MGT 4220 - Chapters 12 - 16

Debt is

A legal obligation to pay money in the future.

Which of the following statements about managing the risk of an employee violating government regulations are correct? (Check all that apply.)

Being proactive is the best way to avoid violating a regulation. Business are financially responsible for employees who violate regulations. Ignorance of the regulation in question is not an acceptable excuse.

The difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date is called ______ value.

Book

Using low-cost or free techniques to minimize the cost of doing business is called ________.

Bootstrapping

A method of obtaining capital in which investors give money to a business in return for a guaranteed percentage of revenues is referred to as _______.

Royalty financing

Accounts Receivable Fixed Asset Inventory Investment Records

Shows records of credit given to customers Automatically calculates and adds depreciation Calculates appropriate stocking and reorder levels Records if businesses keep surplus cash invested in securities

The purpose of an inventory budget is to _________.

Simplify the budget process

Business can earn cash flow from operations, investing and _________.

Financing

Which of the following is true of royalty financing?

It involves an investor providing funds to a business for a contractual percentage of the revenues of the firm for a contractual period.

The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer is known as ______.

Just-in-time inventory

_______ is the process of communicating within or to the organization about how the outputs worked or were received.

Feedback

______ risk is the uncertainty of returns and losing money.

Financial

In the context of financial ratios for comparing investment alternatives, the quantity of time it takes a business to regain the funds it paid out to acquire a capital asset is referred to as ______.

Payback period

Which of the following statements regarding feedback are correct? (Check all that apply.)

All inputs, materials, and labor must be compared to a predetermined standard. All control systems must have feedback. If there is a variation between the output and the standard action, management action must be undertaken to correct the situation.

Which of the following are strategies to minimize a business loss if the event that leads to the loss does occur? (Check all that apply.)

Preparing specific plans and arrangements to handle foreseeable events Making sure that valuable assets are physically secure Creating and enforcing an appropriate code of conduct for business owners and employees

Which of the following are commonly identified sources of business risk? (Check all that apply.)

Employee injuries and illnesses suffered because of their employment. Customers not paying debts. Natural disasters. Business property theft. Loss or harm due to the use of a business' product or service.

Activity Ratios Profitability Ratios Liquidity Ratios Leverage Ratios

They calculate how productive a particular asset is in producing sales activity. They calculate management efficacy in generating wealth from sales and from invested funds. They determine a business's capacity to pay debts and expenses are due in the current accounting period. They determine the relative risk that a business problem could cause bankruptcy.

Which of the following statements regarding discounts for prompt payment are correct?

They may be as much as 2% if the invoice is paid within 5 to 10 business days. They are used to motivate customers to pay their bills in full in a timely manner.

Which of the following statements about tax credits are correct? (Check all that apply.)

They may be provided by federal, state, ore even local governments. They reduce amount of taxes that a business will pay. They are used to encourage investment in specific types of assets, economic activities, or other purposes.

If a firm owner's equity in the firm is $100,000 and he or she has liabilities that amount to $22,000, then according the accounting equation, his or her assets would be worth______.

$100,000 + $22,000 = $122,000

Which of the following tasks should an accounting system easily and efficiently accomplish? (Check all that apply.)

Aiding in the development of a cash budget. Enabling an exhaustive context-sensitive help function.

Which of the following formulas is used in a purchases budget to produce most of the schedules of a master budget?

Amount to be bought = Amount to be used + Desired ending amount - Beginning amount

Payables are

Amounts that are owed to vendors for merchandise or services purchased on credit.

Using a computerized accounting system, which of the following documents may be generated that will indicate the amount of cash a business needs immediately? (Check all that apply.)

An accounts receivable report An accounts payable report

Revenue is

An increase in owners' equity caused by selling a product or service.

The ______ concept is a concept that a business has an existence separate from that of its owners.

Business Entity

Which of the following statements regarding the cash budget are correct?

Business owners estimate expected incomes and expenses and when these transactions will occur in order to create the cash budget. It is the key to cash planning for small businesses. All business budgeting begins with a forecast of sales.

Which of the following statements about the growth trap are correct? (Check all that apply.)

Businesses that grow at exponential rates often experience the growth trap. Growing produces more money, but cash is needed right away to grow, thus the business gets trapped. Too much good news may contribute to a growth trap because of a cash shortage.

Which of the following are one of the Four Cs of borrowing? (Check all that apply.)

Collateral that can be used to secure the loan. Capacity of the business to repay the loan. Character of the business' owners. Conditions of the industry and economy in which the business operates.

