decisions regarding planning, pricing, and sales B. Compiling the company's financial information for release to the public C. Conducting a cost analysis and explaining the findings to management D. Training employees and management on personal financial literacy

80. B S/He can mobilize the necessary resources to get the project done. The project champion is a person who can mobilize the necessary resources to get the project done. S/He is usually a high-ranking person within the organization who sponsors the project but is not necessarily closely involved in the work of the project. S/He is instrumental in choosing a project manager but does not personally fulfill that role. SOURCE: OP:158 SOURCE: LAP-OP-158—Projected To Win (Nature of Project Management)

testfin1208.txt OP:158 80. Which of the following is a true statement regarding a project champion: A. S/He is the same person as the project manager. B. S/He can mobilize the necessary resources to get the project done. C. S/He is usually a low-ranking employee in the business. D. S/He is closely involved in the work of the project.

54. C A budget analysis provides an overview, while standard cost analysis shows the details of variances. When employees analyze a budget, they can determine overall variances in their projections; however, they cannot determine the causes (or the details) of the variances in projections. That information is provided by analyzing standard costs to determine whether too much money was paid for materials, too much time was spent on labor, materials were wasted, or the amount of inputs required differed from projections. This helps businesses pinpoint problems. Both budgets and standard costs deal with projected or forecasted amounts, quality and quantity considerations, and all staff involved in setting the projections. SOURCE: FI:662 SOURCE: Cliffs Notes. (2018). Standard costs. Retrieved October 23, 2018, from https://www.cliffsnotes.com/study-guides/accounting/accounting-principles-ii/flexiblebudgets-and-standard-costs/standard-costs Test 1194 FINANCE CLUSTER EXAM—KEY 25

testfin1194.txt FI:662 54. How does analysis of standard costs differ from analysis of a budget? A. A budget analysis deals with quality and quantity considerations, while standard cost analysis deals with quantity considerations. B. A budget analysis shows forecasted amounts, while standard cost analysis shows actual costs. C. A budget analysis provides an overview, while standard cost analysis shows the details of variances. D. A budget analysis is conducted by all staff involved in setting the budget, while standard cost analysis is conducted by a departmental manager.

77. C Used entirely new technology. There are many different types of projects and ways to categorize projects. One type is projects that use entirely new technology. Hybrid cars are an example of this because they required entirely new technology. Though the introduction of hybrid cars required new technology, it was not the project that created the technology itself. Hybrid cars are not an enhancement of an existing project. They also were not created using existing technology. SOURCE: OP:158 SOURCE: LAP-OP-158—Projected To Win (Nature of Project Management)

testfin1194.txt OP:158 77. When the hybrid vehicle was introduced, it was an example of a project that A. created new technology. B. created a new product using existing technology. C. used entirely new technology. D. enhanced an existing project.

87. D Profit-sharing. Employees are key in the achievement of governance objectives. Businesses use many different tactics to encourage or motivate their workers to reach those objectives and goals. Profit-sharing is a good tactic to adopt if the company seeks to improve employee motivation by improving the distribution of wealth throughout the corporation. Cash incentives, team-building, and flexible scheduling may improve overall employee motivation, but they do not improve the distribution of wealth throughout the corporation. SOURCE: PD:301 SOURCE: Investopedia. (2018, October 20). Proft-sharing plan. Retrieved October 22, 2018, from https://www.investopedia.com/terms/p/profitsharingplan.asp

testfin1194.txt PD:301 87. The Farside Corporation wants to encourage its workforce to better achieve governance objectives. Which tactic should the company use to motivate its employees and improve the distribution of wealth throughout the corporation? A. Flexible scheduling B. Cash incentives C. Team-building D. Profit-sharing

98. B Conduct background checks on job applicants. Because hiring and training employees is an expense for businesses, they should ensure that the applicants' previous work experiences do not present business risks for them. Because applicants are unlikely to discuss unfavorable past work experiences during an interview, businesses need to take action to verify the information on their employment applications. Employers should confirm the applicants' previous employment, verify their references, and conduct background checks on applicants if needed. CopyIt may have reduced its liability by checking the drivers' previous driving records and employment history before extending job offers to them. There is not enough information provided to determine if the accidents involve substance abuse, so mandating monthly drug testing for all employees may not prevent future driving accidents. Requiring current drivers to take a driving exam every six months will not prevent the business from hiring unsafe drivers. SOURCE: RM:043 SOURCE: Noe, R.A., Hollenbeck, J.R., Gerhart, B., & Wright, P.M. (2010). Human resource management: Gaining a competitive advantage (7th ed.) [pp. 252-253]. New York: McGrawHill/Irwin.

testfin1194.txt RM:043 98. CopyIt Printing Company employs several delivery drivers. Last year, the local police cited two of the company's new drivers for causing accidents that resulted in passenger injuries and vehicular damage. The printing company later discovered that the drivers were cited for numerous traffic violations while employed for other companies. To avoid hiring unsafe drivers in the future, the company should A. mandate drug testing for all employees on a monthly basis. B. conduct background checks on job applicants. C. require delivery drivers to take a driving exam every six months. D. ask job applicants about their former employers during the interview process.

100. B Develop a way to encrypt and store customers' bank information in the company database for future use. By encrypting the information, the company can eliminate some of the risk of storing customers' banking information while making the payment process easier, leading to less lost revenue and more satisfied customers. Letters explaining the policy may help customers understand the need for security, but they do nothing to help with the loss of revenue or to satisfy customers. Eliminating the pay-by-phone option would upset the customers who pay in that manner, and requiring payments by mail would probably lead to more lost revenue. Asking customers to set up automatic payments doesn't mean they will, and it doesn't address what they want—an easy way to pay by phone; it would not eliminate the need to store the banking information. SOURCE: RM:062 SOURCE: Kaplan, R., & Mikes. A. (2012, June). Managing risks: A new framework. Retrieved October 22, 2018, from https://hbr.org/2012/06/managing-risks-a-new-framework

testfin1194.txt RM:062 100. The Davis Company requires customers to provide their banking information each time they pay by phone to eliminate the financial and legal risks associated with storing banking information. However, customers strongly desire the ability to quickly pay by phone and often do not have their banking information available. The current situation is causing late and missed payments, resulting in lost revenue for the company. Dissatisfied customers experiencing late fees, who often rant about the company's poor service online, are creating a poor brand image for the company. Which of the following actions should the company take to best manage its legal, financial, IT, and brand risks: A. Send letters explaining how the current payment policy protects customers' personal information. B. Develop a way to encrypt and store customers' bank information in the company database for future use. C. Eliminate the pay-by-phone option and require customers to mail their payments to a P.O. Box. D. Encourage customers to set up automatic electronic payments, eliminating the need to store the information. Test 1194 FINANCE CLUSTER EXAM—KEY 14

