POBF 6.01 & 6.02

Return on Capital

A measure of how well a business generates cash flow in relation to the capital it has already invested in itself.

Money owed to the business is known as

accounts receivable

Which of the following is an example of business-related financial information:

accounts receivable record

Useful financial information is understandable to

anyone who needs it

Which of the following is a type of financial statement that accountants prepare for a business:

balance sheet

Which of the following activities is part of accounting:

gathering financial information

The finance function ensures that the company's financial goals are

in line with organizational priorities

Cash Accounting

income and expenditures are recorded at the time the money changes hands

For financial information to be relevant, it must also be

timely

Which of the following is a key component of managing working capital:

cash conversion cycle

For financial information to be reliable, it must also be

complete

For financial information to be comparable, it must also be

consistent

There may be more than one acceptable way to record and organize a piece of financial information, but it's important to

do it the same way each time

Decisions about financing refer to the

Acquisition of funds

The cash conversion cycle should be

As short as possible

net profit

Gross Profit - Expenses

accounting system

The methods and procedures used in consistently handling the business's financial information.

cost accounting

Used to reduce and eliminate costs in a business. Cost accounting is used to determine a price for a product or service that will allow earnings of a reasonable profit.

net loss

When expenses are greater than income

GAAP is a system that provides accountants with

acceptable procedures

A manager looks at financial information to see if the company can afford to purchase a popular new item it wants to add to its shelves. This is an example of using financial information to

increase sales

To keep communication flowing with other departments, the finance function depends on

information systems

Accounting is distinct from finance because its main focus is on

investments

Which of the following groups of people would be most interested in using financial information for trend identification:

investors

A business's managers decide to use some surplus cash to pay off a loan early. This is an example of using financial information to

manage debt

In business, the most important application of financial information is

managerial decision making

Finance is the business function that involves managing

money

Money the business owes is known as

accounts payable

The finance function is usually responsible for which of the following processes:

budgeting

Managers use financial information to create and adjust

budgets

Determining which projects a business should invest in is known as

capital budgeting

A business's managers sign a legal agreement to provide services to another business. Before signing, they go over financial information to ensure the payment terms are acceptable. This is an example of using financial information to

enter into contracts

Assets a company already owns and can use to finance a new venture are called

equity

When return on capital is positive, the company is

growing in value.

Which of the following is a capital investment decision:

how to finance investments

If an accountant wants to prepare reliable financial reports, s/he must be

neutral

The finance function would definitely be involved in a decision regarding

new business projects and strategies

Which of the following is an example of personal financial information:

pay stub

How does the finance function relate to company spending?

plans and control spending

Managerial Accounting

preparing/reporting financial date to internal users, usually managers, who need financial information to control day-to-day operations and to make financial decisions and plans affecting the business

Balance Sheet

provides a snapshot of a business' assets, liabilities, and equity on a given date

Accounting is distinct from finance because its main focus is on

record keeping activities

Accrual Accounting

records transactions at the time they occur even if no money changes hands at the time.

A manager looks at financial information and sees that the company could save money by switching to a different Internet provider. This is an example of using financial information to

reduce expenses

The goals of the finance function are to ensure profitability and to

reduce risks

Which of the following is a measure of how well a business generates cash flow:

return on capital

debit

to enter an amount on the left side of an account.

credit

to enter an amount on the right side of an account.

Which of the following is a reason that managers might look at financial information from another company:

to see how their company compares to the competition

A business's managers expected to reduce expenses by four percent last quarter. The financial information, however, shows that expenses were actually reduced by two percent. This is an example of

variance

assets

what a company owns

A company's current balance of assets and liabilities falls under the focus of

working capital management