For international businesses, banking services are extremely important. Both a _______ and a _______ are popular methods of paying for import and export transactions.
letter of credit; banker's acceptance
What do trade credit terms of "2/15, net 30" mean to a buyer?
A discount of 2 percent is offered if the bill is paid within 15 days; otherwise, the entire amount is due within 30 days
What is a promissory note?
A promissory note is a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date
The interest rate commercial banks charge their best customers, usually large corporations, for short-term loans is the:
prime interest rate
Benefits for factoring accounts receivable include all of the following, except:
the firm selling its accounts receivable gets more than face value.
Which of the following types of short-term financing is usually only available to large firms with high credit ratings?
commercial paper
The _______ market is a market in which an investor purchases financial securities (via an investment bank) directly from the issuer of those securities; while, the _______ market is a market for existing financial securities that are traded between inves
primary; secondary
What is the difference between preferred stock and common stock?
A corporation may issue many types of preferred stock, with varying dividend rates.
This occurs when stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors.
Private placement
What is financial leverage?
Financial leverage is the use of borrowed funds to increase the return on owner's equity
Which of the following is an advantage of issuing corporate bonds over obtaining a long-term loan?
Corporations can borrow a lot of money from a lot of different bondholders and raise larger amounts of money than could be borrowed from one lender
A corporation may either _______ or _______ to ensure that it has sufficient funds available to redeem a bond issue.
issue bonds as serial bonds; establish a sinking fund
Which of the following is not a benefit to a company issuing convertible bonds?
The exchange of convertible bonds is at the owner's option rather than the issuing company's option
___is the presentation of raw numerical or verbal descriptions in a form that is useful for a specific purpose.
information
When considering the specific information needed to make decisions, __managers consider current wage levels and benefits, legislation, and court decisions regarding employment.
human resources
When managers are selecting a management information system they must tailor it to the needs of the organization it serves. The information technology officer must make sure that the system provides ____ a reasonable cost.
relevant information
A company will request a(n) ___when it wants to determine if its financial statements have been prepared in accordance with generally accepted accounting principles
audit
Because of several accounting scandals that led to the financial disintegration of large companies and the accounting firms that perpetrated the scandals, Congress enacted the _____
Sarvanes-Oxley Act
A ___ is an individual who has met state requirements for accounting education and experience and has passed a rigorous accounting examination.
certified public accountant
Large corporations normally distribute a(n) ___to stockholders and other interested parties that describes a firm's operating activities and its financial condition.
annual report
A company selling goods subtracts ___ from sales to determine gross profit.
cost of goods sold
When a company wants to determine how its operating, investing, and financial activities affect cash during an accounting period, it will have a ____ prepared
statement of cash flows
Today, most corporations include in their___comparisons of the important elements of their financial statements for recent years
annual reports
Which of the following best describes a consistent pattern of cause and effect that can be used in an industry for creating a competitive edge over competitors and improving the firm's profits?
information rule
The collection of information about customers, such as their preferences, locations, demographics, and mobility is important for business success. Organizing and using this information is imperative to a business' survival. Which of the following describe
knowledge management
Firms require information on a variety of subjects so they can plan for the future, implement the plans, and evaluate the results against historical data. Which of the following managers needs information regarding future sales levels, current inventory l
operations manager
What function is being served by employees who take data from a management information system and compile it into a report that includes graphs, charts, and a PowerPoint presentation?
present the information to the users
What function is an employee of a firm conducting when he or she systematically collects, analyzes, and reports the financial information to the company in the form required to make decisions about a firm's financing, investing, marketing, and operating
accounting
As part of the accounting process, employees provide managers and employees within the organization with information needed to determine the cost of producing specific products or services. This information is used to evaluate current expenses and to comp
cost accounting
If a firm sold all of its assets and paid all of its bills, what would remain?
owners' equity
When an individual invents a new product and patents it, a writer copyrights and publishes a book, or a company develops a symbol that represents it and has it registered as their own, they have created assets. What type of assets have they created?
intangible assets
When determining if a company has a cash surplus or cash deficit at the end of a specific period of time, one would typically subtract the expenses from the income. This can also be done as the first step in creating a budget. What is the specific name gi
income statement
Which of the following best describes the information provided by a statement of cash flows?
cash on hand
Which of the following should be used to evaluate a firm's ability to pay its current liabilities?
current ratio
__ consists of all the activities concerned with obtaining money and using it effectively.
financial management
__ refers to the time lag between the actual production of goods and when the goods are sold
speculative production
In the traditional approach, each new budget is based on the dollar amounts contained in the budget for the preceding year; however, in a(n) __every expense in every budget must be justified
Zero-Based Budget
Businesses have four primary sources of funds.___generally provides the greatest part of a firm's financing.
sales revenue
__provides a safe place to store money but normally generates the lowest interest income of any account.
Passbook-savings account
When a business needs additional money to continue operations it has several options available to it. One option, a___ , is an arrangement with the lender in which a loan is approved before the money is actually needed. While the loan is preapproved, whic
line of credit
If a business needs a short-term loan it could seek __ from its suppliers, which is usually available to all businesses with good credit and extended to the buyer without a finance charge.
trade credit
When a lender seeks collateral for a loan it can use almost any asset as security, but prefers __ when seeking tangible security and may insist that it be stored in a public warehouse with the lender keeping the warehouse receipt.
finished goods
When individuals use their home computers to buy and sell stock that is not listed on a securities exchange, they are participating in the __ , which has existed since long before home computers were invente
over-the-counter market
If a nonprofit organization needs to raise funds for a building project, it could issue __ , which are backed only by the organization's reputation.
debenture bond
Typical job titles in finance include chief financial officer, vice-president of finance, bank officer, consumer credit officer, financial analyst, financial planner, loan officer, insurance analyst, and investment account executive. Which of the followin
a post-graduate degree
Short-term financing is often sought by businesses for a variety of purposes. Which of the following is not usually one of the reasons businesses obtain short-term financing?