97. D The insurance policy holders are also the company's stockholders. A risk retention group is a type of insurance company that is owned by its members—its stockholders. As the owner of the insurance company, a risk retention group retains and controls its liability rather than transferring its risks to another entity. Risk retention groups are typically formed by similar businesses and industries and pay lower licensing fees than traditional insurance companies. SOURCE: RM:043 SOURCE: Investorwords.com. (2019). Risk retention group (RRG). Retrieved August 9, 2019, from http://www.investorwords.com/15646/risk_retention_group_RRG.html

testfin1208.txt RM:043 97. Which of the following statements is true regarding risk retention groups: A. Risk retention groups tend to pay higher licensing fees than traditional insurance companies. B. A risk retention group may insure companies from many different industries. C. Group members control risk by retaining equity and transferring liability to external sources. D. The insurance policy holders are also the company's stockholders. Test 1208 FINANCE CLUSTER EXAM 12

2. C Prevent the banking system from failing. Regulations require safeguards that help ensure that the banking system does not collapse. Regulations aim to prevent and offset the negative effects of bank failures. Regulations in the financial industry do not aim to limit the amount of money that individuals can earn. Financial regulations help reinforce the integrity of the financial system rather than challenging it. Financial regulations do not necessarily relate to product safety. SOURCE: BL:148 SOURCE: MetricStream. (2017).Integrated risk and compliance management for banks and financial services organizations: Benefits of a holistic approach. Retrieved October 4, 2019, from http://www.metricstream.com/whitepapers/html/financial_services.htm

testfin1216.txt BL:148 2. An important purpose of regulations in the finance industry is to A. challenge the integrity of the financial system. B. limit the amount of money individuals can earn. C. prevent the banking system from failing. D. ensure companies are held accountable for product safety.

15. B Complex financial terms and concepts. Dependable financial planners are able to explain investment products and options in terms that their clients will understand. They also help their clients understand the importance of investing as a means of achieving long-term financial goals. Good financial planners help their clients make appropriate changes to their portfolios as their financial goals and plans evolve and explain whyhigh-risk investments may not be appropriate options to achieve these financial goals. SOURCE: CR:012 SOURCE: BlueShore Financial. (2002-2019). Ten traits of successful financial advisors. Retrieved October 4, 2019, from https://www.blueshorefinancial.com/ToolsAdvice/Articles/FinancialPlanning/TenTraitsOfSucc essfulFinancialAdvisors/ Test 1216 FINANCE CLUSTER EXAM—KEY 14

testfin1216.txt CR:012 15. Dependable financial planners help their clients understand A. the importance of focusing on short-term gains. B. complex financial terms and concepts. C. the difficulties of changing a financial plan. D. why high-risk investments are appropriate for everyone.

37. C Eurobonds. Eurobonds are bonds sold in a foreign country in the currency of the issuing company. Frankfort and Sons, for example, is an American firm, so its Eurobonds will be denominated in American dollars. However, these bonds will be sold overseas, not in the United States. Yankee bonds are issued in the U.S. by a foreign company and denominated in American dollars. Interbonds are fictitious. Savings bonds are issued by the U.S. Department of the Treasury. They are nontransferable securities that can be cashed prior to their maturity date. SOURCE: FI:337 SOURCE: Investopedia. (2019, September 28). Eurobond. Retrieved October 4, 2019, from http://www.investopedia.com/terms/e/eurobond.asp?lgl=no-infinite Test 1216 FINANCE CLUSTER EXAM—KEY 18

testfin1216.txt FI:337 37. Frankfort and Sons, an American firm, is preparing to issue bonds overseas. Even though the bonds will besold outside the U.S., they will be denominated in American dollars. These bonds are called A. Interbonds. C. Eurobonds. B. Yankee bonds. D. savings bonds.

39. D All former entities no longer exist, and a single, new legal entity is formed. A consolidation occurs when two businesses agree to create a new entity so that one business can take over the net assets of another entity; neither of the original entities continues to exist. After an acquisition, all entities continue operating, connected by a parent-subsidiary relationship. A merger occurs when a business absorbs 100% of another entity's stock and the acquirer continues to exist. In a consolidation, the acquirer purchases 100% of the target's equity, not less. SOURCE: FI:573 SOURCE: Kenton, W. (2019, August 12). Consolidate. Retrieved October 4, 2019 from https://www.investopedia.com/terms/c/consolidate.asp

testfin1216.txt FI:573 39. Which of the following is a distinguishing feature of a consolidation in the finance industry: A. The acquirer does not have to purchase 100% of the target company's equity. B. All entities continue operating, connected by a parent-subsidiary relationship. C. One of the entities continues to exist, absorbing 100% of another entity's stock. D. All former entities no longer exist, and a single, new legal entity is formed. Test 1216 FINANCE CLUSTER EXAM 5

40. D An individual buys 10 shares of stock for $150 per share on one market, and immediately sells each share for $200 on another market. Arbitrage is profiting from the sale of a financial instrument (e.g., stock) or good on a different market. Arbitrage ofteninvolves the buying and selling of goods and other types of services. For example, a person who buys a set of football tickets from a sport organization for $100 and sells them on eBay to another person for $500 is engaging in arbitrage. When an individual earns interest on his/her money by agreeing to leave it in a financial institution for a certain time frame, s/he is investing in a certificate of deposit. Businesses that set aside money for their employees' retirement are contributing to a pension plan. A business that sells bonds is using debt financing to raise funds for its expansion efforts. SOURCE: FI:574 SOURCE: Moffatt, M. (2019, March 4). What is arbitrage?Retrieved October 4, 2019, from http://economics.about.com/cs/finance/a/arbitrage_3.htm

testfin1216.txt FI:574 40. Which of the following is an example of arbitrage: A. A business sells corporate bonds to obtain funds to finance major expansion efforts. B. An individual earns interest on his/her money by agreeing to leave it in a financial institution for a certain time frame. C. A business places a percentage of its income into a retirement account for employees. D. An individual buys 10 shares of stock for $150 per share on one market, and immediately sells each share for $200 on another market.