Identify an important consideration when giving a gift to help someone start or continue their business.

Consider nonvoting stock, if the gift is an equity investment.

Identify an important when giving a gift to help someone start or continue their business.

Consider nonvoting stock, if the gift is an equity investment.

Regular and systematic reduction in income that transfers asset value to expense over time is called _______.

Depreciation

Book value is the

Difference between original cost of an asset and the total amount of depreciation expense that has been recognized to date.

A reduction in the sales price provided to credit customers for paying outstanding amounts in a timely manner is referred to as a for prompt payment.

Discount

______ is/are payments of profits to the owners of corporations.

Dividends

Which of the following statements about joint ventures are correct? (Check all that apply.)

Each business keeps its own identity and continues to conduct its own business separately. There are a number of tax benefits to participants. They are used to lower an individual company's risk.

Which of the following is a statistical technique that determines the amount of inventory that a business must possess to reduce total inventory cost?

Economic order quantity

In the context of a cash disbursements budget, which of the following factors are combined to predict the amount and timing of cash discharge? (Check all that apply.)

Estimate of expenses Knowledge of payment patterns

Aspects of the world outside a business that could change the business's costs are called ________ _______.

External factors

T/F: For all small businesses, the cash receipts budget is the same as the sales budget.

False

The standardized rules for accounting procedures set out by the Financial Accounting Standards Board (FASB) and used in all audits and submission of accounting reports to the government are known as ________.

Generally Accepted Accounting Principles

______ capital is capital resources that neither provide any ownership nor require any repayment to the giver.

Gift

The ______ is an accounting concept that a business is expected to continue in existence for the foreseeable future.

Going Concern Concept

Which of the following statements about customer-related risks are correct? (Check all that apply.)

Injuries that occur at a business may or may not be the firm's fault, but are often a business' liability. Damages or injuries that occur during the use of a business' products is referred to as product liability. A business may be liable for injuries that are a result of trespassing or a criminal act such as a robbery.

The ______ value is the amount of an asset for which a company will write an insurance policy.

Insurable

______ is a contract between two or more parties in which one party agrees, for a fee, to assume the risk of another.

Insurance

In the context of managing business risk resulting from events involving personnel, ______ is a set of rules and procedures that work to limit the opportunity for employee theft or malfeasance.

Internal control

In the context of financial ratios for comparing investment alternatives, identify a true statement about rate of return on investment (ROI).

It is a measure of the connection between an initial investment and the profits that are expected to be obtained from making the investment.

Which of the following statements about the balance sheet are correct? (Check all that apply).

It is also called the statement of financial position. It provides information on current and long-term assets and liabilities. It presents a snapshot of a business' financial holdings and liabilities at the close of business on a specified date.

Which of the following statements about the business entity concept are correct? (Check all that apply.)

It is implicit in all business regulation. It makes it possible to separate business and personal transactions. It underlies the legal forms of establishing businesses such as corporations, limited partnerships, and limited liability companies.

Identify the true statements about the Modified Accelerated Cost Recovery System (MARCS)

It is set by the Internal Revenue Service. It allows taxpayers to depreciate more of a cost earlier in the life of a capital expense.

Which of the following statements regarding periodic inventory are correct? (Check all that apply.)

It is the process of physically counting business assets. It meets the requirements of both local and federal taxing agencies. The time between counts is usually one year, but some businesses conducted them more often.

Which of the following is one of the five primary criteria for a small business' recording-keeping system?

It must assure that the details are accurate. It reports must be timely. Its data must be secure. It must be understandable to the manager. It should be simple to use.

Which of the following is an advantage of offering credit to customers?

It reduces the cost of selling, because it is much less expensive to obtain repeat business than it is to get new customers. It increases sales because people who buy on credit tend to buy more. It increases repeat business. Increased sales result in increased profit even though giving credit raises some costs.

Identify the main types of business risk related to events involving personnel of a business. (Check all that apply.)

Loss of crucial employees Employee theft Breach of government regulations

__________ is a medium of exchange accepted by the community.

Money

Cash is

Money that is immediately available to be spent.

Which of the following statements regarding safety stock are correct? (Check all that apply.)

Most managers use a rule of thumb developed from experience to decide on safety stock levels. It provides a cushion when sales are greater than forecast or when deliveries are delayed. Having too little stock is often worse than having too much.

Which of the following is a disadvantage of offering credit to customers? (Check all that apply.)

