Test bank for anybodys business 1st edition by van syckle

TEST BANK FOR ANYBODYS BUSINESS 1ST EDITION BY VAN SYCKLE 1) Whenever your standard of living goes up, so does your quality of life Answer: FALSE Diff: Easy Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 2) Net profit, when used alone, shows a company’s true financial health Answer: FALSE Diff: Easy Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 3) A budget quantifies all of a company’s expected inflows and outflows of cash Answer: TRUE Diff: Easy Page Ref: Objective: Recognize cash flow and how to interpret a cash flow statement 4) Income and revenue are not the same thing Answer: TRUE Diff: EASY Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 5) Revenue can come from goods and services, but not from experiences that customers have Answer: FALSE Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 6) Not-for-profit organizations not need net income Answer: FALSE Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 7) A company can still have cash flow problems if it is profitable Answer: FALSE Diff: Easy Page Ref: 17 Objective: Recognize profit and how to interpret an income statement Multiple Choice 8) Which of the following is NOT a financial statement? A) cash flow statement B) general ledger C) income statement D) balance sheet Answer: B Diff: Easy Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 9) Which of the following is NOT a factor affecting standard of living? A) your income B) the quality of goods and services available to you C) tour well-being D) the consumption patterns of the people in your community Answer: C Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 10) A publicly traded company is A) a company that is family-owned and –founded B) a company that is funded primarily through federal income taxes levied by the government C) a company that is owned by its employees D) a company that issues stock for people to buy on a stock exchange or other markets Answer: D Diff: Easy Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 11) An annual report is A) a description of a firm’s financials, distributed to everyone who owns stock in the firm B) a statement describing market growth in a specific industry, such as automotive or telecommunications C) a set of documents explaining trends and challenges in a nation’s economy D) a booklet published by the Treasury Department each year outlining returns on Treasury bill investments Answer: A Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 12) Which of the following is NOT true about open book management? A) Employees are encouraged to suggest ways to improve the company’s performance B) Employees directly review their managers’ on-the-job performance C) Employees have access to the firm’s financial statements and other information about the company’s performance D) Employees see how their performance affects the company’s performance Answer: B Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 13) Which of the following is the most likely objection to open book management? A) Employees will feel disrespected by management if the company’s financial performance is poor B) The company will be violating laws about keeping financial information confidential C) The firm’s financial information will get into the hands of competitors D) Employees will have difficulty seeing the connection between their performance and the company’s Answer: C Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 14) Open book management improves employees’ quality of life because A) it creates a work environment characterized by reduced stress B) it ensures employees a steady paycheck C) it enables employees to buy higher-quality goods and services D) it frees employees from having to contribute ideas for improving the company’s performance Answer: A Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 15) The “bottom line” is A) the lowest possible revenue a company can earn without having to declare bankruptcy B) the final decision a CEO makes regarding whether to sell the company or divest a division C) an accounting calculation that figures out a company’s financial performance based on net profit D) an equation showing how much market share a company lost during the previous fiscal year Answer: C Diff: Easy Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 16) Which of the following is a well-stated business goal? A) “Strengthen our ability to manufacture products without error.” B) “Enhance morale and engagement throughout our workforce.” C) “Improve our ability to innovate new products and services.” D) “Increase revenues twofold by the end of the fiscal year.” Answer: D Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 17) In a company using open book management, which of the following incentives would likely motivate the majority of employees to improve their performance? A) vacations to resorts on distant, exotic locations B) gift certificates to local cultural and sports events C) a profit-sharing or equity-sharing program D) a bonus check that is a specific percentage of employees’ pay Answer: C Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 18) Financial statements help managers and employees A) understand their company’s previous, current, and possibly future performance B) improve their standard of living but not their quality of life C) select other companies that may be worth investing in D) distinguish differences between their company’s and rival companies’ offerings Answer: A Diff: Moderate Page Ref: Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them 19) Which of the following are NOT reflected in a company’s cash flow statement? A) purchases of office supplies needed by the business B) payments from customers for products C) monies the company owes investors D) rent checks from a property the company is subleasing Answer: C Diff: Challenging Page Ref: Objective: Recognize cash flow and how to interpret a cash flow statement 20) A budget A) spells out which vacant positions a company will need to fill with new hires B) quantifies all of a company’s expected inflows and outflows of cash C) shows the trends in a firm’s revenues and profits over the previous three years D) depicts salary differences between executives, managers, and employees Answer: B Diff: Easy Page Ref: Objective: Recognize cash flow and how to interpret a cash flow statement 21) You are comparing cash flow statements for your business from the current month and the previous month Which of the following would you be able to figure out? A) what denominations the business’s cash is in B) whether