52. D Variance analysis involves too much of a time delay. Accounting staff typically calculate variances based on monthly accounting reports. However, some businesses find that is too much of a time delay to correct a problem quickly and effectively. In those cases, companies may decide against using variance analysis. Variance analysis is based on tangible, objective data. Real causes can be uncovered with careful variance analysis. Since horizontal analysis compares multiple periods of business activity to identify trends, it actually requires more time to conduct than variance analysis. SOURCE: FI:661 SOURCE: Accounting Tools. (2018, December 21). Variance analysis.Retrieved October 15, 2019, from https://www.accountingtools.com/articles/what-is-variance-analysis.html

testfin1216.txt FI:661 52. Why do some companies decide against using variance analysis? A. Horizontal analysis requires much less time. B. Variance analysis is not based on real, tangible data. C. Real causes cannot be correctly identified. D. Variance analysis involves too much of a time delay.

60. A More data attacks come from inside the organizations than outside them. Financial institutions' data are at risk of attacks originating from both within and outside the organizations. In fact, more data attacks typically come from inside the organizationthan outside it. Unfortunately, most financial institutions have traditionally concentrated their data security efforts on firewalls and other technology to prevent outside attacks while neglecting to address the risk of inside attacks. And, even the bestfirewall in the world can't eliminate every external threat to the data. In addition, data at rest and data in process are actually more at risk than data in transit. In recent years, though, financial service companies have increased their investment in financial-information security to address these issues. SOURCE: FM:011 SOURCE: Bunn, C. (2016, December 22).A focus on insider threats in banking & financial institutions. Retrieved October 4, 2019, from https://www.isdecisions.com/blog/it-security/insider-threatsbanking-financial-institutions/

testfin1216.txt FM:011 60. Which of the following statements regarding the security of most financial institutions' data is true: A. More data attacks come from inside the organizations than outside them. B. Firewalls completely eliminate all external threats to the data. C. Data in transit are more at risk than data at rest or data in process. D. Investments in financial-information security have decreased in recent years. Test 1216 FINANCE CLUSTER EXAM 7

62. A Cash flow. Companies use cash flow budgets to project how and when cash will flow in and out of a business within a specified time period. Cash flow budgets help organizations determine if they are handling their money wisely, and if they have enough cash on hand to continue operating as normal. An operating budget is a forecast and analysis of projected income and expenses over the course of a specified time period. Operating budgets are often compared month to month to see if a company is overspending on supplies. A master budget is a comprehensive budget that provides a complete picture of a company's financial activity and health. A static budget is a fixed budget that remains unchanged throughout the year. For example, a company may have a static budget for standard office supplies. In this example, Joanna is creating a cash flow budget because she is specifically examining her company's accounts payable and receivable to determine the amount of available cash. SOURCE: FM:013 SOURCE: The Motley Fool. (2016). 5 types of budgets for businesses. Retrieved October 4, 2019, from http://www.fool.com/knowledge-center/5-types-of-budgets-for-businesses.aspx

testfin1216.txt FM:013 62. Joanna works as an accountant for a construction company. She is drafting a budget to determine whether the company has enough money to start construction on a new high-rise building. As part of her research for the budget, Joanna examines the company's accounts payable and receivable. Joanna is drafting a(n) __________ budget. A. cash flow C. master B. operating D. static

87. A Codetermination. Codetermination is the act of reserving seats on the board of directors for employees. Profit-sharing is an incentive plan that provides payments to employees that depend on the company's profitability. Equity-sharing is an incentive plan that provides shares of equity to employees.Unions are legally recognized employee representatives from different industries coming together to protect workers' rights. SOURCE: PD:301 SOURCE: Blair, M. (n.d.). The role of employees in corporate governance. Retrieved October 4, 2019, from http://webcache.googleusercontent.com/search?q=cache:OzdchlpdL8MJ:www.oecd.org/corp orate/ca/corporategovernanceprinciples/2482851.ppt+&cd=2&hl=en&ct=clnk&gl=us

testfin1216.txt PD:301 87. To better achieve governance objectives, Shamrock Corporation wants employees to be present at board meetings and have a say in issues that the board of directors face. Which tactic should Shamrock Corporation use? A. Codetermination C. Equity-sharing B. Profit-sharing D. Unions

17. B Trajectory. CRM technology is frequently used to measure and analyze a business's typical customer trajectory, which is a pattern of purchases. Duration is the length of time that a customer stays a customer. A vintage is a group of customers that are similar in some way. For instance, they might be grouped together because they all became a business's customers in the same year. Touchpoints are all of the opportunities that a business has to connect with customers and reinforce its brand image. SOURCE: CR:024 Use Customer Relationship Management (CRM) technology SOURCE: Salesforce. (2020). What is CRM? Retrieved July 10, 2020, from https://www.salesforce.com/au/learning-centre/crm/what-is-crm/

testfin1229.txt CR:024 17. A stockbroker is using customer relationship management (CRM) technology to learn more about his typical customer's purchasing pattern. The stockbroker is using CRM technology to analyze the typical customer A. duration. C. vintage. B. trajectory. D. touchpoint.