Often businesses will have to borrow to replace the missing cash. Sooner or later a customer will not pay his or her bill. Providing credit delays the receipt of cash.

______ lease is a long-term rental in which ownership of the asset never passes to the person paying the lease.

Operating

_______ is the process of transforming materials, labor, and energy into goods or services.

Operations

Which of the following statements regarding operations are correct? (Check all that apply.).

Operations may include designing, fabricating, and assembling. It converts into outputs. All businesses have some type of operations

Which of the following describes the equation for productivity?

Outputs/Inputs

______ equity is money from selling part of the business to people who are not and will not be involved in the management of business.

Outside

______ is contracting with people or companies outside your business to do work for a particular business.

Outsourcing

_______ is giving a third party legal rights to debts owed to a business in order to provide assurance that borrowed money will be repaid.

Pledging receivables

______ is an increase in owners' equity caused by selling a product or service.

Revenue

A ______ is the line of distribution of a product from its start as materials outside the firm to its handling, to its handling by sellers into the hands of customers.

Supply chain

A ______ is a direct reduction in the amount of taxes that must be paid, dependent on meeting some legal criteria.

Tax credit

Variable costs are expenses

That change with each unit produced.

Which of the following are the costs incurred with all capital assets over time? (Check all that apply.)

The acquisition cost of the asset The cost of owning the asset The cost of operating the asset

Risk is

The level of probability that an investment will not produce expected gains.

A supply chain is:

The line of distribution of a product from its start as materials outside the firm to its handling by sellers into the hands of customers.

Which of the following statements regarding borrowing are correct? (Check all that apply.)

The owner is not seperated from the business, in fact the business is considered an extension of the owner. No matter the form of business, the lender makes the loan to the owner, not the business. The owner's character is an important lending criteria and it is judges by his or her personal credit rating.

Capital budgeting is

The process of deciding among various investment opportunities to create a specific spending plan.

Which of the following statements regarding trade discounts are correct? (Check all that apply.)

These discounts are given by suppliers and vendors to encourage customer to pay on time. One should compare the annual effective interest rate of the discount to the cost of borrowing from other sources. The rule of thumb for a trade discount is 1% if the billing period is less than 30 days.

Which of the following statements regarding outside equity are correct? (Check all that apply.)

These individuals are called investors, since they are lettering a business owner use their money now in order to get wealth in the future. People who buy ownership rights in a business are considered outside equity investors. They are said to be outside, since they are not part of the business' management. It is called equity, because the investors have legal ownership rights to the business.

Which of the following statements regarding angel investors are correct? (Check all that apply.)

They invest their own money. They typically invest between $50 and $250K. They invest in businesses due to their personal interest and as a personal investment. They like businesses that are located near them.

Which of the following statements regarding the economic activities of local, state, and federal governments are correct?

They partner with businesses through programs that reduce the amount of risk they face

Percentage discounts from gross invoice amounts provided to encourage prompt customer payment is called ________.

Trade discounts

Which of the following is considered an acquisition cost for a new piece of equipment? (Check all that apply.)

Transportation Installation Purchase Price

T/F: An appropriate accounting system records details of financial dealings that ease the task of verifying business conduct.

True

T/F: Few small businesses provide credit directly to customers.

True

T/F: Gift capital can be termed as capital resources that neither provide any ownership nor require any repayment to the giver.

True

Process is the

business activities necessary to convert inputs into desired outputs.

Which of the following are advantages of renting an asset when compared with buying the asset? (Check all that apply.)

A business may be able to return a rented property, thus avoiding future rent payments. The timing and amount of cash outflows is specified in the rental contract.

Identify the schedules that must be completed to create a master budget. (Check all that apply.)

A cash budget A cash receipts budget

A statement of the sources and uses of cash in a business for a specific period of time is known as the ______.

A cash flow statement

A ______ is an agreement between two or more entities to pool resources in order to complete a project.

Joint venture

Wealthy individuals who invest in companies in relatively early stages of their development are called ______.

Angel investors

In the context of accounting functions, _____ records to track what a business owes and to make timely payments in order to capture prompt pay discounts and help maintain a good credit rating for a business.

Accounts Payable

______ are money that is owed to the business by customers who purchased products or services on credit.

Accounts receivable

Which of the following statements regarding accounts receivable are correct? (Check all that apply.)

Accounts receivable is money that customers owe a company. The key to controlling receivables is to sort them by age, so older receivables stand out. Many businesses treat receivables that are more than 90 days old as delinquent.

