Business 101 Final
Function of securities markets
-They assist businesses in finding long-term funding to finance capital needs -They provide private investors a place to buy and sell securities that can help them build their financial future
Which of the following is a reason why internal audits are important to a firm?
-They ensure financial statements are more reliable -They enable management to make better decisions. -They ensure all transactions are in accordance with GAAP.
Sinking funds are attractive to both issuing firms and investors for the following reasons:
-They provide for an orderly retirement of a bond issue -They reduce the risk the bond will not be repaid -They support the market price of the bond because they reduce the risk the bond will not be repaid
Reasons to use a Gantt chart
-To identify projects in process -To determine stages of a project -To trace a production process
Ways that commercial paper is different from bank loans include that it:
-carries a lower interest rate than commercial bank loans -is sold to investors, not banks -is unsecured
Disadvantages of using credit cards in small business financing include:
-higher interest rates -penalties on late payments
It is better to got to banks instead of family and friends for business loans because:
-loans from family can hurt family relationships -banks can assist the business in analyzing problems
An organization that issues bonds is legally obligated to:
-make regular interest payments -repay the entire bond principal amount at a prescribed time
Advantages of using retained earnings for financing:
-save interest payments -dividends -any possible underwriting fees for issuing bonds or stock -create no new ownership in the firm
The results of the weakness of the banking system in the early days of the United States included the fact that:
-the barter system was common -it made business and trade more difficult -some local government issued their own currency
Which of the following information is provided in a stock quote?
-the highest and lowest price the stock traded for that day -the stock's high and low over the past 52 weeks -the dividend paid -the stock's dividend yield -important ratios like the price/earnings ratio -the earnings per share
Characteristics of a bond include promises:
-to repay the amount owed -to repay on a certain date -to pay a certain interest rate
Accounting cycle
1. Analyze source documents 2. Record transactions in journals 3. Transfer journal entries to ledger 4. Take a trial balance 5. Prepare financial statements 6. Analyze financial statements
What are the steps in PERT?
1. Analyzing and sequencing tasks that need to be done 2. Estimating the time needed to complete each task 3. Drawing a PERT network illustrating information from steps 1 and 2 4. Identifying the critical path
Select the three basic requirements of production:
1. Build and deliver products in response to the demands of the customer at a scheduled delivery time 2. Provide an acceptable quality level 3. Provide everything at the lowest possible cost
Steps in investing in stocks and bonds from beginning to end with the first step at the top of the list
1. Decide that you want to buy stocks or bonds. 2. Find a stockbroker. 3. The stockbroker negotiates a price and places an order. 4. The trade is reported to your broker, who then notifies you.
What rights do common stockholders have?
1. Elect members of the company's board of directors and vote on important issues affecting the company and 2. Share in directors and vote on important issues affecting the company, if approved by the firm's board of directors
Three steps in the financial planning process in order from beginning to end:
1. Forecasting the firm's short-term and long-term financial needs. 2. Developing budgets to meet those needs. 3. Establishing financial controls to see whether the company is achieving its goals.
Three general good steps in estate planning are:
1. Select a guardian for minor children 2. Prepare a will 3. Prepare a durable power of attorney
What are the three things that every loan agreement should have?
1. agree to specific loan terms 2. put the agreement in writing 3. arrange for repayment in the same way they would for a bank loan
Benefits of a 401k include:
1. your contributions reduce your present taxable income 2. tax is deferred on the earnings 3. many employers will match your contributions
The term "2/10, net 30" means a discount of _______ percent in _______ days, all due in _____ days.
10, 2, 30
Companies with _____ or fewer workers can provide them with a Simple IRA and the company can match contributions.
100
International standards for the environment ISO
14000
A _______ is an employer-sponsored savings plan that allows you to deposit a set amount of pretax dollars and collect compounded earnings tax-free until withdrawal, when the money is taxed at ordinary income tax rates.
401k
Assures quality control ISO
9000
Pledging?
A percentage of the value of a firm's accounts receivable pledged (usually about 75%) is advanced to the borrowing firm.
Part of Securities and Exchange Act of 1934
A prospectus must be sent to prospective investors, prevent insiders within the company from taking advantage of privileged information they may have
The abbreviation for the independent agency of the US that insures bank deposits is the _______.
FDIC
The __________ __________ __________ __________ defines the generally accepted accounting principles.
Financial Accounting Standards Board
An advantage related to conducting quality control throughout production instead of at the end of the production line
Finding defects prior to completion saves expensive resources
The electronic-based network that links dealers so they can buy and sell securities electronically is:
NASDAQ
What does NASDAQ stand for?
National Association of Securities Dealers Automated Quotations
What type of securities markets handle the sale of new securities?
Primary
That part of the production process that physically or chemically changes materials
Process manufacturing
_______ ratios measure how effectively a firm is using its various resources to achieve profits.
Profitability
An investment where the withdrawals are tax-free is a ______ IRA.
Roth
An investment where the withdrawals are tax-free is a __________ IRA.
Roth
Various state agencies and the ____ have regulations on the issuing of stock.
SEC
What is the term given to a summary of all financial data to make certain the figures are correct and balanced?
Trial balance
When a manager continually monitors all phases of the production process to assure quality is being built into the product from the start, she is likely to be using _______ _______ _______.
Statistical quality control (SQC)
Government bonds compete with U.S. corporate bonds in securities markets
U.S. government bond, treasury bill, treasury note, treasury bond, municipal bond, yankee bond
Reasons bond interest rates may differ?
Vary according to the state of the economy, the reputation of the issuing company, and the interest rate for bonds of similar companies
What is a bull market?