54. C Maintain budgetary control. Variance analysis is a technique used in managerial accounting to determine the difference between planned and actual results. Businesses us e budgets to maintain control over costs. Variance analysis makes sure the company is following the budget. Variance analysis does not necessarily help a business make choices between two alternatives, compare itself with competitors, or predict future trends. SOURCE: FI:661 Discuss the use of variance analysis in managerial accounting SOURCE: AccountingTools. (2021, June 16). Variance analysis definition. Retrieved August 6, 2021, from https://www.accountingtools.com/articles/what-is-variance-analysis.html

testfin1248.txt FI:661 54. Variance analysis helps a business A. compare itself with competitors. C. maintain budgetary control. B. make choices between two alternatives. D. predict future trends.

44. C All assets, liabilities, revenue, and expenses are combined for the parent and its subsidiaries. Consolidated statements combine the financial information of the parent and any subsidiaries as if they are one economic unit. Transactions between parent and subsidiaries are actually eliminated to avoid double counting. Using separate allocations for individual assessment would not create consolidated financial information. Identifying individual profits and losses defeats the purpose of representing all associated entities as one unit. SOURCE: FI:573 Discuss the nature of convergence/consolidation in the finance industry SOURCE: Kenton, W. (2020, June 21). Consolidated financial statements. Retrieved July 10, 2020, from https://www.investopedia.com/terms/c/consolidatedfinancialstatement.asp

testfin1229.txt FI:573 44. Which of the following is an accurate statement of how financial information for a parent company and its subsidiaries is represented on consolidated financial statements: A. Separate allocations for the parent and each subsidiary are listed for individual assessment. B. Transactions between the parent and subsidiaries are included for accurate representation. C. All assets, liabilities, revenue, and expenses are combined for the parent and its subsidiaries. D. All financial components are combined except for individual profits and losses of each entity.

71. D Pinpoint exactly what you want to know. In order to create a successful multi-table query, the first step is figuring out exactly what question you want the database to answer. If you aren't exactly sure what you want to know, the database cannot provide you with the information you need. Determining the criteria for the query, locating the correct tables, and setting the correct join direction are all important steps to take before creating the query, but none of them will be successful unless the exact question has been determined first. SOURCE: NF:124 Demonstrate advanced database applications SOURCE: Goodwill Community Foundation, Inc. (2020). Access 2013: Designing a multi-table query. Retrieved July 10, 2020, from https://www.gcflearnfree.org/access2013/designing-amultitable-query/1/

testfin1229.txt NF:124 71. What is the first step in designing a multi-table query? A. Set the correct join direction. C. Locate the correct tables. B. Determine the criteria. D. Pinpoint exactly what you want to know. Test 1229 FINANCE CLUSTER EXAM 8

86. B Extrinsic. These are the actual rewards obtained for performing the job. Intrinsic rewards come from within yourself. Concomitant rewards result from such working conditions as a pleasant work environment or good relationships with coworkers. Vocational satisfaction or reward is the overall pleasure obtained from working in an occupation. SOURCE: PD:013 Assess personal interests and skills needed for success in business SOURCE: DCR Strategies. (2020). Employee rewards: Intrinsic vs. extrinsic. Retrieved July 14, 2020, from https://www.dcrstrategies.com/employee-incentives/employee-rewards-intrinsic-vsextrinsic/

testfin1229.txt PD:013 86. Salaries, commissions, and bonuses obtained from a job are examples of __________ rewards. A. intrinsic C. concomitant B. extrinsic D. vocational

12. C Internal control mechanisms. Internal control mechanisms monitor the progress and activities of an organization and make corrections when the company goes off track. Examples of internal control mechanisms include oversight of management, segregation of control, independent internal audits, and policy development. These are not examples of tasks of the board of directors—rather, internal control mechanisms are intended to make sure that the board of directors behaves in accordance with company values and goals. These are also not examples of transparency in management or external control mechanisms. External control mechanisms are controlled by people outside of an organization and are designed to serve the objectives of regulators, governments, trade unions, and financial institutions, for example. SOURCE: PD:214 Describe the components of a well-governed company (e.g., board of directors, reporting, transparency, internal and external audit functions) SOURCE: Davoren, J. (2020). Three types of corporate governance mechanisms. Retrieved July 10, 2020, from http://smallbusiness.chron.com/three-types-corporate-governance-mechanisms66711.html

testfin1229.txt PD:214 12. In corporate governance, oversight of management, segregation of control, and policy development are all examples of A. external control mechanisms. C. internal control mechanisms. B. tasks of the board of directors. D. transparency in management.

90. C Encouraging employee participation at board meetings. Achieving corporate governance objectives requires the participation of all people involved with a company. It is especially important for an organization's employees to be actively engaged in corporate governance. Employees should be encouraged to participate in board meetings to raise questions or concerns that they may have about the company's actions. Preventing stakeholders from viewing financial information, allowing senior managers to serve on the board of directors, and releasing an annual report detailing their failures and losses are not appropriate steps companies should take to achieve corporate governance objectives. SOURCE: PD:301 Ascertain employee's role in achieving governance objectives SOURCE: Safetrac. (2015, January 19). Achieving good corporate governance. Retrieved July 10, 2020, from http://www.safetrac.com.au/achieving-good-corporate-governance/ Test 1229 FINANCE CLUSTER EXAM—KEY 30

testfin1229.txt PD:301 90. One way that organizations can achieve their corporate governance objectives is by A. allowing senior managers to serve on the board of directors. B. preventing stakeholders from viewing financial information. C. encouraging employee participation at board meetings. D. releasing an annual report detailing their failures and losses.

2. A Prevent the banking system from failing. Regulations require safeguards that help ensure that the banking system does not collapse. Regulations aim to prevent and offset the negative effects of bank failures. Regulations in the financial industry do not aim to limit the amount of money that individuals can earn. Financial regulations help reinforce the integrity of the financial system rather than challenging it. Financial regulations do not necessarily relate to product safety. SOURCE: BL:148 Discuss the nature and scope of compliance in the finance industry SOURCE: MetricStream. (2021). Integrated risk and compliance management for banks and financial services organizations: Benefits of a holistic approach. Retrieved August 6, 2021, from https://www.metricstream.com/whitepapers/html/financial_services.htm

testfin1248.txt BL:148 2. An important purpose of regulations in the finance industry is to A. prevent the banking system from failing. B. limit the amount of money individuals can earn. C. challenge the integrity of the financial system. D. ensure companies are held accountable for product safety.