The total cost of obtaining an asset, including purchase price, transportation, and installation in order to ready it for its first productive use is called the ______ cost.

Acquisition

Which of the following are the broad categories of financial ratios? (Check all that apply.)

Activity ratios Profitability ratios Leverage ratios Liquidity ratios

Which of the following is implied by the going concern concept?

As a separate unit, a business may continue even if it is bought by another owner.

An easy and effective accounting system helps a firm maintain an internal "______" that records all entries and modifications to the accounting system to allow errors to be identified and corrected.

Audit Trail

A financial plan for the future based on a single level of operations is called a ______.

Budget

The ______ _______ ______ is a schedule of the amounts and timings of payments of money out of a business.

Cash disbursements budget

________ is planning and tracking the amounts and timing of money to be received and paid during the business cycle.

Cash flow management

Which of the following is one of the common financial statements?

Cash flow statement Income statement Statement of owners' equity Statement of retained earnings Balance sheet

A ________ budget is a schedule of the amounts and timings of the receipt of cash into a business.

Cash receipts

A ______ is a contractual provision of an insurance policy that specifies what risks the insurance company is assuming.

Coverages

Which of the following are risks that arise from customers and others? (Check all that apply.)

Damage or injury that is cause during the use of a business' products. The risk that a customer will not pay a business for the product or service. Injuries suffered while on the property.

Which of the following is a purpose of money? (Check all that apply.)

Facilitate exchange of unlike assets. Measure the value of tangible and intangible things. Keep track of wealth.

T/F: Dividends are a charge for the use of money and is usually calculated as a percentage of the principal.

False

T/F: Small online businesses that have very little cost of labor are mandated to show labor as a separate amount.

False

T/F: The most prevalent way employees steal cash from employees is through larceny and embezzlement.

False

______ is a financial crisis that is caused by a business growing faster than it can be financed.

Growth trap

Which of the following are important considerations when giving a gift to help someone start or continue their business?

If it is a loan, the agreement should outline the payment terms including the interest rate. The agreement should specifically state that it is a gift. Put the agreement into writing.

Which of the following statements is true of the process of pledging receivables? (Check all that apply.)

In this process, a business is liable solely for the amount borrowed and accrued interest on the loan. It is usually less expensive than factoring. It involves using receivables of a business as collateral for loan.

Which of the following statements about separation of duties are correct? (Check all that apply.)

It is a core management technique to safeguard money or other valuable business assets. Business owners have more difficulty stopping two or more employees who work together to steal from the firm. Employees are the second largest source of business theft after shoplifters.

Which of the following statements regarding secured debt are correct? (Check all that apply.)

It is the debt that is secured by specific assets that can be seized for nonpayment. Asset loans are usually secured by large assets like automobiles, machinery, and other equipment. Commercial banks and credit unions make secured loans.

Which of the following statements about the income statement are correct? (Check all that apply.)

It is the primary source of information about a business' profitability. Revenues - Expenses = Net Income. The single-step and multiple step are two formats commonly used for creating an income statement.

Which of the following statements regarding capital assets are correct? (Check all that apply.)

Land, buildings, and machinery are examples of capital assets. Most small businesses have few capital assets. The value that these assets bring to the business is often more than if they were sold.

Which of the following are the most common means by which employees steal cash from their employers? (Check all that apply.)

Larceny and embezzlement Skimming Phony disbursements

Which of the following are reasons business owners should use outside equity. (Check all that apply.)

Outside equity lessens the owner's exposure to financial loss. The business will not have increased costs in the form of interest.

Which of the following is a benefit of using outside equity?

Outside investors often bring new ideas, processes, and procedures to existing businesses.

Which of the following represents a best cash flow management practice? (Check all that apply.)

Owners should understand how and when the business uses its cash. Accounts receivables should be closely monitored for late payments. There should be enough cash available to meet a business' needs. Owners should be able to obtain cash quickly from a variety of sources.

Which of the following statements regarding operating leases are correct? (Check all that apply.)

Ownership of the asset never passes to the lessee. At the end of the lease period the lessee either returns the asset or purchases it at the asset's fair market value. These are similar to renting.

Amounts that are owed to vendors for merchandise or services purchased on credit are known as _______.

Payables

______ inventory is the process of physically counting business assets on a set schedule.

Periodic

In the context of financial ratios for comparing investment alternatives, which of the following is the formula to calculate the rate of return on investment (ROI)?

ROI = (average annual profits)/(average investment)

Which of the following is an example of a variable cost?

