MGMT 340 Cheek Final

Which of the following is the contribution margin approach formula? a. SP(FC - VC)S b. (SP - VC)S - FC c. FC = (SP - VC) d. (FC - VC)S - SP

B

When using the graphic approach to break-even analysis, the entrepreneur must plot total _____ and total _____. a. expenses; revenue b. costs; income c. income; expenses d. revenue; costs

d

A manufacturing firm needs to establish which of the following budgets? a. material purchases budget b. profit budget c. cost budget d. accounting budget

a

Many companies continue to use the payback method because it is a. more favorable in its short-term effects on earnings. b. inexpensive to use. c. an immediate cash payment. d. a longer loan program.

a

One type of budget used by the entrepreneur is a(n) _____ budget. a. operating b. project c. R&D d. cost

a

Which of the following is not a common characteristic of financial statements? a. They are complex. b. They are accurate. c. They are realistic. d. They are holistic.

a

Which of the following is not one of the most common methods used in capital budgeting?

anticipated change in net income method

In handling questionable costs, the cost in question is substituted first as a _____ cost and then as a _____ cost. a. variable; total b. fixed; variable c. mixed; fixed d. total; fixed

b

Accounts receivable turnover measures the rate at which accounts receivable are being collected on a monthly basis.

False

An entrepreneur must graph at least two numbers-total sales and total expenses-when using the graphic approach for break-even analysis.

False

Ratio analysis can be applied from which of the following directions? a. horizontal only b. external and internal c. vertical only d. vertical and horizontal

d

_____ analysis looks at financial statements and ratios over time. a. Specific efficiency ratio b. Vertical c. Inventory d. Horizontal

d

Break-even analysis is used to assess

expected product profitability

Capital budgeting is used to help the entrepreneur plan for capital depreciation.

False

The traditional accounting equation is: Assets + Liabilities = Owners' Equity.

False

Which of the following balance sheet ratios measures solvency?

Current

Loan proceeds are not directly tied to a. sales revenue. b. planned expansion of a firm. c. expenses. d. meeting cash-flow problems.

A

The cash flow does not come from a. goods purchased on account. b. loan proceeds. c. cash sales. d. cash payments received on account.

A

When using trend line analysis, how many periods are required? a. one b. five c. two d. three

B

An inventory turnover ratio of 9.81 means that the average dollar volume of inventory is used up almost _____ time(s) during the fiscal year a. 100 b. 1 c. 10 d. 1.2

C

Which of the following is the first step in the preparation of the cash-flow budget? a. identification of cash inflows b. identification and timing of cash outflows c. identification of cash outflows d. identification and timing of cash inflows

D

Which of the following is the traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet? A Assets + Liabilities = Owners' Equity b. Assets = Liabilities - Owners' Equity c. Assets + Owners' Equity = Liabilities D Assets = Liabilities + Owners' Equity

D

After the operating budget has been prepared, an entrepreneur can proceed to the next phase of the budget process, which is the cash-flow budget.

True

Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price.

True

Capital investments or capital expenditures are expected to last beyond one year.

True

The cash-flow budget provides an overview of cash inflows and outflows for the budget period.

True

The principal objective of capital budgeting is to maximize the value of the firm.

True

The typical business will have cash inflows from three sources: cash sales, cash payments received on account, and loan proceeds.

True

A fixed cost a. never changes. b. changes inversely to changes in activity for a given period of time. c. does not change in response to changes in activity for a given period of time. d. changes in response to changes in activity for a given period of time

c

How many months of the year should be illustrated in the first pro forma income statement? a. 8 b. 3 c. 12 d. 6

c