17. C Interaction data. Customer Relationship Management (CRM) data warehouses typically contain several types of data. Interaction data contain details regarding written and/or phone solicitations made to a customer, visits that the customer made to the business, and instances when the customer contacted the call center for assistance. Demographic data include gender, age, race, ethnicity, income level, and other basic customer information. Self-provided data are pieces of information that the customer has voluntarily shared with the business. Historical data include old sets of data reviewed and used for new purposes. SOURCE: CR:024 Use Customer Relationship Management (CRM) technology SOURCE: Borbas, M. (2015, August 17). What is customer analytics part 2: Sourcing customer interaction data. Retrieved August 6, 2021, from https://www.inetco.com/blog/2015/08/whatis-customer-analytics-part-2-sourcing-customer-interaction-data/

testfin1248.txt CR:024 17. While filing a homeowner's insurance claim, Mrs. Ramirez was accidentally disconnected from the call center representative who was helping her. When Mrs. Ramirez called back, she didn't know whom to ask for, because she couldn't remember the name of the representative who had been assisting her. What type of Customer Relationship Management (CRM) data would be most helpful in identifying the representative? A. Self-provided data C. Interaction data B. Demographic data D. Historical data

15. A To lower costs. Consolidation is the merging of financial providers within the same institutional category. For example, consolidation occurs when two banks merge to form one bank. By consolidating, the financial firms can achieve economies of scale, which result in reduced redundancy and lower costs. Consolidation can increase the assets (liquid capital) for all of the financial firms involved. Consolidation can also provide consumers with a wider range of financial products. Consolidation may or may not lower business risk. SOURCE: FI:573 Discuss the nature of convergence/consolidation in the finance industry SOURCE: Hartman, D. (2017, September 26). The advantages of bank mergers. Retrieved August 6, 2021, from https://pocketsense.com/the-advantages-of-bank-mergers-13657465.html Test 1248 FINANCE CLUSTER EXAM—KEY 13

testfin1248.txt FI:573 15. A primary factor that has led to the consolidation of financial firms is the desire A. to lower costs. C. for fewer products. B. for fewer assets. D. to lower risks.

41. B Leading. Stock market returns are commonly considered to be leading economic indicators because they often decline in advance of an economic decline and improve prior to positive movement in the overall economy. Lagging economic indicators such as the unemployment rate do not change direction until after the general economy improves or declines. Coincident economic indicators move simultaneously with the overall economy. Exploratory economic indicators are fictitious. SOURCE: FI:574 Describe the relationship between economic conditions and financial markets SOURCE: Moffatt, M. (2018, February 19). A beginner's guide to economic indicators. Retrieved August 6, 2021, from https://www.thoughtco.com/beginners-guide-to-economic-indicators-1145901 Test 1248 FINANCE CLUSTER EXAM—KEY 18

testfin1248.txt FI:574 41. What type of economic indicator are stock market returns commonly considered to be? A. Lagging C. Coincident B. Leading D. Exploratory

42. A Fixed; floating. To enable capital to flow more freely internationally, countries around the world have reduced or eliminated many regulations and restrictions. For example, many developed countries shifted their exchange rates from being fixed to floating. Fixed exchange rates are set by the government, while floating exchange rates are determined by market supply and demand for currency. Although fixed exchange rates are still popular in some parts of the world, most developed countries have floating exchange rates. A pegged exchange rate is a fixed exchange rate. Declining exchange rates have not significantly contributed to financial globalization. SOURCE: FI:575 Explain the nature and scope of financial globalization SOURCE: Wise. (2017, May 15). Explaining the difference between fixed and floating exchange rates. Retrieved August 6, 2021, from https://wise.com/gb/blog/fixed-floating-exchange-ratedifference

testfin1248.txt FI:575 42. One factor that contributed to financial globalization was the shift of many developed countries from __________ exchange rates to __________ exchange rates. A. fixed; floating C. pegged; declining B. floating; fixed D. declining; pegged

52. B Business cycle risks. By investing their funds in many different countries, investors are able to diversify their risk and reduce their exposure to business cycle risks. However, financial globalization seems to increase the risks of "speculative bubbles" and "herd behavior" of investors. Liberalization is the removal of government regulations on the flow of capital and international trade. Many countries around the world have reduced or eliminated limits on foreigners' access to their financial markets. Capital appreciation occurs when stock that a person owns becomes worth more than what the person paid for it. Capital appreciation is a positive aspect of investing, not something to avoid. SOURCE: FI:575 Explain the nature and scope of financial globalization SOURCE: Hall, M. (2018, January 12). Globalization and international investment. Retrieved August 6, 2021, from https://www.investopedia.com/ask/answers/022615/what-effect-has-globalizationhad-international-investments.asp

testfin1248.txt FI:575 52. Financial globalization helps investors reduce their exposure to A. speculative bubbles. C. regulatory liberalization. B. business cycle risks. D. capital appreciation.

53. B Classification by controllability. Classification by controllability, which is based on a manager's control over particular costs, helps an organization determine how well its managers handle costs that they personally impact. Classification by function, which identifies costs as product costs or period costs, is not necessarily linked to specific managers. Classification by behavior refers to whether a cost is fixed or variable within an organization. Classification by relevance determines whether a cost is a sunk cost or an out-of-pocket cost within an organization. SOURCE: FI:660 Explain the nature of managerial accounting SOURCE: Tamplin, T. (2021, August 10). Classification of cost. Retrieved August 11, 2021, from https://learn.financestrategists.com/explanation/cost-accounting/analysis-ofcost/classification-of-cost/

testfin1248.txt FI:660 53. Which of the following cost classifications can help a decision maker determine how well different department managers performed: A. Classification by function C. Classification by behavior B. Classification by controllability D. Classification by relevance

