Week 7: Accounting for Business and Management

______ are executives who develop and implement the firm's financial plan and determine the most appropriate sources and uses of funds. a) Financial managers b) Chief Executive Officers c) Chief Operating Officers d) Board of Directors

a) Financial managers

Which of the following is true of Mint.com? a) It is an online tool for managing personal finances. b) It tracks a company's cash inflows and outflows. c) It is a complex and sophisticated budgeting system. d) It promotes worldwide consistency in financial reporting practices.

a) It is an online tool for managing personal finances.

_____ would be the LEAST likely to obtain a private placement. a) Small individual investors b) Life insurance companies c) Commercial banks d) Pension fund managers

a) Small individual investors

A company's financial plan should answer all of the following questions EXCEPT: a) What is the contingency plan in case of bankruptcy? b) What funds will the company require during the appropriate period of operations? c) How will it obtain the necessary money? d) When will it need more cash?

a) What is the contingency plan in case of bankruptcy?

A(n) _____ is a financial statement that is directly based on the accounting equation. a) balance sheet b) income statement c) statement of cash flows d) statement of changes in retained earnings

a) balance sheet

Borrowing money a) creates leverage. b) increases equity. c) decreases risk. d) reduces liquidity.

a) creates leverage.

If a firm has a current ratio of 2.5, it means that for every $2.50 in _____ it has $1.00 in a) current assets; current liabilities b) total assets; total liabilities c) current assets; total liabilities d) total assets; current liabilities

a) current assets; current liabilities

Ramon has been hired to collect and record financial transactions and prepare financial statements for a Christian organization affiliated to a church, which makes him a a) not-for-profit accountant. b) government accountant. c) public accountant. d) management accountant.

a) not-for-profit accountant.

Lambert manages the sales force for his company. He is engaged in the _____ activity. a) operating b) accounting c) financing d) investing

a) operating

Fernando is not an employee of the Edith Corporation, but he was hired as a management consultant to provide unbiased advice about Edith Corporation's financial condition. Fernando is a(n) a) public accountant. b) government accountant. c) internal auditor. d) management accountant.

a) public accountant.

Altoona Products buys a $500,000 machine by taking out a bank loan. The company's assets will _____ by $500,000 while its liabilities will _____ by $500,000. a) rise; rise b) fall; fall c) rise; fall d) fall; rise

a) rise; rise

What is the first step in preparing a financial plan? a) Determine the expected level of profits for future periods b) A forecast of revenue over some future time period c) Estimate the funds needed to implement the strategies d) Estimate how many additional assets the company will need

b) A forecast of revenue over some future time period

Which of these describes the process of measuring, interpreting, and communicating financial information to enable people inside and outside the company to make informed decisions? a) Selling b) Accounting c) Operating d) Investing

b) Accounting

Which of the following represents the accounting equation? a) Assets + Liabilities = Owners' Equity b) Assets = Liabilities + Owners' Equity c) Liabilities = Assets + Owners' Equity d) Owners' Equity - Liabilities = Assets

b) Assets = Liabilities + Owners' Equity (ALOE)

Which of these deals with the process of planning, obtaining, and managing a company's funds to accomplish its objectives as effectively and efficiently as possible? a) Accounting b) Finance c) Knowledge management d) Business analytics

b) Finance

Which of the following was established in 1973 to promote worldwide consistency in financial reporting practices? a) FASB b) International Accounting Standards Committee (IASC) c) The World Bank d) GAAP

b) International Accounting Standards Committee (IASC)

Which of the following is the best definition of financial risk? a) It is the uncertainty about the gain or loss from an investment. b) It is the uncertainty that an investment's actual return will be less than its expected return. c) It is the possibility that an investment will earn a negative return. d) It is the possibility that an investment will lose money.

b) It is the uncertainty that an investment's actual return will be less than its expected return.

Excel Corporation sells $1,000 worth of goods on July 25 on credit. The customer sends the company a check on August 15. The customer receives the goods on September 1. Assuming the company uses accrual accounting, the sale will be recorded in a) August. b) July. c) September. d) October.

b) July.

The _____ was created by the Sarbanes-Oxley Act of 2002. a) Securities & Exchange Commission b) Public Accounting Oversight Board c) GAAP d) FASB

b) Public Accounting Oversight Board

Short-term assets are expected to be converted into cash within a) a month. b) a year. c) four months. d) six months.

b) a year.

