Business Foundations Exam 4

In accounting, a ledger is time-ordered list of accounting transactions.
True or False

False

The balance sheet presents a "snapshot" of an organization's financial position at a given moment.
True or False

True

Money is a medium of exchange.
True or False

True

Certification of deposit are accounts with funds that usually cannot be withdrawn without advance notice and/or have limits on the number of withdrawals per period.
True or False

False

When the Federal Reserve Board buys securities it decreases the money in circulation.
True or False

False

A marketable security is a temporary investment of cash.
True or False

True

Serial bonds are a sequence of small bond issues of progressively longer maturity.
True or False

True

The terms accounting and bookkeeping are interchangeable.
True or False

False

Accounting refers to the process of_____
A) reporting to only those within the organization
B) developing promotional plans
C) recording, measuring, and interpreting financial information
D) producing goods and services
E) reporting to only those outside the organization

C

An income statement shows______
A) a company's assets, liabilities, and equity
B) how much income each employee earned
C) an organization's profitability over a period of time
D) how much income the CEO earns per year
E) a company's variable costs at a particular point

C

______ is the total amount of money received from the sale of goods or services, as well as from other business activities such as the rental property and investments.
A) revenue
B) expense
C) net income
D) profit
E) price

A

Net income is_______
A) valuation of assets after all taxes are paid
B) cash disbursements after taxes
C) expenses after taxes
D) all earnings after all expenses have been deducted
E) liabilities after taxes

D

_______ refers to money owed a company by its clients or customers who have promised to pay for the products at a later date.
A) current liabilities
B) balance sheet
C) accounts payable
D) current assets
E) accounts receivable

E

A company's assets that are used or converted into cash within the course of a calendar year______
A) current assets
B) current liabilities
C) fixed assets
D) long-term assets
E) equity

A

_______ includes the owners' contributions to a company along with income earned by the company and retained to finance continued growth and product development.
A) owners' assets
B) owners' equity
C) revenue
D) profits
E) owner's liabilities

B

The financial statement that explains how a firm's cash changed from the beginning of the accounting period to the end is called the________
A) income statement
B) statement of cash flows
C) profit-loss statement
D) balance sheet
E) master budget

B

Which of the following calculations helps managers compare an organization's productivity, profitability, and financing mix with other similar entities?
A) specific analysis
B) feedback analysis
C) general analysis
D) cash-flow analysis
E) ratio analysis

E

Return on assets and return on equity are examples of _______ ratios.
A) debt
B) profitability
C) current
D) asset utilization
E) liquidity

B

The________, an asset utilization ratio, indicates how many times a firm collects its accounts receivables in one year.
A) inventory turnover
B) return equity
C) asset turnover
D) receivables turnover
E) accounts payable

D

______ ratios compare current assets to current liabilities to indicate the speed with which a company can turn its assets into cash to meet debts as they fall due.
A) profitability
B) asset utilization
C) debt
D) current
E) liquidity

E

When money serves as a way to accumulate wealth, money primarily functions as a______
A) store of value
B) yardstick of value
C) medium of exchange
D) counterfeit deterrent
E) measure of value

A

To be used as a medium of exchange, money must be_________
A) flexible
B) non-portable
C) indivisible
D) imitable
E) durable

E

As a medium of exchange, money_____
A) makes it harder to trade
B) creates a complicated service structure
C) can easily be counterfeited
D) reduces the need for bartering
E) is indivisible

D

Coins are used primarily to provide_____
A) divisibility
B) inimitably
C) portability
D) acceptability
E) stability

A

In general, the longer the term of certificate of deposit, the _________
A) lower is its interest rate
B) higher is its inflation rate
C) higher is its liquidity
D) lower is its value
E) higher is its interest rate

E

If consumers do not pay off their entire credit card balance, they_____
A) will get a rebate from the card issuer
B) will receive interest on the paid amount
C) have to pay interest on the unpaid amount
D) have to pay interest on the total paid amount and the unpaid amount
E) have their purchased goods repossessed by the creditors

C

The Federal Reserve Board controls the amount of money available in the economy_______
A) by issuing credit cards
B) through monetary policy
C) by levying heavy taxes
D) through certification of deposit
E) by printing new currency notes

B

Cash, investments, accounts receivable, and inventory are________
A) current assets
B) long-term assets
C) long-term liabilities
D) retained earnings
E) current liabilities

A

Working capital management refers to_____
A) managing long-term assets
B) managing long-term liabilities
C) financing small business enterprises
D) managing short-term assets and liabilities
E) financing internal projects

D

Which of the following types of marketable securities are the safest?
A) eurodollar deposits
B) commercial paper
C) certificates of deposits
D) U.S. Treasury bills
E) cash deposit

D

Which of the following is money than an organization owes to suppliers for goods and services?
A) accounts payable
B) secured bonds
C) accounts receivables
D) trade credit
E) U.S. Treasury bill

A

A finance company that buys other companies' accounts receivables for less than they are worth and assumes responsibility for collecting the debt is known as a _________
A) concilitator
B) lockbox
C) brokerage
D) factor
E) collateral