Increase cash in accounts for accounting purposes
What has a company accomplished when it creates a financial statement that projects income and expenditures over a specified future period?
budgeting for financial needs
When a corporation needs money for long-term financing, where could it obtain these funds without the requirement of repayment?
equity capital
When an individual purchases merchandise in a retail store using a credit or debit card which they insert into or swipe through a magnetic card reader, what type of electronic banking service are they using?
point-of-sale terminals
When a business purchases goods and pays for them with a written order for a bank to pay the seller a stated amount of money on a specific date, what has it provided for payment?
banker's acceptance
Which of the following is not a reason it is usually easier to obtain short-term debt financing than long-term debt financing?
Lenders of short-term loans do not require collateral.
If Boeing needed a short-term loan of over $100,000 to finance its accounts receivable, which of the following would most likely be the least expensive option and involves the least risk for Boeing?
commercial paper
Snap, a long time privately held corporation, raised $3.4 billion when it sold stock on the New York Stock Exchange for the first time in 2017. Snap is the parent company of Snapchat and sold the stock with the goal of using the funds raised for further d
Initial public offering
When a corporation needs a larger amount of money than is possible by borrowing from one lender, or it does not want to borrow it all from one lender, which of the following might it use?
corporate bond
When the amount of available information is _______, managers tend to make better decisions; while, when the amount of information is _______, there is a high risk of making poor decisions.
high; low
What is the difference between data and information?
Data are numerical or verbal descriptions that usually result from some sort of measurement. Information is data presented in a form that is useful for a specific purpose.
Which of the following statements best explains an expert system?
An expert system is a type of computer program that uses artificial intelligence to imitate a human's ability to think.
Managers in each of the five areas of management need specific information in order to make decisions. Which manager needs to have detailed information about a firm's products and services and those offered by competitors?
Marketing managers
Which statement best describes what might happen if a business has a management information system (MIS) that is not the right size for the firm?
If an MIS is too large or too complex for the organization, then unused capacity and complexity do nothing but increase the cost of owning and operating the system.
What is the best definition of a management information system?
A management information system is a system that provides managers and employees with the information they need to perform their jobs as effectively as possible.
Which of the following is NOT a function performed by a management information system (MIS)?
Interprets the data with artificial intelligence
Which of the following is NOT a component of a typical business report?
A SWOT analysis
Which would be the best way to illustrate the number of salespeople in each region of the country, sales for different types of products, and total sales for all products?
A table
Which of the following is best described as an accepted set of guidelines and practices for U.S. companies reporting financial information and for the accounting profession?
GAAPs
All of the following are key components of the Sarbanes-Oxley Act, except:
Accounting firms can provide many types of nonaudit and consulting services to the companies that they audit
Which type of accounting provides managers and employees with the information needed to make decisions about a firm's financing, investing, marketing, and operating activities?
Managerial accounting
How are current assets distinguished from fixed assets?
Current assets are assets that can be converted quickly into cash or that will be used in one year or less; fixed assets are assets that will be held or used for a period longer than one year.
A balance sheet has all of the following characteristics, except:
Liabilities must equal assets plus owners' equity.
The "Retained Earnings" account is one of the _____ accounts.
owners' equity
If a business firm has assets worth $170,000 and liabilities that total $40,000, what is the value of the owners' equity?
$130,000
Which financial summary reports the firm's profitability over a particular period of time?
income statement
The amount of money a firm spent to buy or produce the products it sold during the period to which the income statement applies is:
cost of goods sold
If a retailer has revenues of $800,000, cost of goods sold that total $370,000, and operating expenses that total $300,000, what is its net income before taxes?
$130,000
Which of the following provides a summary of money coming into and going out of the firm that tracks a company's cash receipts and payments?
Statement of cash flows
The major activities of a firm, as shown on the statement of cash flows, include all of the following, except:
taxes
Which of the following determines the ending cash balance using the statement of cash flows?
a. (Cash flows from operating activities + Cash flows from investing activities + Cash flows from financing activities) + Beginning cash balance
Which of the following statements does not accurately describe profit margin (return on sales) for a business?
The lower the profit margin, the better the cost controls within the business.
The current ratio is calculated by dividing _____ by _____.
current assets; current liabilities
The quickest way to improve inventory turnover is to:
order merchandise in smaller quantities at more frequent intervals
Financial management involves all of the following activities, except:
knowing detailed information about a firm's products and services and those offered by competitors.
Financial reform after the recent economic crisis has been most concerned with which of the following:
holding Wall Street firms accountable for their actions.
All of the following are traits and skills an employee in the financial industry needs, except:
extensive knowledge of human resources law
What is the time lag between the actual production of goods and when the goods are sold known as?
Speculative production
The risk-return ratio is based on the principle that:
high-risk decision should generate higher financial returns for a business.
A _______ estimates cash receipts and cash expenditures over a specified period; a(n) _______ estimates a firm's expenditures for major assets, including new product development, expansion of facilities, replacement of obsolete equipment, and mergers and
cash budget; capital budget
What is the difference between equity capital and debt capital
Equity capital is provided by the owners or owner of a business, while debt capital is borrowed money.
Which of the following is not a primary source of funds for a business?
Zero-based capita
Which of the following is a method a financial manager may use to monitor and evaluate a firm's financing?
Preparing interim budgets
A document stating that the bank will pay the depositor a guaranteed interest rate on money left on deposit for a specific period of time is known as a:
certificate of deposit (CD)
Which of the following is NOT a commonly used form of an electronic funds transfer (EFT) system?
Revolving credit agreement