the business has cash C) how much cash the business has D) whether the business has more or less cash this month than last month Answer: A Diff: Easy Page Ref: 10 Objective: Recognize cash flow and how to interpret a cash flow statement 22) Which of the following indicates that a company has negative cash flow? A) The company’s cash on hand is unpredictable from month to month B) The company’s cash is in the form of small bills C) The company has more cash now than it did the previous month D) The company has less cash now than it did the previous month Answer: D Diff: Easy Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement 23) A company raises the price on its products and sells more of them What is the impact on its cash flow? A) Cash inflow increases B) Cash inflow decreases C) Cash outflow increases D) Cash outflow decreases Answer: A Diff: Moderate Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement 24) How would you apply the principle of “paying yourself first”? A) Every time you get paid, put most of the money into a checking account that you can easily access B) Every time you get paid, use a set amount of money to buy a small luxury item you’ve been wanting C) Every time you get paid, transfer a set amount of money to a savings account or 401(k) D) Every time you get paid, pay your most important bills first and save the rest of the money Answer: C Diff: Moderate Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement 25) What is an important benefit of the practice of paying yourself first? A) The practice enables you to treat yourself to lavish purchases B) You keep all your money in a liquid form that you can easily access as needed C) You can pay off your largest bills in a more timely manner D) The money you save will create personal cash inflow by earning interest Answer: D Diff: Moderate Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement 26) Interest is A) the fee that a bank or other institution pays you for the use of your money B) the fee that you pay a bank in order to use a personal or business checking account C) the money you set aside in a savings account every time you get paid D) the money taken out of your paycheck to pay taxes Answer: A Diff: Easy Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement 27) Suppose you have put $50 in an interest-bearing account and you want to double the amount of money in the account What calculation would you use to determine how many years it would take to double your money? A) Divide 50 by the interest rate and add B) Divide 72 by the interest rate C) Multiply the interest rate by D) Add the interest rate to Answer: B Diff: Moderate Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement 28) How does the Rule of 72 calculation work? A) Subtract the interest rate from 72 B) Divide 72 by the interest rate C) Multiply the interest rate by 72 D) Add the interest rate to 72 Answer: B Diff: Moderate Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement 29) You have saved $200 in an interest-bearing account and plan to leave it there for years How would you calculate the interest you would need to earn in order to double your money in those years? A) Divide 72 by the number of years you have to save B) Multiply 72 by the number of years you have to save C) Multiply by 2, then subtract the product from 72 D) Divide the number of years you have to save by 72 Answer: A Diff: Moderate Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement 30) In addition to cash-in and cash-out transactions, a cash flow statement shows A) cash a company’s creditors have on hand B) the profit a company earned in the most recent quarter C) a company’s beginning and ending cash balances D) amounts a company owes suppliers Answer: C Diff: Easy Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement 31) What is another term for net profit? A) net cash B) net income C) net revenue D) net value Answer: B Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 31) What is net profit? A) the amount of money a business has paid to its suppliers over one year B) the amount of money a business has in the bank at any one time C) the amount of money a business brings in from customers in one year D) the amount of money remaining after a business has paid all its expenses Answer: D Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 33) What is another term for income statement? A) profit and loss statement B) general ledger statement C) business value statement D) revenue and expense statement Answer: A Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 34) An income statement measures A) a company’s budget for the coming year and the resources needed to fund the projects in the budget B) a company’s cash flow recorded over the course of one year of selling to customers C) a company’s net profit by tracking the firm’s revenues and expenses during a given period D) a company’s debts and other liabilities incurred by its strategic plan executed over the previous year Answer: C Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 35) Income is A) the amount of cash a company deposits in its bank during one year B) the amount of cash a company expects to bring in during the coming year C) the amount of money a company generates during a period of time D) the total amount of money received by a company for a good, service, or experience Answer: C Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 36) Revenue is A) the amount of cash a company deposits in its bank during one year B) the amount of cash a company expects to bring in during the coming year C) the amount of money a company generates during a period of time D) the total amount of money received by a company for a good, service, or experience Answer: D Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 37) Revenue is recorded A) only after payment for a sale has been received by the company B) when a sale is made, but not necessarily when payment for the sale is received C) as soon as a customer has expressed interest in placing an order with a company D) when a customer approves the price proposed for a particular good or service Answer: B Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 38) Which of the following is NOT an example of a good? A) a car B) a vacation C) a bottle of shampoo D) a washing machine Answer: B Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 39) Which of the following companies is in the service business? A) a company that rents cars B) a company that sells consumer products C) a company that makes medical devices D) a company that manufacturers military equipment Answer: A Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 40) In the equation for calculating a company’s net profit, what expenses refer to? A) the invoices sent to the company by the suppliers it is buying from B) the cash flowing out of the company during the current period C) the amount of money the company spent on something during a certain time D) the total amount money the company expects to spend in the coming year Answer: C Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 41) When does a company record its expenses? A) when the company receives a bill B) when the company pays a bill C) when the company’s supplier has put a bill in the mail D) when the company decides to purchase something Answer: A Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement 42) When does an expense become a cash outflow? A) when a company makes a withdrawal from its bank B) when a company decides to make a purchase C) when a company receives a bill D) when a company pays a bill Answer: D Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 43) Expenses are divided into A) operating expenses and income B) cost of revenue and operating expenses C) cash out and cash deferred D) invoices received and invoices paid Answer: B Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 44) What is another term for cost of revenue? A) cost of profit B) cost of operating income C) cost of goods sold D) cost of interest Answer: C Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 45) What is cost of revenue? A) any amount incurred by a company for expenses directly related to sale of a product B) amounts a company pays for expenses not directly related to the sale of its product C) unavoidable expenses that a company incurs when it generates reports on its financial dealings D) costs incurred only by companies that sell services rather than tangible goods Answer: A Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 46) What are operating expenses? A) amounts incurred by a company for expenses directly related to sale of a product B) amounts a company pays for expenses not directly related to the sale of its product C) unavoidable expenses that a company incurs when it generates reports on its financial dealings D) costs incurred only by companies that sell services rather than tangible goods Answer: B Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 47) You are a car dealer Which of the following would your cost of revenue consist of? A) rent paid to the owner of your building B) amounts spent on utilities C) money paid for administrative salaries D) purchase of cars for resale Answer: D Diff: Moderate Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 48) You are an antiques dealer Which of the following would NOT be an example of your operating expenses? A) rent paid to the owner of your building B) amounts spent on utilities C) money paid for administrative salaries D) purchase of antiques for resale Answer: D Diff: Moderate Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 49) Shareholders are A) people who own a part of a company and have a vested interest in its profits B) people who may or may not own a part of a company but are directly affected by its activities C) computer systems that keep track of a company’s stock price D) companies that track the financial performance of a particular industry Answer: A Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 50) Stakeholders are A) people who own a part of a company and have a vested interest in its profits B) people who may or may not own a part of a company but are directly affected by its activities C) computer systems that keep track of a company’s stock price D) companies that track the financial performance of a particular industry Answer: B Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement 51) A business model is A) a corporation’s strategy for gathering information about competitors B) a prototype for a new product or service a company wants to develop C) a physical rendering of how a company’s facilities will be constructed D) an organization’s plan for creating value for its stakeholders Answer: D Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement 52) The goal of a not-for-profit organization is to A) eventually advance to for-profit status B) earn a profit for its owners C) use any money it makes to further the cause or association it promotes D) deliver products or services that benefit corporations Answer: C Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement 53) The goal of a for-profit organization is to A) eventually advance to not-for-profit status B) earn a profit for its owners C) use any money it makes to further the cause or association it promotes D) deliver products or services that only benefit charities Answer: B Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement 54) Which two types of income statements are allowed under GAAP? A) cash and accrual B) inflow and outflow C) credit and debit D) receivable and payable Answer: A Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement 55) In your business, you record revenue when money comes in from customers, and record expenses when you pay bills What basis of accounting are you using? A) cash B) income C) accrual D) debit Answer: A Diff: Moderate Page Ref: 16 Objective: Recognize profit and how to interpret an income statement 56) In your business, you record income when you deliver a good or provide a service, and record expenses when they are incurred, not necessarily when you pay the bills What basis of accounting are you using? A) cash B) income C) accrual D) debit Answer: C Diff: Easy Page Ref: 16 Objective: Recognize profit and how to interpret an income statement 57) What are accounts receivable? A) paid bills for products or services a company has sold B) unpaid bills for products or services a company has sold C) unpaid bills for expenses a company has incurred D) paid bills for expenses a company has incurred Answer: B Diff: Easy Page Ref: 16 Objective: Recognize profit and how to interpret an income statement 58) What are accounts payable? A) paid bills for products or services a company has sold B) unpaid bills for products or services a company has sold C) unpaid bills for expenses a company has incurred D) paid bills for expenses a company has incurred Answer: C Diff: Easy Page Ref: 16 Objective: Recognize profit and how to interpret an income statement 59) Why is that large businesses that have a lot of accounts receivable and payable cannot use the cash basis of accounting? A) It doesn’t give them an accurate picture of their net profits for a set period