D

Plants, offices, and equipment are considered_____
A) marketable securities
B) short-term liabilities
C) current assets
D) common stock
E) long-term assets

E

One of the ways to analyze a company's financial performance is to compare its performance with those of the_______
A) manufacturers producing their products
B) suppliers of the raw materials
C) foreign governments
D) U.S. government
E) companies in the same industry

E

Asset utilization ratios measure__________
A) how much debt the firm is using relative to other sources of financing
B) how well a firm uses its assets to generate each $1 of sales
C) the performance of the firm relative to others on a per-share basis
D) the speed with which a company can turn its short-term assets into cash to pay off its short-term debts
E) how much income a firm generates relative to its assets, equity, and sales

B

U.S. money includes subtle colors in addition to the traditional green, as well as enhanced security features, such as a watermark, security thread, and color-shifting ink. Which of the following characteristics of money is being protected by these measures?
A) stability
B) divisibility
C) portability
D) acceptability
E) difficulty to counterfeit

E

Which of the following actions is the Federal Reserve Board most likely to take in an attempt to increase the money supply in the economy?
A) raise reserve requirements
B) buy government securities
C) raise discount rates
D) restrict credit controls
E) print more money

B

When the Federal Reserve Board sells government securities the________
A) property taxes increase
B) money supply in the market becomes stable
C) money supply in the economy increases
D) property taxes decrease
E) money supply in the economy decreases

E

Which of the following effects is seen on the money supply and the economy when the Federal Reserve Board raises the discount rate?
A)People are encouraged to make major purchases and economic activity increases.
B) Inflation increases, the money supply increases, and economic activity increases
C) Interest rates increase, the money supply decreases, and economic activity slows down
D) Banks make more loans, the money supply increases, and economic activity increases
E) Interest rates decrease, the money supply increases, and the economic activity increases

C

In the context of managing cash in an organization, which of the following is true?
A) Corporate checking accounts typically earn interest
B) Business organizations make money from idle cash
C) Money managers try to keep as much as cash in their hands as possible
D) To manage a firm's cash, companies try to speed up cash collections from customers
E) Managers measure cash flow as the amount of cash the firm spends in a period of one year

D

Since idle cash does not make money, a manager may choose to invest this extra cash in temporary investments called______
A) junk bonds
B) marketable securities
C) transaction balances
D) long-term assets
E) secured bonds

B

AMZ Inc, a company that deals with bikes, has its own manufacturing unit. The equipment used in the manufacturing unit of company is an example of a ____
A) current asset
B) short-term asset
C) fixed asset
D) floating-rate bond
E) junk bonds

C

Of the following potential investment projects the project that poses the least risk is_______
A) expanding into a new market
B) introducing a new product in a foreign market
C) buying new equipment for an established market
D) adding to a product line
E) repairing old equipment

E

Evelyn is a self-employed, state-certified accountant who files tax returns, prepares financial records, and audits corporate financial records. She is known as a _______ accountant
A) private
B) forensic
C) certified public
D) noncertified
E) certified management

C

Thomson is a manager at a bank. He gas to decide whether to lend $10,000 to safe toys, a company that produces toys that don't have a choking hazard. He should______
A) turn down the loan application
B) prepare an organization budget
C) report the organization's financial performance to outsiders
D) approve the loan application without checking the company's credibility
E) review the company's financial statements.

e

Maurice was asked to extend trade credit to a restaurant she hadn't serviced before. She asked to see its balance sheet to determine if it could pay its bills. She divided its current assets by its current liabilities to get its ______
A) receivable turnover
B) earnings per share
C) current ratio
D) inventory turnover
E) book value per share

C

Chloe's Cosmetics doesn't have a lot of inventory. As a results, its______ ratio is almost exactly the same as its current ratio.
A) receivables turnover
B) debt utilization
C) total asset turnover
D) liquidity
E) quick

E

Darrell owns and operates a small farm that produces vegetables and fruits. His friend Marcus owns and operates a butchery that sells various meat. Darrell often gives Marcus vegetables and fruits in exchange for meat and vice versa. This scenario best describes____
A) using fiat money
B) bartering
C) operating actions
D) purchasing
E) using "IOUs"

B

Every month, Charlotte receives a bill in the mail from her mortgage company. By the first of each month, she must send back her oayment, along with the bottom part of the bill, which includes her account information and the amount enclosed. She pays these mortgage bills using a form of payment that is essentially a written order to her bank to pay the mortgage company the specified amount from the money in her bank account. What form of payment is Charlotte using in this scenario?
A) a check
B) a debit payment
C) a certificate of deposit
D) paper money
E) a line of credit

A

Bill owns a bakery, and he has put all his savings into running this business. During the busy holiday season, he realizes that he needs short-term help financing the bakery's operations, so he goes to the bank and requests $25,000. The bank agrees to lend bill the mount of money. Which of the following types of loans does this scenario best describe?
A) a trade credit
B) a line of credit
C) an unsecured loan
D) a certificate of deposit
E) a secured loan

B