When the market is doing well
The ______ ______ is responsible for financing international economic development and is sometimes called the International Bank for Reconstruction and Development
World Bank
The Sarbanes-Oxley Act prohibits account firms from providing consulting services to companies they ________.
audit
______ is the reviewing and evaluating of records used to prepare a company's financial statements
auditing
Internal ______ ensure that all transactions are performed in accordance with GAAP.
auditors
Stocks issued by higher-quality companies are referred to as _______-chip stocks.
blue
The _____ of _____ of the Federal Reserve System sets margin rates in the U.S. market.
board of governors
A _____ quotation gives the bond's interest rate, maturity date, rating, and current price, as well as whether it's callable.
bond
A _______ is a corporate certificate indicating that an investor has lent money to a firm (or a government).
bond
Long-term liability that represents money lent to the firm that they must pay back is a
bond payable
recording
bookkeeping
Leverage or debt ratios measure the degree to which a firm relies on:
borrowed funds
Items on a firm's cash budget include:
borrowing needs, debt repayment, operating expenses, and short-term investments
When a company allocates the use of specific resources throughout the firm based on a financial plan indicating management's expectations, then the company is using a ______ as the basis for making decisions.
budget
Capital, cash, and operating are three types of _____.
budgets
The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding:
business operations
Borrowing some of a stocks' purchases cost from the brokerage firm is called:
buying stock on margin
Common financial transactions include:
buying/selling goods and services, acquiring insurance, paying employees, and using supplies
If the Federal Reserve wants to increase the amount of money in circulation, it will ______ government bonds.
buys
Cellular or modular layout
can accommodate changes in design
The interest rate attached to a bond:
cannot be changed and payments are usually made twice a year
The positive difference between the purchase price of a stock and its sale price is called _______ _______.
capital gains
A ______ ______ forecast is part of a short-term forecast to predict monies coming in and going out of a girm.
cash flow
A statement of ______ ______ provides a summary of money coming into and going out of the firm.
cash flows
A professional who has completed a curriculum on 106 financial topics and a 10-hour examination is called a ______ ______ planner.
certified financial
Mutual funds called _______ funds limit the number of shares; once the fund reaches its target number, no new investors can buy into the fund.
closed-end
Which of the following was considered the cause of the market turmoil of 2008?
collapsing of the real estate market
What are factors in setting the interest rate?
collateral, firm's credit rating, market interest rates
_______ _______ companies are firms that make short-term secured loans with higher interest rates than banks.
commercial finance
A non-deposit institution that will make short-term loans to borrowers who offer tangible assets as collateral are called ______ finance companies which are different from ______ which accept deposits.
commercial, banks
_______ stock is the most basic form of ownership in a firm.
common
Companies can issue ______ and ______ stock.
common and preferred
Earnings per share is profit earned by a company for each share of outstanding ______ ______.
common stock
Basic earnings per share is the ratio of net income after taxes to:
common stock shares outstanding
Tremendous career opportunities exist in operations management as manufacturing and service companies attempt to remain ________ in the global market.
competitive
Investors can exchange ______bonds for shares of common stock in the issuing company.
convertible
The rate of return a company must earn in order to meet demands of its lenders and expectations of its equity holders is called the:
cost of capital
Benefits of using the internet as a purchasing tool
cost savings, access to many suppliers, time savings
Nonbanks are financial organizations that accept no ______ but offer many of the services provided by regular banks.
deposits
When an insurance company pays the current value of a loss it is called the _______ cost.
depreciated
If you follow the six steps to controlling your assets you are more likely to :
develop financial techniques for becoming financially secure and have money for investment
_________ insurance pays part of the cost of long-term sickness or an accident.
disability
If a bond does not have features that make it attractive to other investors, you may have to sell at a _______. But if other investors do highly value it, you may be able to sell your bond at a _______.
discount, premium
The length of time your money is committed to an investment is referred to as the ______.
duration
A debit card is a _______ check that withdraws money from a checking account.
electronic
________ ________ ________ systems send transactions directly from one computer to another.
electronic funds transfer (EFT)
Today, bonds are registered to specific owners and changes in ownership are recorded ______
electronically
Credit cards are most useful to:
ensure payment to the merchant, track purchases, replace the need to carry cash
On a balance sheet, assets may include:
equipment, buildings, land, furniture, motor vehicles that help generate income, patents, trademarks, copyrights, and goodwill (TANGIBLE AND INTANGIBLE RESOURCES)
With regard to repayment in financing, financing that has no repayment date is a sign of ______ financing.
equity
_____ financing is selling part of the company or reinvesting retained earnings in the company.
equity
A barter _______ is a modern-day technique to swap goods and services for other goods and services through the use of trade credits.
exchange
Collections of stocks and bonds that are traded on exchanges but are traded more like individual stocks than like mutual funds are ______-______ funds.
exchange-traded
A person who distributes the assets of your estate is a _______.
executor
The physical arrangement of resources in the production process refers to:
facility layout
________ is a significant question because, once the decision has been made and implemented, the firm must live with it due to the high costs involved.
facility location
Examples of a problem solved by operations management planning as it relates to manufacturing include:
facility location, time-to-market, inventory control
A financial institution or commercial bank that purchases a business' accounts receivable at a discount and then keeps what they collect is a:
factor
The selling of accounts receivable, known as ________, is more common in industries such as clothing, furniture, and global trade.
factoring
When a firm sells its accounts receivable at a discount rate in return for cash, the firm is _______.
factoring
While a loan must be repaid, ______ is the selling of accounts receivable.
factoring
A comprehensive set of environmental standards that encourages companies to conduct business in a cleaner, safer, and less wasteful way is known as
ISO 14000
What certification does the European Union demand in order to do business with companies?