56. B Controlling finances. Budgets are financial plans that are used to project revenue and expenses. The aim of budgets is to control finances. Determining cash flow, understanding profitability, and analyzing sources of income are not functions of cost accounting budgets. SOURCE: FI:662 Discuss the nature of cost accounting budgets SOURCE: Boyd, K. (2021). Cost accounting: Budgeting basics. Retrieved August 6, 2021, from https://www.dummies.com/business/accounting/cost-accounting-budgeting-basics/ Test 1248 FINANCE CLUSTER EXAM—KEY 21

testfin1248.txt FI:662 56. Which of the following is a function of cost accounting budgets: A. Determining cash flow C. Understanding profitability B. Controlling finances D. Analyzing sources of income

68. B To evaluate performance. Standard cost systems are used to determine variances between forecasted costs and actual costs, thereby evaluating a business's performance. The quality of manufacturing processes can be evaluated, but standard cost systems do not establish quality standards. Industry standards can be used to establish standard costs; however, standard cost systems do not set industry standards. Unused inventory will be a consideration in determining the variances between forecasted and actual costs; however, unused inventory is not returned on the basis of standard cost systems. SOURCE: FI:662 Discuss the nature of cost accounting budgets SOURCE: Tamplin, T. (2021, June 22). Standard costing. Retrieved August 6, 2021, from https://learn.financestrategists.com/explanation/variance-analysis/standard-costing/

testfin1248.txt FI:662 68. What is a purpose of standard cost systems? A. To establish quality standards C. To return unused inventory B. To evaluate performance D. To create industry standards

80. B Passage of laws that recognize electronic documents as legally binding. As businesses have become more comfortable with the use of electronic information, their willingness to accept electronic documents as legally binding contracts has also increased. This has been buoyed by the passage of laws recognizing electronic documents and signatures as legally binding. Electronic information exchange procedures have not been removed. These procedures provide a way for people to exchange information electronically. Security remains an issue for online financial-information management. Although customers' right to privacy is an issue, it has not contributed to the increased use of online technology in financial-information management. SOURCE: FM:011 Describe the use of technology in the financial-information management function SOURCE: Citrix. (2021). Are electronic signatures legally binding? Retrieved August 6, 2021, from https://rightsignature.com/legality/are-electronic-signatures-legally-binding.html

testfin1248.txt FM:011 80. Why has online technology's use increased in financial-information management? A. Removal of electronic information exchange procedures B. Passage of laws that recognize electronic documents as legally binding C. Recognition that the security of transactions is no longer an issue D. Protection of customers' right to privacy

72. A Data normalization. Normalization is the process of efficiently organizing data in a database. There are two goals of the normalization process: eliminating redundant data and ensuring that data is stored in ways that make sense. By eliminating redundant data, Jonas is performing data normalization. Digital analysis involves analyzing and interpreting data for patterns, consistencies, or discrepancies. Data filtering involves refining data sets so that they can be more easily understood. Information scanning is not a term typically used in the business world. SOURCE: NF:124 Demonstrate advanced database applications SOURCE: Chapple, M. (2020, April 12). Database normalization basics. Retrieved August 6, 2021, from https://www.lifewire.com/database-normalization-basics-1019735

testfin1248.txt NF:124 72. Jonas is a data scientist at a research firm. Part of his responsibilities include looking through his firm's databases and eliminating redundant data. Jonas is performing A. data normalization. C. data filtering. B. digital analysis. D. information scanning.

87. D Allocating funds for the objectives in the budget. For an organization to meet its governance objectives, all members must be working toward them. An accountant can contribute to this process by understanding governance objectives and accounting for them in the budget. An accountant does not necessarily work to minimize risks associated with objectives or ensure strong community relations. Accountants may determine whether profit margins are shrinking, but this does not necessarily relate to governance objectives. SOURCE: PD:301 Ascertain employee's role in achieving governance objectives SOURCE: Safetrac. (2019). How to achieve good corporate governance. Retrieved August 6, 2021, from https://www.safetrac.com.au/achieving-good-corporate-governance/

testfin1248.txt PD:301 87. How can an accountant best contribute to an organization's governance objectives? A. Determining whether profit margins are shrinking B. Minimizing risks associated with the objectives C. Ensuring strong community relations D. Allocating funds for the objectives in the budget

89. B Stockholders. Stockholders are the owners of a corporation. Therefore, their interests are an important factor in corporate governance. Managers, CEOs, and lower-level employees are not considered the owner(s) of a corporation. SOURCE: PD:302 Identify the factors that impact governance structures SOURCE: Masters, T. (2021). Who legally owns a corporation? Retrieved August 6, 2021, from https://smallbusiness.chron.com/legally-owns-corporation-54930.html Test 1248 FINANCE CLUSTER EXAM—KEY 28

testfin1248.txt PD:302 89. Which of the following are considered the owners of a corporation: A. Managers C. CEOs B. Stockholders D. Lower-level employees

97. D Obstruction of justice. Obstruction of justice is a legal penalty that applies to individuals or businesses that hide important information from law enforcement agencies, such as an accounting firm concealing a client's questionable financial data. If evidence indicates that unethical or illegal business practices have obstructed a criminal investigation, the business could be fined, and the employees concealing the information could face imprisonment. A public scandal could severely tarnish a business's reputation, as in the case of the Arthur Andersen accounting firm and its affiliation with Enron. Expropriation is the act of government taking over private property. Breach of contract involves breaking the terms of a legal agreement. Substantiate means to provide proof or evidence of something. SOURCE: RM:043 Discuss legal considerations affecting risk management SOURCE: FindLaw. (2019, April 19). Obstruction of justice. Retrieved August 6, 2021, from https://criminal.findlaw.com/criminal-charges/obstruction-of-justice.html

testfin1248.txt RM:043 97. If an accounting firm deliberately conceals information about a client's financial status, the government may charge the business with A. substantiation. C. breach of contract. B. expropriation. D. obstruction of justice.