Professionals who are responsible for gathering, recording, reporting, and interpreting the financial information of an organization are known as a) statisticians b) accountants c) IRS agents d) IRS agents' managers

b) accountants

Most private placements are _____. a) U.S. government securities. b) corporate debt issues. c) corporate equity issues. d) municipal debt issues.

b) corporate debt issues.

In a quarterly meeting, Antonio, a financial manager at InVest Inc. states that the company will benefit in the long term by utilizing a mix of debentures than focusing only on issuing shares. He states that this strategy will give his company a positive _____, which will increase the rate of return of the firm. a) risk-return trade-off b) leverage c) hedge fund advantage d) divestiture

b) leverage

Leverage _____ the return to shareholders and _____ the risk of their investment. a) lowers; lowers b) lowers; increases c) increases; lowers d) increases; increases

b) lowers; increases

All of the following are tangible assets EXCEPT a) cash b) patents c) building d) inventory

b) patents

Melissa is the financial manager for Branson Inc. and has decided to raise additional funds for the company by raising equity capital. She might do so by a) selling bonds. b) persuading existing owners to contribute additional funds. c) selling marketable securities. d) establishing a line of credit with a local bank.

b) persuading existing owners to contribute additional funds.

The sovereign wealth fund is a variation of a) market securities. b) private equity fund. c) private placements. d) debt capital.

b) private equity fund.

The gain or loss that results from an investment over a specified period of time is known as a) risk b) return c) probability d) value

b) return

Major current assets include all of the following EXCEPT a) accounts receivable. b) stockholders' equity. c) marketable securities. d) cash.

b) stockholders' equity.

If a company has an acid test ratio of 1.00, $5 million in inventory, and $10 million in current liabilities, what are its total current assets? a) $5 million b) $10 million c) $15 million d) $20 million

c) $15 million

An asset turnover ratio of 2.5 means that for every $1 in assets, the firm generates _____ in sales. a) $0.50 b) $2.00 c) $2.50 d) $3.00

c) $2.50

Cumberland Fabrication has $80 million in assets and $50 million in owners' equity. How much does the firm have in liabilities? a) $80 million b) $50 million c) $30 million d) $20 million

c) $30 million

Daniel's company needs to obtain funds in order to keep the business going; however, he does not want stockholders influencing the direction of his company. What type of financing should Daniel acquire? a) Angel investment b) Venture capital c) Debt capital d) Equity capital

c) Debt capital

Which principles encompass the conventions, rules, and procedures for determining acceptable accounting and financial reporting practices at a particular time? a) SOX b) IASB c) GAAP d) FASB

c) GAAP

Amelia asked her accountant to prepare a summary of the company's "bottom line." What specific information is Amelia interested in? a) Comparison of assets and liabilities b) The company's financial position for that week c) Net income after taxes d) Statement of owners' equity

c) Net income after taxes

Which of these have a much longer time horizon, perhaps up to 5 or 10 years? a) Inventory management plan b) Current liability plan c) Strategic plan d) Operating plan

c) Strategic plan

______ has the direct responsibility for shareholder relations. a) The controller b) The chief financial officer c) The chief executive officer d) The treasurer

c) The chief executive officer

What happens when the value of dollar drops? a) The earnings of a U.S. company with national operations increase. b) The earnings of a U.S. company with national operations decrease. c) The earnings of a U.S. company with international operations increase. d) The earnings of a U.S. company with international operations decrease.

c) The earnings of a U.S. company with international operations increase.

Which of the following is true of short-term funds? a) They are more expensive than long-term funds. b) They are less risky than long-term funds. c) They have volatile interest rates. d) They include equity and exclude current liabilities.

c) They have volatile interest rates.

All of the following are sources of short-term funds EXCEPT a) commercial paper. b) trade credit. c) corporate bonds. d) bank loans.

c) corporate bonds.

In a sense, a(n) ________ is the reverse of a merger. a) tender offer. b) leverage buyout. c) divestiture. d) acquisition.

c) divestiture.