ISO 9000
What is the first public offering of a corporation's stock?
Initial public offering (IPO)
_______ investors are large organizations, such as pension funds, mutual funds, and insurance companies, that invest their own funds or the funds of others.
Institutional
As an investor, you may want to explore opportunities in global markets. What are suggestions to consider when investing in global markets?
Invest in companies with a solid track record, consider mutual funds and exchange-traded funds, trade with an established broker that has an office abroad
Preferred stock differs from common stock as it:
It is callable, which means preferred stockholders could be required to sell their shares back to the corporation. It can also be converted to shares of common stock, and it can be cumulative. Does not usually have voting rights, pays dividends to preferred stockholders first, pays a fixed dividend
Advantages of mutual funds:
It is simple to change your investment objectives, investors can buy directly from the fund and avoid broker fees, they provide professional investment management
What is the preemptive right of a common stockholder?
It is the right to purchase any new issues of shares of the same class.
A financial report showing profitability is called a _______ statement.
income
Return on sales is net ______ divided by net sales.
income
The ______ ______ summarizes all the revenue from operating activities, money resources used up, expenses, and resources left after all costs and expenses.
income statement
The ______ _______ summarizes revenues, costs, and expenses over a specific period of time.
income statement
Firms will leverage (raise needed funds through borrowing) because it will:
increase a firm's rate of return on ownership's investment
The terms of the bond such as interest and repayment date are called the ________.
indenture terms
An _______ audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.
independent
A _____ fund may reflect a group of large companies, small companies, emerging countries, or real estate.
index
Because of ________ _______, more flexibility in choice of business location has increased while allowing firms to remain competitive.
information technology (IT)
Types of organizations that can issue bonds include:
federal, state, and local governments, federal government agencies, foreign governments, and corporations
A smaller firm may have more cash management problems than a larger one, including:
fewer options to finance using credit cards
A company's __________ statements summarize all of the transactions that have occurred over a particular period.
financial
When considering long-term financing options a financial manager must consider the organization's _______ goals and objectives.
financial
Financial management primarily involves managing a firm's:
financial resources
What is the term for a written report that quantitatively describes the financial health of a company?
financial statement
________ assets are long-term assets like land, buildings, and equipment.
fixed
Using machines designed to do multiple tasks in order to produce a variety of products is called _______ _______.
flexible manufacturing
A capital budget is:
for spending plans on major purchases
An example of _____ utility is when a butcher produces a specific cut of beef.
form
In order to save money it is important for a person to live ______ by choosing inexpensive options.
frugally
A firm's ______ must be made available in the correct amount and time in order to fulfill its needs and obligations, such as payroll or loan payments.
funds
Finance is the function of acquiring and management of:
funds
A demand deposit (checking account) is known as that because:
funds may be withdrawn at any time by its owner
If interest rates go down, then bond prices:
go up
Revenue is the monetary value of what a firm received for:
goods sold, services rendered, interest earned
Aspects of outputs in production process
goods, services, ideas
U.S. ______ bonds are considered the safest investments.
government
Considered users of managerial accounting information:
government taxing authorities, government regulatory agencies, people interest in the organization's income and financial position, managers of the firm
Revenue minus cost of goods sold is called ______ _____.
gross profit or gross margin
Stocks of corporations in emerging fields such as technology and biotechnology or Internet-related firms, whose earnings are expected to grow at a faster rate than other stocks, are referred to as ______ stocks.
growth
When your insurance company will pay what it takes to purchase a lost item new, it is called:
guaranteed replacement cost
Penalties for insider trading
imprisonment, fines
The members of a stock exchange such as the NYSE:
sell and buy securities for companies and individuals
It is easy for investors to buy securities from companies almost anywhere in the world because:
there are fewer legal barriers
It is easier to design mass customization for services rather than products because
there is no tangible good to be adapted
Which of the following is true about venture capitalists?
they invest in businesses with high potential, they have assisted many major companies during start-up
Which of the following are key benefits to investors in investing in a mutual fund or ETF?
they offer small investors a way to spread the risk of stock and bond ownership and have their investments managed by a financial specialist for a fee
A durable power of attorney allows the person you name to:
take over your finances if you become incapacitated
On the statement of cash flows financing activities would include:
taking on new debt, or equity capital or cash used to pay business expenses, past debts, or company dividends
Characteristics of a Simple IRA include:
the employer can match contributions, employees can contribute up to $12,000
What type of long-term assets have no real physical form but do have value?
intangible assets
A bond's ______ rate is sometimes called the coupon rate.
interest
_______ is the payment the bond issuer makes to the bondholders to compensate them for the use of their money.
interest
Credit cards can be most harmful when:
interest accumulates on debt, one makes purchases for non-needed items
What influences the bond interest rates that businesses must pay?
interest rate paid by U.S. government bonds
What is on a bond quotations?
interest rate, maturity date, rating, current price, whether it's callable
A short production run with frequent adjustments to machines is considered a ___________ process of production.
intermittent
Producing customized pieces of furniture for clients requires a short production run with frequent machine adjustments to satisfy customer requirements. This type of production lends itself to a _______ production process.
intermittent
Careful control of ______ costs allows a firm to maintain correct levels of stock and product.
inventory
Which ratio is the cost of goods sold divided by the average inventory?
inventory turnover ratio
When selecting an investment option, which criterion relates to the chance that an investment will be worth less at some future time than it's worth now?