99. A A risk inventory. A risk inventory is a listing of all of an organization's critical enterprise-wide risks. A risk assessment is a tool used in risk management, but it does not necessarily list a company's every critical enterprise-wide risk. Enterprise risk management allows a company to plan, organize, lead, and control the risk in every level of an organization. A risk control is a tactic to mitigate a perceived risk. SOURCE: RM:062 Discuss the nature of enterprise risk management (ERM SOURCE: CCL. (2021). Preparation of risk inventory. Retrieved August 6, 2021, from https://www.cclcompliance.com/services/compliance-advisory/risk-management/preparationof-risk-inventory/ Test 1248 FINANCE CLUSTER EXAM—KEY 30

testfin1248.txt RM:062 99. Tyrese and his team are creating a list of their company's critical enterprise-wide risks. They are compiling A. a risk inventory. C. enterprise risk management. B. a risk assessment. D. a risk control.

25. A Constructive criticism. Constructive criticism is evaluative information designed to help someone improve. In this case, criticism is used by the manager to let you know how you can improve your job performance. Internal feedback is feedback that comes from within, or self-evaluation. Positive feedback is feedback involving praise. Destructive criticism is evaluative information that serves only to hurt or discredit someone. SOURCE: EI:003 Explain the use of feedback for personal growth SOURCE: LAP-EI-903—Grin and Bear It (Using Feedback for Personal Growth)

testfin1255.txt EI:003 25. Your manager has reminded you to correct register errors as they occur to ensure close-out accuracy. This type of comment is A. constructive criticism. C. positive feedback. B. internal feedback. D. destructive criticism.

38. D Lower costs. Consolidation is the merging of financial providers within the same institutional category. For example, consolidation occurs when two banks merge to form one bank. By consolidating, the financial firms can achieve economies of scale, which reduces redundancy and lowers costs. Another advantage of consolidation to firms is that it provides more liquid capital for all companies involved. Onestop shopping is an advantage to consumers. Consolidation does not always lead to fewer technology problems. SOURCE: FI:573 Discuss the nature of convergence/consolidation in the finance industry SOURCE: Kenton, W. (2020, November 27). Consolidate. Retrieved September 27, 2021, from https://www.investopedia.com/terms/c/consolidate.asp Test 1255 FINANCE CLUSTER EXAM—KEY 18

testfin1255.txt FI:573 38. One advantage of consolidation to financial firms is A. less liquid capital. C. fewer technology problems. B. one-stop shopping. D. lower costs.

41. C Reduce their exposure to business cycle risks. As a result of financial globalization, investors have access to many more markets and investments worldwide. By investing their funds in several different countries, investors are able to diversify their risk and reduce their exposure to business cycle risks within any particular country. Liberalization is the removal of government regulations on the flow of capital and international trade. A home bias is a preference for investments in domestic markets versus markets in other countries. An investor who invests funds in several different countries demonstrates that they do not have a home bias. While international investors can purposefully avoid emerging markets located in developing countries when investing, integrated financial markets—markets that facilitate the free flow of capital across national borders—are not so easy for international investors to avoid. Liberalization and financial globalization have increased foreigners' access to domestic financial markets. SOURCE: FI:575 Explain the nature and scope of financial globalization SOURCE: Fisher, G.S. (2012, January 17). Why global diversification still makes sense. Retrieved September 27, 2021, from https://www.forbes.com/sites/greggfisher/2012/01/17/why-globaldiversification-still-makes-sense/

testfin1255.txt FI:575 41. By investing their funds in several different countries, investors A. easily avoid integrated and emerging financial markets. B. demonstrate their liberalization and home biases. C. reduce their exposure to business cycle risks. D. reduce foreigners' access to domestic financial markets.

51. B Recording and classifying transactions. Managerial accounting can aid in the implementation phase of a decision-making process through the practice of recording and classifying transactions. For example, if a payment is made to a designer, the payment will be recorded and classified for future reference. Budgeting expected revenue is a managerial accounting technique that would assist during the planning stages of the decision-making process. Comparing results to the budget would occur during the evaluation stage of the decision-making process. Representing plans financially is manifested in the budget and other reports that are completed during the planning phase, rather than during implementation. SOURCE: FI:660 Explain the nature of managerial accounting SOURCE: Datar, S.M., & Rajan, M.V. (2014). Managerial accounting: Making decisions and motivating performance (p. 11). Upper Saddle River, NJ: Pearson Education.

testfin1255.txt FI:660 51. A company manager is making a decision concerning promotional strategy. What managerial accounting technique can assist in the implementation phase of their decision-making process? A. Budgeting expected revenue C. Comparing results to the budget B. Recording and classifying transactions D. Representing plans financially

54. C Directing. Budgeting involves setting goals, executing those goals, and comparing results to those goals. Kenneth is executing his goals by directing his employees' actions with the help of his budget. Planning is setting goals. Controlling is comparing performance to expectations. Monitoring is tracking progress. They are all functions of budgets, but they are not specifically related to Kenneth's example. SOURCE: FI:662 Discuss the nature of cost accounting budgets SOURCE: Warren, C.S., Reeve, J.M., & Duchac, J. (2014). Managerial accounting (12th ed.) [p. 230]. Mason, OH: South-Western Cengage Learning.

testfin1255.txt FI:662 54. Kenneth is easily able to guide the actions of his employees by referring to his budget. This is an example of which function of budgets? A. Controlling C. Directing B. Planning D. Monitoring

72. A Reduce data redundancy. Data normalization is the process of efficiently organizing data in a database. One of the primary goals of data normalization is reducing data redundancies. In other words, data normalization makes sure that the same data are not recorded or stored in more than one place. It is not the goal of data normalization to discard unusual data, improve data collection, or increase data quality. SOURCE: NF:124 Demonstrate advanced database applications SOURCE: Chapple, M. (2020, April 12). Database normalization basics. Retrieved September 27, 2021, from https://www.lifewire.com/database-normalization-basics-1019735

testfin1255.txt NF:124 72. A primary goal of data normalization is to A. reduce data redundancy. C. improve data collection. B. discard any unusual data. D. increase data quality.