Raw materials Sales commissions Product shipping

An accounting process that identifies the causes of all difference between book and bank balances is known as ______.

Reconciliation

Which of the following elements are likely to be included under the recurring payments section of a cash flow report? (Check all that apply.)

Rent Wages

_______ stock is an amount of inventory carried to ensure that the business will not run out of inventory due to fluctuating sales levels.

Safety

Which of the following are sources of cash?

Selling a business' products and services & collecting cash from customers. Investment that a business has made, such as in stocks, bonds, and land. Through financing through debt or equity.

______ is a type of internal control that separates the physical control of an asset from the person accounting for that asset.

Separation of duties

Which of the following statements regarding bootstrapping are correct? (Check all that apply.)

Studies report that between 90 and 95% of start-up business are initially funded through bootstrapping. Business owners often use their own capital and the funds generated by operating the business to finance the business' start-up and growth. The majority of small business start-ups are funding by bootstrapping.

Which of the following are strategies to minimize the likelihood and magnitude of a business loss?

The business should minimize the amount of the loss should the loss occur. The business should minimize the amount of the loss by making sure valuable assets are secure. The business should minimize the probability of the occurrence of an event that leads to the loss.

Which of the following statements regarding operations are correct? (Check all that apply.)

The cost of disposing of the asset

Which of the following statements about debt are correct? (Check all that apply.)

The federal government provides loan guarantees for small businesses through the SBA to make borrowing easier. It is a claim on the value of assets that a business owns. It can take many forms and be both secured by an asset and unsecured like when borrowing using a credit card. Businesses may borrow from many sources like banks, development agencies, governments, and individuals. Banks and other creditors can force a business into bankruptcy if it does not pay it debt.

Money that is owed to a business by customers is tracked by the firm's ___________.

Accounts receivable

Which of the following statements regarding variances are correct? (Check all that apply.)

An owner may be able to determine where the business is not meeting its goals by studying the variances report. Budgets will always have at least a small variance. A business owner should examine the variance to determine the significance between the budget and actual spending. Small variances should be ignored.

An accounting statement of what a business owns, what it owes to others, and how much value the owners have invested in it is known as a(n) ______.

Balance Sheet

A(n) _______ describes what a business owns, what it owes to others, and how much value the owners have invested in it.

Balance sheet

______ are assets that are expected to provide economic benefits for periods of time greater than one year.

Capital assets

The company book balance reflects a business' internal accounting record of all transactions that affect ______.

Cash

__________ are/is money that is immediately available to be spent.

Cash

The ______ identifies when, how, and why cash is expected to coming into a business, and when, how, and why it is expected to leave.

Cash budget

The _______ identifies when, how, and why cash is expected to coming into a business, and when, how, and why it is expected to leave.

Cash budget

______ is a legal obligation to pay money in the future.

Debt

Employers have been held harmless for their employees violating regulations when they can provide they have taken which of the following steps? (Check all that apply.)

Have quickly acted when notified of a complaint Conducted employee and management training concerning those policies Have a written policy that has been provided to each employee

The ______ is a statement that lists revenues and expenses and shows the amount of profit a business makes for a specified period of time.

Income statement

The _______ is a statement that lists revenues and expenses and shows the amount of profit a business makes for a specified period of time.

Income statement

Aspects within a business that could change the business' costs are called __________ ___________.

Internal factors

A(n) ________ combines a purchases budget and a cost of goods sold budget.

Inventory budget

Which of the following statements about the balance sheet are correct? (Check all that apply.)

It contains a business' assets, liabilities, and equity. It is a statement of what a business owns, owes, and the value that the owners have invested in it. This statement is called a balance sheet because of accounting equation must balance.

Identify the true statements about a properly conducted and independent internal audit. (Check all that apply.)

It gives a structured evaluation of a business's processes and controls. It gives an objective assessment of a company's risk control structure.

Which of the following are true of a properly conducted and independent internal audit? (Check all that apply.)

It gives an assessment of a company's overall level of business risk. It gives an analysis of the operational and financial performance of a company.

Which of the following statements are true of economic order quantity (EOQ)? (Check all that apply.)

It helps business owners know the amount of inventory to order. It is the quantity of inventory at which the final cost of inventory is minimized.

In the context of financial ratios for comparing investment alternatives, a disadvantage to using the payback period analysis is that Blank______.

It ignores the time value of money

______ is the ratio measure of how well a firm does in using its inputs to create outputs.

Productivity

The process of creating a set of interconnected budgets that combine into a master budget that can be used for assessing and controlling the business processes is called _________.