investment risk
Key criteria for selecting investments
investment risk, yield, duration, liquidity, tax consequences
_______ are cash used in or provided by the firm's investment activities.
investments
A typical mutual fund:
invests in both stocks and bonds
It is important to remember that a budget:
is a financial plan
A uniqueness of a certificate of deposit compared to a time deposit is that:
it has a maturity date
An advantage of a mutual fund is that;
it is simple to change your investment objectives
Reasons to invest in a home include:
it keeps your housing costs more stable, it can gain in value
What happens if a company calls a bond before the maturity date?
it pays investors a price above the bond's face value
A record book or computer program where accounting data are first entered
journal
Financial data from transaction documents are first recorded in a _______. The data are then transferred into categories in a ______ so managers can find all the information about a single account in one place.
journal, ledgers
Bonds can range from the highest quality to _____ bonds.
junk
Bonds that have higher returns but are considered very risky are called:
junk bonds
Balancing customer needs with production needs is the primary goal of ______-______-______.
just-in-time
The goal of operations management is to:
keep operations running efficiently, create a good experience for the customer
Inputs into the production process
land, labor, capital, entrepreneurship, knowledge
Factors of production?
land, labor, entrepreneurship, knowledge
Half the human effort, half the defects, one-third the engineering effort, and half the floor space with 90% inventory are characteristics of _________.
lean manufacturing
Information in the journal is transferred to the ______, so managers can find all the information about a single account in one place.
ledger
The groups the cost of capital (rate of return) must satisfy are:
lenders, stockholders or venture capitalists
Benefits of telecommuting?
less dependence on locating near sources of labor, employees are in touch with company and customers right from home, firms may choose less expensive locations
Lean manufacturing uses:
less human effort, less manufacturing space, less investment in tools, less engineering time to develop a new product
When doing business internationally, a promise by a bank to pay the seller a given amount if certain conditions are met is a _______.
letter of credit
Major services that banks provide to international business include:
letters of credit, banker's acceptances, currency exchange
A debt a firm owes to others is called a _______.
liability
The factors to consider in an investment include:
life (how long), amount, rate of return (interest rate)
To protect your loved ones from the loss of your income, you shoud buy:
life insurance
What is the name of the order that you place to buy a share at a price you specify?
limit order
If a firm wants to speed up the borrowing process with an unsecured, non-guaranteed loan, it will seek a _____ of _____ from its bank.
line of credit
Unsecured, short-term funds a bank will lend to a business, provided the funds are readily available, is called a:
line of credit
The risk/return trade-off principle means that:
the greater the risk for a lender making a loan, the higher the interest rate
Facts about the Federal Reserve Board of Governors include the fact that:
the seven members are appointed by the president and confirmed by the Senate, the primary function is to set monetary policy, they administer and supervise the twelve Federal Reserve banks
What is diversification?
the spreading of investments across different areas to reduce risk
The ease with which an asset can be converted to cash is called:
liquidity
What type of ratio measures a company's ability to turn assets into cash to pay its short-term debts?
liquidity ratio
Types of financial ratios used in ratio analysis:
liquidity, leverage, profitability, activity, debt
Steps to building capital include:
living within your means, investments, income management
A ____ fund is a mutual fund that charges investors a commission to buy or sell its shares.
load
The M-3 (money supply) includes:
only M-2 and institutional money market funds
Mutual funds called ______ funds will accept the investments of any interested investors.
open-end
In operating a business, rent, salaries, supplies, utilities, and insurance are all examples of:
operating expenses
What would be shown on an income statement?
operating expenses, revenue, net income
A manager responsible for producing products, and delivering them on time, on budget, and to specifications is likely an _________ manager
operations
Of the three major activities of a firm, cash transactions associated with running the business are known as:
operations
A specialized area of management that converts or transforms resources, including human resources, into goods and services is the definition of:
operations management
A way to save money for the future is to _______ your financial expenditures carefully.
plan
Enterprise resource planning took the idea of materials planning a step further by:
planning for material needs within the entire company on one database
Aspects of production control in production process
planning, routing, scheduling, dispatching, follow-up
When accounts receivable are ______, they are used as collateral for a loan. The lender advances a percentage of the value to the borrowing firm and collects from the firm as customers pay their bills.
pledged
_____ stockholders do not have voting rights in a firm.
preferred
______ stock is identified by the letters pf on a stock quote.
preferred
What does the term callable mean?
preferred stockholders can be required to sell their shares back to the corporation
The key activities of finance include:
preparing budgets, doing cash flow analysis, and planning for the expenditure of funds on such assets as plant, equipment, and machinery
Corporations make money on the sale of their securities (stock) only once, when they sell them on the _____ market.
primary
_____ markets handle the sale of new securities.
primary
An accounting system includes inputs, _______, and outputs.
processing
_______ is the creation of finished goods and services using land, labor, capital, entrepreneurship, and knowledge.
production
Earnings per share, return on sales, and return on equity are all examples of _______ ratios.
profitability
When investors give computer instructions to sell automatically to avoid potential losses if their stock price dips to a certain point, it is called:
program trading
A promise to pay a person or firm a certain amount at a specified time is a _____ _____.
promissory note
The purpose of the Securities Act of 1933 is to:
protect investors by requiring full financial disclosure by firms selling bonds or stock
Credit cards can be useful to small businesses by
providing the business its own financing, extending repayment over time
Which type of accountant would be available to businesses or individuals on a fee basis?