Last year, ABC Tools had a current ratio of 2.0 and an acid-test ratio of 1.0. This year the firm's current ratio is 2.5 and its acid-test ratio is 1.5. ABC's _____ has _____. a) profitability; improved b) profitability; deteriorated c) liquidity; improved d) liquidity; deteriorated

c) liquidity; improved

Carmen works as a tax accountant at a mid-sized manufacturing company. Carmen would be considered a a) management consultant. b) public accountant. c) management accountant. d) government accountant.

c) management accountant.

Elsa owns a business and is reviewing her company's current financial statements. As a user of accounting information, Elsa is most interested in using this information to a) evaluate credit risk. b) approve new issues of stocks and bonds. c) plan and control activities. d) evaluate tax liabilities.

c) plan and control activities.

The term used to describe the benefits produced by a merger or acquisition is a) partnership. b) leverage. c) synergy. d) profit.

c) synergy.

Altitel Inc. has difficulties with managing operating costs of their company due to shortage of short-term finance. The company needs liquid assets and some capital to improve its performance in the market. Samuel, an established businessman, raises money from wealthy individuals and invests it in the company. He also gives the company critical advice about managing their processes effectively. In exchange, Samuel owns a small part of the company. In the context of the sources of financing, Samuel is a a) leverage advisor. b) risk-return trader. c) venture capitalist. d) hedge fund consultant.

c) venture capitalist.

Which of the following assets would a firm most likely finance using long-term sources? a) Inventory b) Accounts receivable c) Marketable securities d) Another company

d) Another company

Meryl is a corporate certified public accountant (CPA) working on a new budget. When she lists the company's liabilities, which of the following will she include? a) Computer software b) Owners' equity c) Marketable securities d) Employees' wages and salaries

d) Employees' wages and salaries

Which of these are investment companies that raise funds from wealthy individuals and institutional investors and use the funds to make investments in both public and private companies? a) Venture capitalists b) Private placements c) Hedge funds d) Private equity funds

d) Private equity funds

Who appoints the members of the Public Company Accounting Oversight Board? a) FASB b) American Association of CPAs c) Federal Trade Commission d) Securities and Exchange Commission

d) Securities and Exchange Commission

Whereas the ______ reflects a company's financial situation at a specific point in time, the ____ indicates the flow of resources that reveals the performance of the organization over a specific time period. a) statement of changes in retained earnings; balance sheet b) income statement; balance sheet c) statement of cash flows; income statement d) balance sheet; income statement

d) balance sheet; income statement

All of the following are assets EXCEPT a) inventory. b) cash. c) patents. d) bank loans.

d) bank loans.

Team-All Pharmaceuticals needs to raise funds to buy new production equipment. The financial manager would probably suggest that his company raise debt capital by a) using accumulated earnings. b) selling stock. c) selling marketable securities. d) borrowing money from a bank.

d) borrowing money from a bank.

The process that periodically checks actual revenues and expenses against forecast values is a) strategic planning b) leveraging c) budgeting d) financial control

d) financial control

Salman performs professional services similar to those of a management accountant while working for the city of Portland. Salman can best be described as a a) public accountant. b) cost accountant. c) tax accountant. d) government accountant.

d) government accountant.

Leonardo, chief financial officer for a company, wants to take a look at the summary of expenses, revenues, and profits of the firm for the most recent quarter. He can best find this information by consulting the a) balance sheet. b) cash flow statement. c) statement of owners' equity. d) income statement.

d) income statement

Angelina works for a mid-sized manufacturing company. Her responsibility is to examine the company's financial practices to ensure that records include accurate data and that the company's operations are in compliance with federal, state, and local laws and regulations. Angelina is a(n) a) government accountant. b) cost accountant. c) tax accountant. d) internal auditor.

d) internal auditor

Divestitures are of two types: a) sell-offs and trade-offs. b) trade-offs and spin-offs. c) buy-offs and spin-offs. d) sell-offs and spin-offs.

d) sell-offs and spin-offs.

A start-up is being financed by a long-standing and established company. This company takes financial support from wealthy investors. In this context, the company that is financing the start-up is a(n) a) finance manager. b) borrower. c) angel investor. d) venture capitalist.

d) venture capitalist.

Jermaine raises money from wealthy individuals and institutional investors, and invests them in a variety of promising new companies. In exchange, he will become part owner of those businesses. Jermaine is a(n) a) angel investor. b) underwriter. c) entrepreneur. d) venture capitalist.

d) venture capitalist.