82. D Self-esteem. Self-esteem is the regard or respect that you have for yourself. People who have selfesteem understand themselves and like who they are. Social acceptance involves being accepted by others. Safety is associated with personal security and protection from harm. Self-fulfillment involves personal growth, achievement, and reaching one's fullest potential. SOURCE: PD:013 Assess personal interests and skills needed for success in business SOURCE: Psych Central. (n.d.). Building self-esteem. Retrieved on September 23, 2021, from https://psychcentral.com/lib/building-self-esteem

testfin1255.txt PD:013 82. Recognizing your strengths and weaknesses helps you accept yourself, which is one of the foundations of A. self-fulfillment. C. safety. B. social acceptance. D. self-esteem.

89. B Safety laws. External controls are those that govern an organization from the outside. They are usually set by governments. Safety laws are external because they are set by the government, not an organization itself. Whistleblower policies, segregation of duties, and managerial oversight are internal means of control. SOURCE: PD:214 Describe the components of a well-governed company (e.g., board of directors, reporting, transparency, internal and external audit functions) SOURCE: Davoren, J. (n.d.). Three types of corporate governance mechanisms. Retrieved September 27, 2021, from https://smallbusiness.chron.com/three-types-corporate-governancemechanisms-66711.html

testfin1255.txt PD:214 89. Which of the following is an external control used to govern companies: A. Whistleblower policy C. Segregation of duties B. Safety laws D. Managerial oversight

87. C Profit-sharing. Employees are key in the achievement of governance objectives. Businesses use many different tactics to encourage or motivate their workers to reach those objectives and goals. Profit-sharing is a good tactic to adopt if the company seeks to improve employee motivation by improving the distribution of wealth throughout the corporation. Cash incentives, team building, and flexible scheduling may improve overall employee motivation, but they do not improve the distribution of wealth throughout the corporation. SOURCE: PD:301 Ascertain employee's role in achieving governance objectives SOURCE: Kenton, W. (2021, April 24). Profit-sharing plan. Retrieved September 27, 2021, from https://www.investopedia.com/terms/p/profitsharingplan.asp

testfin1255.txt PD:301 87. The Farside Corporation wants to encourage its workforce to better achieve governance objectives. Which tactic should the company use to motivate its employees and improve the distribution of wealth throughout the corporation? A. Team building C. Profit-sharing B. Cash incentives D. Flexible scheduling Test 1255 FINANCE CLUSTER EXAM 9

88. D Incorporate governance objectives into the hiring process. One way that companies can involve employees in governance objectives is during the hiring process. If HR professionals keep governance in mind as they screen candidates, the candidates will be more likely to be aligned with the company's objectives. They will therefore be more likely to support the objectives in the work they do. Punishing employees who do not support corporate governance objectives will not necessarily develop a culture in which employees are engaged in the corporate governance objectives. The budget should be kept in mind when setting corporate governance objectives. Finally, while the shareholders' interests are an important priority, they should not necessarily be considered more important than other stakeholders. SOURCE: PD:301 Ascertain employee's role in achieving governance objectives SOURCE: Safetrac. (n.d.). How to achieve good corporate governance. Retrieved September 27, 2021, from https://www.safetrac.com.au/achieving-good-corporate-governance/

testfin1255.txt PD:301 88. How can a company develop a culture in which employees work toward corporate governance objectives? A. Put the shareholders' interests as the top priority B. Punish employees who do not support corporate governance objectives C. Set objectives without letting the budget affect them D. Incorporate governance objectives into the hiring process

90. C Borrowing money from a bank. Banks often require an organization with a loan to follow external control mechanisms that impact its governance structures. Hiring employees, developing a marketing strategy, and raising prices are all common business activities that are not likely to impact an organization's governance structures. SOURCE: PD:302 Identify the factors that impact governance structures SOURCE: Davoren, J. (n.d.). Three types of corporate governance mechanisms. Retrieved September 27, 2021, from https://smallbusiness.chron.com/three-types-corporate-governancemechanisms-66711.html Test 1255 FINANCE CLUSTER EXAM—KEY 28

testfin1255.txt PD:302 90. Which of the following business activities is most likely to impact an organization's governance structures: A. Developing a marketing strategy C. Borrowing money from a bank B. Hiring a new sales representative D. Raising prices on consumer goods

98. C It determines the minimum reserve requirements in financial trading. Different measures can result in a lower or higher minimum reserve requirement, which results in a lower or higher profit for the financial institution. Although it does not designate the audience that will receive the resulting financial reports, some financial measures should be used for internal purposes, while other measures are more appropriate for external audiences. The number of clients to serve and the types of risks to be encountered are not aspects of selecting a risk measure. SOURCE: RM:058 Discuss the nature of risk control (i.e., internal and external) SOURCE: Ingram, D. (n.d.). External and internal factors of financial risk. Retrieved September 27, 2021, from https://smallbusiness.chron.com/external-internal-factors-financial-risk-4563.html

testfin1255.txt RM:058 98. Why is the choice of a risk measure for internal and external risk of great practical importance? A. It identifies the types of risks that the financial institution will encounter. B. It determines the maximum number of clients that can be served effectively by a financial institution. C. It determines the minimum reserve requirements in financial trading. D. It designates the audience that will receive the resulting financial reports.

99. D Control. Risk control methods are used to reduce or minimize loss. Three common risk control techniques include loss prevention, loss avoidance, and loss reduction. Loss prevention focuses on stopping certain losses from occurring. Companies utilize loss avoidance when they choose not to take part in risky activity. Loss reduction lessens the impact of a loss after it occurs. Risk financing involves setting aside funds to pay for unavoidable losses. Companies transfer risk by purchasing insurance and entering into contracts that transfer the risk to others. Risk retention involves financing the loss through self-insurance and other methods. SOURCE: RM:058 Discuss the nature of risk control (i.e., internal and external) SOURCE: Kenton, W. (2021, January 31). Risk control. Retrieved September 27, 2021, from https://www.investopedia.com/terms/r/risk-control.asp Test 1255 FINANCE CLUSTER EXAM—KEY 30

testfin1255.txt RM:058 99. Loss prevention, loss avoidance, and loss reduction are risk __________ techniques. A. retention C. transfer B. financing D. control


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