public accountant
The formula for the costs of goods sold is:
purchase price + freight charges + storage costs
Term that describes the act of buying all materials needed by an organization
purchasing
__________ a moderately priced house is a great way to have fixed payments and hopefully build equity.
purchasing
Whole life insurance combines:
pure insurance and savings
In the past, conducting inspections at the end of the production line was the approach to _________ ________
quality control
When are dividends generally paid?
quarterly
Government and not-for-profit accounting involves working for organizations whose purpose is to serve:
ratepayers, taxpayers
Historically, a secure investment has been:
real estate
Items that may back a secured bond include:
real estate, equipment, other pledged assets
Items that can be financed by being the collateral in a secured loan include:
real estate, raw materials, automobiles
During the recent financial collapse, financial managers failed to do their job effectively because of:
risky financial decisions and poor investment decisions
Inputs to the accounting system
sales documents, purchasing documents, shipping documents, payroll records, bank records, travel records, entertainment records
It's important to ________ money each month in a separate account in order to pay for large purchases you'll make in the future.
save
Which of the following would be considered an example of the M-2 (money supply)?
savings accounts, certificates of deposit, money market accounts
A financial institution that accept checking and savings deposits and provides home mortgages is a _______ and _______ association.
savings and loan
Fixed position layout
scheduling work operations at site of end product as in home building
The ______ market handles the trading of securities that have already been issued between investors, with the proceeds of the sale going to the investor selling the stock, not the corporation whose stock has previously been sold in an IPO.
secondary
Securities markets are divided into _____ and ______ markets.
secondary and primary
A loan backed by collateral, something valuable like property, is called a _____ loan.
secured
A corporation can issue two different classes of bonds, ______ and ______.
secured and unsecured
A ______ bond is backed up by a pledge of assets, whereas a _______ bond (also called a debenture bond) is backed only by the reputation of the issuer.
secured, unsecured
Investment bankers are specialists who assist in the sale of new _____.
securities
The length of time covered in a long term forecast is usually:
at least a year
Interest on your home mortgage payments is tax _________.
deductible
The purpose of a callable bond is to
pay off the principal balance before maturity.
What stocks are considered risky investments?
penny stocks
______ funds are monies put aside by corporations and others for the retirement of their employees.
pension
Health insurance is important because:
the costs of health care are very high
Needs for operating funds include:
-Managing day-by-day needs of the business -Controlling credit operations -Acquiring needed inventory -Making capital expenditures
Five standards of money:
-Portability -Divisibility -Stability -Durability -Uniqueness
Which of the following are advantages of issuing bonds?
-Bondholders are creditors of the firm, not owners. -Bond interest is a business expense and tax-deductible to the firm. -Bonds are a temporary source of funding. -Bonds can be repaid before the maturity date if they are callable.
Which of the following are disadvantages of issuing bonds?
-Bonds increase debt and may adversely affect the market's perception of the firm. -Paying interest on bonds is a legal obligation. -The face value of the bond must be repaid on the maturity date.
Manufacturers and service organizations can remain competitve in global markets by:
-Focusing more on customers -Maintaining closer relationships with suppliers and other companies to satisfy customer needs -Practicing continuous improvement -Focusing on quality -Saving on costs through site selection -Relying on the Internet to unite companies that work together -Adopting production techniques
Which of the following relate to a prospectus?
-It is a condensed version of the registration statement -It must be sent to prospective investors
What is an index fund?
A utual fund with a portfolio that matches a particular stock index.
Common liability accounts recorded on a balance sheet:
Accounts payable, notes payable, bonds payable
What is NASDAQ?
An automated system for trading stock
_______ are economic resources owned by a firm.
Assets
Fundamental rule of accounting
Assets - Liabilities = Equity
Why are institutional investors a powerful force in securities markets?
Because of their vast buying power
Why do most companies issue no-par stock?
Because par values do not reflect the market value of the stock
The acronym for using computers to design products is referred to as ________.
CAD (computer-aided design)
What is the acronym used for the system of production that uses computers to control the manufacturing process?
CAM (computer-aided manufacturing)
The acronym for computer software that combines CAD and CAM systems in production is
CIM
_______ expenditures are considered major investments in long-term assets.
Capital
What is true of commercial paper?
Consists of unsecured promissory notes, in amounts of $100,000 and up, that mature or come due in 270 days or less
Which of the following are features that preferred stock has but common stock does not have?
Cumulative, fixed dividend, callable
________ is the systematic write-off of the cost of a tangible asset over its estimated useful life.
Depreciation
______ are part of a firm's profits that the firm may distribute to stockholders as either cash payments or additional shares of stock.
Dividends
What does DJIA stand for?
Dow Jones Industrial Average
The acronym for the newer version of MRP (materials requirement planning) is
ERP (enterprise resource planning)
A retirement savings plan aimed at small-business owners is called a _______ plan.
Keogh
______ means to raise funds through borrowing to increase a firms rate of return.
Leverage
When selecting an investment, which criterion relates to how quickly you can get back your invested funds if you want or need them?
Liquidity
_____-_____ forecasts will look at all major inflows and outflows of the firm for a period of more than one year.
Long-term
The money supply term that refers to money that can be access quickly and easily is ________.
M-1
The term for the money supply that includes cash, checking accounts, Certificates of Deposit, money markets, and big deposits such as institutional money market funds is:
M-3
Using sales forecasts to make sure needed parts and materials are available at the right time and place using a computer-based operations management system is the definition of _________ _________ ________ .
Materials requirement planning (MRP)
The U.S. Congress passed legislation which created new government reporting standards for publicly traded companies under the ________ Act.