B) The law says that such business cannot use the cash basis of accounting C) The cash basis of accounting is too complex for large businesses to use D) They don’t have IT systems designed to handle the cash basis of accounting Answer: A Diff: Moderate Page Ref: 16 Objective: Recognize profit and how to interpret an income statement 60) Which financial statement answers the question “Is my company making a profit”? A) the balance sheet B) the general ledger C) the cash flow statement D) the income statement Answer: D Diff: Easy Page Ref: 19 Objective: Recognize profit and how to interpret an income statement 61) Which of the following is NOT a source of cash flow? A) operating activities B) investing activities C) maintenance activities D) financing activities Answer: C Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit 62) You own a computer company Activities such as selling computers, buying components, and assembling the components to make computers are A) operating activities B) investing activities C) maintenance activities D) financing activities Answer: A Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit 63) You own a steel company You build a state-of-the-art manufacturing facility that lets your business operate more efficiently and sell more products Building the facility is a(n) A) operating activity B) investing activity C) maintenance activity D) financing activity Answer: B Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit 64) You own a media company You decide to issue and sell shares of your company’s stock This is a(n) A) operating activity B) investing activity C) maintenance activity D) financing activity Answer: D Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit 65) What is an operating activity? A) an activity that entails the investment in or purchase of assets that could increase a company’s profitability B) an activity that requires upgrades to a company’s information technology system C) an activity that uses or generates cash to keep a company’s daily operations going D) an activity that involves cash exchanges between a company’s shareholders, investors, and creditors Answer: C Diff: Easy Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit 66) What is an investing activity? A) an activity that entails the purchase of assets that could increase a company’s profitability B) an activity that requires upgrades to a company’s information technology system C) an activity that uses or generates cash to keep a company’s daily operations going D) an activity that involves cash exchanges between a company’s shareholders, investors, and creditors Answer: A Diff: Easy Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit 67) What is a financial activity? A) an activity that entails the purchase of assets that could increase a company’s profitability B) an activity that requires upgrades to a company’s information technology system C) an activity that uses or generates cash to keep a company’s daily operations going D) an activity that involves cash exchanges between a company’s shareholders, investors, and creditors Answer: D Diff: Easy Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit 68) What is gross profit? A) revenue plus the costs of creating and delivering products for sale (not including overhead) B) revenue divided by the costs of creating and delivering products for sale (not including overhead) C) revenue minus the costs of creating and delivering products for sale (not including overhead) D) revenue multiplied by the costs of creating and delivering products for sale (not including overhead) Answer: C Diff: Moderate Page Ref: 21 Objective: Examine how people make decisions based on their impact on cash flow and profit 69) You are an employee of a company Which of the following is NOT a benefit of understanding the company’s financial statements? A) This understanding helps you determine the company’s financial health and judge whether your job is secure B) This understanding inspires and helps you to your job more effectively C) This understanding gives you an idea of how likely it is you’ll get a raise or promotion D) This understanding positions you to predict which employees could be demoted into which positions Answer: D Diff: Moderate Page Ref: 23 Objective: Examine how people make decisions based on their impact on cash flow and profit 70) A manager’s primary job is to A) make sure his or her employees’ work meets certain criteria B) assemble the products or provide the services that the company sells C) respond to customers’ complaints about the company’s offerings D) invest some of his or her compensation in company shares Answer: A Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats 71) You participate in the day-to-day work of a business Which of the following perspectives does this give you on the business? A) customer B) manager C) employee D) owner/investor Answer: C Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats 72) You are purchasing a good or service from a business Which of the following perspectives does this give you on the business? A) customer B) manager C) employee D) owner/investor Answer: A Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats 73) You guide employees and make sure their work meets certain criteria in a company Which of the following perspectives does this give you on the company? A) customer B) manager C) employee D) owner/investor Answer: B Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats 74) You have a vested interest in the financial success of a company, though you are not participating in its day-to-day activities Which of the following perspectives does this give you on the company? A) customer B) manager C) employee D) owner/investor Answer: D Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats 75) What is another term for cost of goods sold? A) cost of profit B) cost of operating income C) cost of revenue D) cost of interest Answer: C Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement  ... company’s performance B) Employees directly review their managers’ on-the-job performance C) Employees have access to the firm’s financial statements and other information about the company’s performance... disrespected by management if the company’s financial performance is poor B) The company will be violating laws about keeping financial information confidential C) The firm’s financial information... statements for your business from the current month and the previous month Which of the following would you be able to figure out? A) what denominations the business s cash is in B) whether the business