PRT 5395: Final Quiz

A type of income generated through taxes

Compulsory Income

The rate of return that a firm will earn if it invests in a project and receives the expected cash flows

Internal Rate of Return

If a football stadium adds an additional 10,000 seats. Assuming price is charted on the Y axis (vertical) and quantity is charted on the X axis (horizontal), what happens to the supply curve?

It moves to the right

If the price of gasoline increases from $2/gallon to $5/gallon, what is likely to happen to the amount of gasoline demanded by consumers?

It will go down

The most common budget format you will encounter

Line item/object classification budget

A firm's ability to meet short term financial obligations as they come due.

Liquidity

Which items do not generally appear on the balance sheet? Look over the financial statements used in this module (3)

Net income, total sales

Statements that are true concerning Economic Impact Studies

-They offer an analysis that goes beyond profit and loss -Estimates of economic impact can vary widely based on a variety of factors that include assumptions and multipliers -Economic Impact Studies needs to be analyzed with a critical eye

What are some things to consider when evaluating ratios?

-You should compare a company's ratios to competitors in the industry. -You should look at how ratios change over time -Remember that ratios differ by industry -They provide a quick snapshot of how a company is performing. Good financial managers still dig deeper

On the statement of cash flows, the increase of a liability is considered...

A cash inflow

Bankruptcy...

A company has negative equity (aka net assets), occurs when an organizations liabilities exceed the fair market value of its assets.

______are long-term debt instruments used by businesses and government to raise large sums of money, generally from a diverse group of lenders.

Bonds

Which groups are net demanders of funds? In other words, which groups are more likely to take on more debt in proportion to the amount they lend or invest?

Businesses and governments

The budget construction process mid-sized to large organizations...

Can take up to 9 months or more

This part of the Bankruptcy Reform Act of 1978 details the procedures of selling off the assets of a failed firm

Chapter 7

Which of the following types of organizations is primarily dependent upon earned income for their revenue?

Commercial

Identify groups that could be considered commercial organization's stakeholders.

Employees, community members, customers, and owners

When considering supply and demand, the intersection of the supply and demand curves is known as the

Equilibrium Point

Provides insurance for deposits at banks and monitors banks to ensure their safety and soundness.

FDIC

Supply and demand curves never move

False

The guidelines used to prepare and maintain financial records. Set by Accounting Standards Board.

Generally Accepted Accounting Principles (GAAP)

In general, as the price of a product or service goes up, the quantity demanded

Goes down

How much an organization made or lost is reported on what type of financial statement(s) for an organization using accrual accounting?

Income statement

Identify those that should be excluded when calculating economic impact.

Local residents, time shifters or casuals (those in the area for another purpose)

The primary cause of business failure

Mismanagement

For tax purposes, depreciation is determined using what?

Modified accelerated cost recovery system

_____is an annuity with an "infinite life," providing a continual cash flow

Perpetuity

The amount of money on which interest is paid

Principal

The primary indicators for success for a for-profit commercial organization include:

Profit, shareholder value, and return on investment

Which category of assets is never considered a current asset?

Property, Plant, and Equipment

The balance sheet...

Provides a glimpse of what a company/organization owns and owes at a given point in time

Which of the following types of organizations is primarily dependent upon taxes for their revenue?

Public

Which of the following types of organizations is typically run by a government agency?

Public

The main purpose of this type of organization is to "serve the social welfare and commonwealth needs of all citizen's."

Public organization

A zero based budget ...

Puts less emphasis on historical data and assesses actual needs and costs, assumes you "start from scratch"

Chapter 11 bankruptcy details the procedures for...

Reorganizing a failed (or failing) firm

Measures the overall effectiveness of management in generating profits with available assets. Calculated as: Net Income/Total Assets

Return on Assets

What is the primary source of funds for most public organizations (e.g., Salt Lake Parks and Recreation)

Taxes

What definition best describes Shareholder Equity or Net Assets?

The company's net worth after liabilities are subtracted from assets.

Is it possible to have conflicting rankings when comparing two or more projects using IRR and NPV

Yes

Standards of conduct or moral judgments that apply to individuals involved in commerce is known as

business ethics

You've invested $1000 for a 5 year period. The annual interest rate is 10% which is compounded quarterly. When you calculate the future value of your investment, what is the quarterly interest rate you should use?

2.5%

You've invested $1000 for a 5 year period. The annual interest rate is 10% which is compounded quarterly. When you calculate the future value of your investment, how many periods (N) should you include in your calculations?

20

Petitions for Chapter 11 can be voluntary or involuntary. Identify a potential source for a involuntary reorganization

A creditor

Which items would be considered current assets?

Accounts receivable, cash equivalents, inventory, and cash

This type of budget includes all expected revenues, expenses, and profit goals for an organization based on its regular day-to-day business.

Annual Operating Budget

Source of funding for capital projects may come from...

Debt, bonds, capital campaigns, taxes

Entrance fees to a national park would be considered...

Earned Income

Which of the following is a primary indicator of success for a private not for profit organization?

Financial Viability

Income from grants, foundations, and individual donations is considered...

Gratuitous Income

If a project has a Net Present Value less than $0

It's likely to be a bad investment

Economic Impact of Visitor Spending =______*______*_______

Multiplier, number of visitors, average spending per visitor

Cash flows associated with sale and production of the firms products and services

Operating cash flows

What is one disadvantage of a sole proprietorship?

Owner has unlimited liability - all of the owner's wealth can be taken to satisfy debts

It is important for non-profits like the United Way of the YWCA to

Serve a societal need and remain financially viable

Summarizes the firm's cash flow over a given period of time

Statement of cash flows

Finance is BEST described as

The art and science of managing money

Economic Impact Studies are most commonly used by

The tourism Industry and Governments

A budget should consider growth and improvements over previous years

True

What are major considerations for organizations considering a sponsorship agreement?

-Strategic fit -Access to target audience

Measures an organization's ability to meet short term obligations. Calculated as: Current Assets/Current Liabilities

Current ratio

What is the primary market for a private not for profit organization?

Market is defined by a particular need

Cost of Project/Annual Cash Flow What does the above formula calculate?

Payback period

In general, a dollar today is worth_____than a dollar in the future. This holds true when there is modest inflation

more

Economic impact studies are useful because they

provide a different approach for demonstrating accountability for public funds

In general, for-profit commercial business try to

reduce their taxes

A financial benefit afforded to non-profits and public organizations is that they are

tax exempt

Which items are considered current liabilities?

Accounts payable, salaries payable, portion of debt due within 1 year

Which accounting method recognizes revenue at the time of sale, even if no cash has been collected?

Accrual

Assets - Liabilities =

Equity or Net Assets

What are other names for the Income Statement?

Profit and Loss Statement, Statement of Activities

Why is it important for PRT professionals to study finance?

To understand and quantify the results of actions

In the statement of cash flows, depreciation is adjusted as...

a cash inflow