Sarbanes-Oxley
The ________ and ________ Commission is the federal agency that has responsibility for regulating the various stock exchanges.
Securities and Exchanges Commissions
Process layout
Serving different customers with different needs
A quality control standard that allows for 3.4 defects per one million opportunities is called:
Six Sigma quality
The SEC was created by:
The Securities and Exchange Act of 1934
How do voting rights in a corporation allow common stockholders to influence corporate policy?
The board members they elect choose the firm's top management and make major policy decisions.
How do cash flow problems usually start?
The firm uses up its credit.
Advantages to a corporation of issuing stock includes which of the following?
There is no legal obligation to pay dividends to stockholders
Role of investment bankers?
They help prepare for new stock issues, they underwrite new issues of stocks or bonds
What role do investment bankers play in securities markets?
They help sell corporation securities in the primary market.
A bar chart indicating what projects are being worked on and what stage they are in is representative of:
a Gantt chart
To encourage a customer to pay its bill on time or early, a firm will often offer:
a discount for payment before a certain date
Statements about pledging:
a firm's accounts receivable are used as basis for loan, the firm gets a percentage of the pledged accounts receivable as a loan
What makes buying on margin a risky way to invest in stocks?
a margin call
Examples of a fixed-position layout
a new home build, new road construction, bridge construction
What is a stock?
a share of ownership in a company
A unique element of ERP is that it combines computerized functions of all divisions into one database supported by:
a single integrated software system
An IRA (individual retirement account) is:
a tax-deferred investment plan that lets you save part of your income for retirement
Putting together components is the ________ process.
assembly
When producing large quantities of a few types of products, a _______ _______ layout should be used.
assembly line
One should only borrow money for...
assets that increase in value and assets that generate income
A balance sheet includes:
assets, liabilities, owners- equity
Which of the following are services provided by nonbanks?
accept loan applications, brokerage services, investment services
Reasons bond interest rates may differ
according to the state of the economy, the reputation of the issuing company, and the interest rate for bonds of similar companies
Classifying, summarizing, interpreting, and reporting
accounting
Computerized _______ programs post information from journals instantaneously so that financial information is readily available.
accounting
______ payable are current liabilities involving money owed to others but not yet paid.
accounts
______ ratios, such as inventory turnover, measure the effectiveness of managers in the basic function of creating profits.
activity
Net income is:
all revenue minus all expenses, including taxes
Besides Social Security, the government:
allows some tax-deferred investments and contributions, wants you to save for retirement
Seven times your family income plus extra ($100,000) for college is:
an estimate for life insurance needs
Financial managers must understand tax regulations because:
analyze the tax implications of managerial decisions to minimize the taxes the business must pay
A rule of thumb is not to buy a home that costs more than two and half times your ______ ______.
annual income
Stakeholders who want to look at detailed financial information on the financial condition, progress, and expectations of a company will look at:
annual report
A contract to make regular payments to a person for life or for a fixed period is called a ________.
annuity
Secured bonds are
backed by collateral
In order to get control of your finances the first step is to take an inventory of your financial assets by developing a personal _______ sheet.
balance
The financial statement that reports a firm's financial condition at a specific time is the:
balance sheet
A ____________ is a promise to pay a certain amount at a certain time with no conditions.
banker's acceptance
Statements about banking
banking is now a global industry, issues around the world can influence banking on the local level
Commercial banks, savings and loans, credit unions, and non-banks are all considered to be a part of the U.S. _______ _______.
banking system
Banks prefer to lend short-term money to larger, established businesses because:
banks are very sensitive to risk
Reasons a firm should stay in close touch with its banks include
banks may assist in spotting cash flow problems, banks like to see regular financial statements from borrowers
When the prices of stocks decline steadily, the market is called a ______ market.
bear
Planning, routing, scheduling, distribution, and follow-up are all aspects of _______ in the production process.
control
CIM?
computer integrated manufacturing
CAD?
computer-aided design
CAM?
computer-aided manufacturing
An accountants' time is freed up to do more important tasks such as financial analysis due to the assistance provided by using:
computerized accounting programs
As an investor, you may want to explore opportunities in global markets. Which of the following are suggestions to consider when investing in global markets?
consider mutual funds and exchange-traded funds, trade with an established broker that has an office abroad, invest in companies with a solid track record.
In order to be a quality organization, a firm must
consistently produce what the customer wants
What process requires long production runs that turn out finished goods over time?
continuous process
The ________ approach is buying stock when everyone else is selling or vice versa.
contrarian
Customers are happy when firms extend _____ for purchases.
credit
A nonprofit, member-owned financial cooperative that offers the full variety of banking services to their members is called a:
credit union
What are quality of life issues that must be considered by companies when choosing a facility location?
crime, climate, schools
A final step used in PERT is to identify the _______ _______.
critical path
The related tasks that take the longest to complete in a project are called the:
critical path
If one or more dividends are not paid when promised, they accumulated and the corporation must pay them later before it can distribute any common stock dividends. This is referred to as:
cumulative
When preferred shareholders are due any skipped dividend payments before common stock holders can be paid, they hold which type of stock?
cumulative preferred stock
______ assets are items that can or will be converted into cash within one year.
current
Social Security money comes from:
current workers
Sometimes a company is willing to spend millions to move their facility from one location to another in order to increase buyer traffic, drawing more potential
customers
Making a unique product or providing a unique service to a specific individual means to do what?
customize
Bonds that are unsecured are called ________ bonds.
debenture
______ bond is another term for unsecured bond.
debenture
The benefit of using a _____ _____ is that it is set up so that you cannot spend more than you have in the bank.