Profit planning

The ______ depicts the number of units that are expected to be acquired during a budget period.

Purchases budget

Loans that provide the lender with the legal right to seize specific assets in the event of nonpayment is called Blank______ debt.

Secured

The basic accounting concept that assets equal liabilities plus owners' equity is known as the ______.

Accounting Equation

The ________ demonstrates that the claims of creditors and owners in total cannot be greater than the asset value of a business.

Accounting equation

In the context of managing business risk resulting from events involving personnel, which of the following statements regarding internal control are correct?

Internal control involves separation of the duties of maintaining the security of assets from that of maintaining records of those assets. Internal control is about setting up policies and procedures that work to make dishonesty difficult.

An asset that is acquired for the purpose of either generating future incomes and cash flows or appreciating in value to provide an increase in future wealth is called a(n) ____________.

Investment

Which of the following statements about capital budgeting are correct? (Check all that apply.)

It answers the question, "Which of the available investment alternatives provides the greatest benefit relative to the cost of the investment?" Its goal is to improve the quality of decisions about how to best use a business' scarce resources. It works by determining the costs and benefits of each alternative investment.

The final schedules completed to create a master budget are used to prepare a(n) _________.

Pro forma projected balance sheet

The business activities necessary to convert inputs into desired outputs is known as a ______.

Process

The sum of the cash inflows and outflows recorded in a firm's accounting records is the ______ balance.

Company book

Which of the following statements about insurance are correct? (Check all that apply.)

Insurance provides a benefit by requiring a relatively small fee compared to the amount of loss that is possible Not all risks are insurable Insurance coverage is either not available or excessively expensive for common events

Which of the following statements regarding just-in-time (JIT) inventory management are correct? (Check all that apply.)

It assembles product in the absolute minimum time possible. It ships product to the customer immediately upon completion. It is the ultimate extension of pull-through processing. It accepts inventory as it is sold. Raw material, work in process, and finished goods are all kept at the minimum levels possible.

Which of the following statements about budgeting are correct?

It is a quantitative expression of the use of resources necessary to achieve a business' strategic goals. The budget becomes the basis for controlling activities and the use of resources. It becomes a standard against which a business' performance can be measured. The first step of budgeting is making a forecast of future sales.

In the context of the labor budget, which of the following steps are included in predicting labor costs when they vary with the output amount? (Check all that apply.)

Multiplying the labor cost per unit with the number of units produced. Estimating the amount of labor required to produce each unit.

Which of the following methodologies help reduce the trouble of selecting from among investment options? (Check all the apply.)

Net present value analysis Differential revenues and expenses

Business _______ is the probability that the future state of a business will be less successful than planned, resulting in the loss of value of business assets.

Risk

Financial risk is

The uncertainty of returns and the probability of losing money.

Which of the following statements about reconciling bank balances with a business' book balances are correct? (Check all that apply.)

The owner should reconcile company book balances with bank balances to avoid cash flow problems. Businesses should bank where online access to account information that is continuously updated is offered. Service charges, direct customer payments, interest received or charges, and returned checks will affect the bank balance.

Which of the following statements about insurable value are correct? (Check all that apply.)

The value of land, excavation, and basements is not insurable. It is the amount of an asset for which a company will write an insurance policy. Not all the value of a property has insurable value.

Which of the following are disadvantages of renting an asset when compared with buying the asset? (Check all that apply.)

The value of the asset does not show up on a firm's balance sheet. The asset cannot be used as collateral to obtain borrowed funds.

Employee Theft Violation of government regulations Loss of key employees

Using company resources for making personal items Failing to provide required accommodations for employees with disabilities A critical employee becoming disabled

The difference between an actual and budgeted revenue or cost is called the _________.

Variance

T/F: The common financial statements provide business owners with information to help make informed decisions regarding a firm's operations and overall financial health.

True

Which of the following statements regarding coverages are correct? (Check all that apply.)

Workers' compensation, unemployment insurance, and vehicle liability are examples of coverages General liability, product liability, a malpractice coverages are examples of coverages that are not required, but can be purchased They are required by law to provide social protection from harm caused to employees, customers, and uninvolved individuals

Which of the following statements about cash flow statements are correct? (Check all that apply.)

It reports cash inflows called receipts and outflows known as payments for a specific period of time. Business owners should create cash flow statements that are developed from the business' cash records. Operating, investing, and financing activities are the three most common activities the cash flow statement reports.