debit card
A firm raising funds through various forms of borrowing with the intent to pay it back is using _____ financing.
debt
With regard to tax considerations in financing, the fact that interest is tax deductible is a sign of ______ financing.
debt
_____ financing involves borrowing money.
debt
There is no management influence for ______ financing whereas common stockholders have voting rights for _____ financing.
debt, equity
When the Federal Reserve wants to encourage economic activity, it will ______ the discount rate.
decrease
The goal of living frugally is to:
have a better future
A firm's chance of success is increased by:
having a good financial plan
Stocks of public utilities are considered income stocks because of their:
high dividend yield
Penny stocks are sold by corporations that compete in:
high-risk industries
The government gives several motivations, including interest deductions, to encourage __________.
home ownership
The amount a business borrows and for how long depends on which of the following?
how quickly it can resell the merchandise it purchases with the funds and the type of business and industry it is in
When choosing an investment an individual will take into consideration tax consequences which is:
how the investment affects your tax situation
The best determination of how a house will appreciate is:
location
Financial managers take the data and reports prepared by accountants and:
make recommendations on improving the financial performance of the firm
A ______ accountant works for a single firm or agency and performs accounting functions for use in making decisions within that firm or agency.
managerial
________ accounting is used to provide information to managers within the organization to assist them in making decisions
managerial
The key working areas of accounting include:
managerial accounting, financial accounting, auditing, tax accounting, and government and not-for-profit accounting
Select the key functions of financial management:
managing the firm's cash, credit accounts, and inventory, managing taxes, collecting funds, controlling funds
401k money can only be invested in:
many different combinations
An order to buy or sell stock immediately at the current price is a:
market order
The type of production that does not concern itself with customer preferences, but instead focuses om making a large number of a few products is called ________ production.
mass
Which production systems tailors products to meet the needs of large numbers of individual customers?
mass customization
The operating budget is also called the:
master budget
The exact date the issuer of a bond must pay the principal to the bondholder is called the ______ ______.
maturity date
A CPA must:
meet a state's requirements for education and experience and pass a series of exams
The basic premise of just-in-time inventory is:
minimum inventory is kept on hand
Short-term funds should be used for
monthly expenses, unanticipated emergencies, cash flow problems, expansion of current inventory, temporary promotional programs
Commercial finance companies take ______ risks than banks and charge ______ interest rates.
more; higher
Items that are included in a household budget include:
mortgage/rent, utilities, food, clothing, vehicles, furniture, life insurance, car insurance, medical care, taxes
Time-to-market means:
moving products quickly to customers at the lowest cost
One reason a firm is cautious about extending credit is:
much of a firm's total assets can be tied up in accounts receivable (credit accounts)
A certified public accountant:
must pass a series of exams, must follow GAAP in the United States
The purpose of a will is to:
names the guardian for your children, states how you want your assets distributed, names the executor for your estate
Commercial paper is often used when the firm:
needs cash for a few months and does not want to go through a bank
Another name for profit is:
net income
The difference between revenue and costs is:
net income (or loss)
Long-term Funds should be used for
new-product development, replacement of capital equipment, mergers or acquisitions, expansion into new markets, new facilities
A mutual fund that charges no commission is called a _______ fund.
no-load
Social security is:
not an actual fund, but it uses monies from current taxpayers to pay retirees, a taxpayer-funded retirement program
Major methods of efficient credit procedures include:
offering cash discounts for prompt payment, studying payment history of potential customers to access risk, offering discounts for cash payments
When providing a service the goal of __________ __________ is to create a good experience for the customer.
operations management
The _____ market provides companies and investors with means to trade stocks not listed on the national securities exchanges.
over-the-counter (OTC)
A stock certificate represents stock ______.
ownership
Preferred stock is generally issued with a _____ value that becomes the base for a fixed dividend the firm is willing to pay.
par
The dollar amount assigned to each share of stock which is included in the corporation's charter is called the:
par value
A great benefit of a tax-deferred contribution is that it:
reduces your tax liability
In case of bank failure, the FDIC will:
reimburse account holders, transfer the accounts to a new bank
A term-loan agreement is a promissory note that requires the borrower to:
repay the loan with interest in monthly or annual installments
The ______ ______ is percentage of commercial banks' checking and savings accounts they must keep in the bank.
reserve requirement
The ________ _______ is a powerful tool of the Federal Reserve that controls the amount of money banks have available to lend to customers.
reserve requirement
Profits the company keeps and reinvests in the firm are called:
retained earnings
The accumulated earnings from a company's profits that are reinvested into the business and not paid out to stockholders are called:
retained earnings
The most favored source of meeting long-term capital needs is ______ _______.
retained earnings
The most favored source of meeting long-term capital needs is:
retained earnings
An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called:
return on equity
How much money a firm will borrow often depends on how long it takes to convert inventory into ______.
revenue
Financial control is a process through which a firm periodically compares its budget to which of the following?
revenues, costs, expenses
A line of credit that is guaranteed but usually comes with a fee is called:
revolving credit
The difference between a line of credit and revolving credit agreement is that the:
revolving credit agreement is guaranteed
A __________ is a special policy purchased to cover certain expensive items.
rider
Changes in the financial markets and closely linked world economies will increase investor _____.
risk
Independent rating firms such as Standard & Poor's and Moody's Investors Service rate bonds according to their degree of ______.
risk
A ______-term forecast is usually for one year or less.
short
The difference between short- and long-term financing is that:
short is for a year or less
What is the meaning of notes payable?
short-term or long-term liabilities that a business promises to repay by a certain date
Benefits of enterprise resources planning (ERP)
shorter time between orders and payment, less staff needed to do ordering and order processing, reduced inventories, and better customer service, any department can see the status of an order at any time
A process layout is used in production when:
similar equipment and functions are grouped together
A ______ fund is a reserve account in which the issuer of a bond periodically sets aside some part of the bond principal prior to maturity, so that enough capital will be accumulated by the maturity date to pay off the bond.
sinking
Running a household as been compared to running a _____ business.
small
Short-term financing is more important to a small business than long-term financing because:
small businesses are more concerned with funding day to day operations
Uniting of CAD and CAM systems into CIM allows for both design and manufacture using ________.
software
A company that uses a capital account for owners equity is organized as a _________ ________ or a partnership
sole proprietorship
Mutual fund managers pick what they consider to be the best stocks and bonds available and help investors:
specialists who pick what they consider to be the best stocks and bonds available and help investors diversify their investments, change investments more easily
What is specified on a stock certificate?
specifies the name of the company, the number of shares owned, and the type of stock it represents
ISO is a worldwide nongovernmental federation of national _________ bodies
standards
Cash receipts and disbursements related to operations, investments, and financing are reported on the:
statement of cash flows
The three major activities of operations, investments, and financing are included on which financial statement?
statement of cash flows
The different between PERT and Gantt is that Gantt provides project _______ while PERT estimates _______ required for project completion.
status; time
A _______ _______ specifies the name of the company, the number of shares owned, and the type of stock it represents.
stock certificate
The places where stocks and bands are traded are called ______ ______.
stock exchanges
One of the best places to invest your money over a longer period of time is in the:
stock market
An action by a company that gives stockholders two or more shares of stock for each one they own is called a _____ _____.
stock split
In order to reduce a stock's high per-share price, a company can declare a ________ ________ in which they issue two or more shares for every one that's outstanding.
stock split
A ______ is a registered representative who works as a market intermediary to buy and sell securities for clients.
stockbroker
In a public corporation, the ownership is held by _______.
stockholders
What type of accountant is most likely to develop strategies for a firm in dealing with the Internal Revenue Service?
tax accountant
Disciples within the accounting profession:
tax accounting, financial accounting, managerial accounting
How the investment will affect your tax situation is referred to as ______ ______.
tax consequences
A modular layout is used in production when:
teams of workers produce complex units of a product
Developing countries are providing new markets for companies that can provide them with needed:
technology, goods, services
_______ affords a company less dependence on choosing a location tjat is close to labor sources and may allow it to keep employees who would otherwise refuse to move.
telecommuting
The simplest and least expensive form of life insurance which gives protection of a given number of years is called _______ _______.
term insurance
Variable life insurance is a form of whole life insurance:
that invests the cash value of the policy in stocks or other high-yield securities
The quality control steps of plan, do, check, act are aimed at finding potential errors before they happen as part of:
the Deming cycle, statistical process control
Reasons to invest in a moderately priced house include:
the chance of investment appreciation, it has a fixed housing cost
Who declares dividends?
the corporation's board of directors
The tax deduction allows a person to buy more home for the money because:
the interest you pay on the loan is deductible
The "bottom line":
the net income (or net loss) the firm incurred from revenue minus sales returns, costs, expenses, and taxes over a period of time, last line on the income statement
Securities that are not traded on registered stock exchanges are traded on:
the over-the-counter market
Preferred stockholders are given preference over common stockholders in:
the payment of dividends, the claim on company assets
The federal government makes homeownership more affordable because:
the real estate taxes are tax deductible and the loan interest is tax deductible
A savings account is also referred to as a:
time deposit
The ______ ______ of money is the idea that money in your possession today is worth more than money that will be in your possession in the future.
time value
Moving products quickly and at the lowest possible cost to customer in order to remain competitive is known as
time-to-market
Why do companies sometimes split their stock?
to decrease per-share prices
Technology allows the consumer:
to find the best loan deal quickly and easily, to have funds available with the use of ATMS
To really understand where your money goes, it is important:
to record all expenses
It is important to learn how to control your assets:
to stay out of debt, to accumulate funds for retirement, to reach personal and financial goals
________ _______ is the practice of buying goods and services now and paying for them later.
trade credit
summary of data in ledgers
trial balance
To become a certified internal auditor, an accountant must have at least ______ years' experience in internal auditing
two
A broadly based insurance policy that saves you money because you buy all your insurance from one company is called a:
umbrella policy
A life insurance policy that lets you choose how much of your payments should go to insurance or investments is called a ________ life policy.
universal
A line of credit loan is:
unsecured
A loan that does not require collateral is called a:
unsecured loan
Which statements are correct about loans?
unsecured loans are usually only for very stable customers, secured loans are backed by collateral
Product (assembly) layout
used to produce large quantities of a few products
What does the production process add to materials?
value, form utility
The conversion process of inputs into a final product is what adds ________ or ________ to a good or service.
value, utility
Money invested in new or emerging companies that investors believe have great profit potential is:
venture capital
By providing needed goods and services to developing markets a company:
will experience growth
Equity financing includes money raised from:
within the firm, from operations or through the sale of ownership in the firm
Advantages of using a credit card in small business financing include:
works well for Internet purchases, acceptance in many places
The banking industry is developing ways to reduce the cost and discourage the use of:
written checks
The expected of return on an investment is called ______.
yield
A danger of credit cards is that:
you may buy things that you would not otherwise
Disadvantages of bartering:
your items of value may have a limited life, you have to carry around goods that are hard to transport
When you make a house payment:
your money goes to interest and repayment of the loan
