Q&A Hero

Q: The direct cost incurred in using an asset for the purpose for which it was intended is termed as _____. A. cost of operating B. cost of owning C. whole of life cost D. cost of disposition

Q: Which of the following is the cost incurred in financing, insuring, taxing, or tracking an asset? A. Acquisition cost B. Cost of owning C. Cost of operating D. Replacement cost

Q: The sum of all costs of capital assets, including acquisition, ownership, operation, and disposal is called _____. A. acquisition cost B. cost of owning C. whole of life cost D. replacement cost

Q: _____ refers to the machinery, tools, or materials used in the performance of the work of a business. A. Property B. Plant C. Inventory D. Equipment

Q: _____ is a general term for real estate, but it can also be applied as a legal term for anything owned or possessed. A. Equipment B. Plant C. Inventory D. Property

Q: The total cost of obtaining an asset, including such costs as purchase price, transportation, installation, testing, and calibrating in order to ready it for its first productive use is termed as _____. A. replacement cost B. cost of operating C. cost of disposition D. acquisition cost

Q: The _____ is the total cost of substituting an asset with an essentially identical asset. A. cost of disposition B. replacement cost C. cost of operating D. acquisition cost

Q: _____ refers to a type of periodic inventory that conducts a count of the entire inventory being held for sale at a specific point in time. A. Factoring B. Perpetual inventory C. Physical inventory D. Benchmarking

Q: _____ is the determination of the amount of assets held by the firm for sale or production. A. Inventory valuation B. Capital budgeting C. Factoring D. Depreciation

Q: Potential buyers and investors are most interested in the _____ value of a business's assets. A. book B. replacement C. charge back D. disposal

Q: If a business offers its assets as collateral, lenders are most interested in the _____ value. A. book B. fair market C. replacement D. disposal

Q: Which of the following is a primary advantage of replacement value? A. Lower premiums on the policy B. Higher price of the new asset C. High accuracy of the value D. Lower price of the new asset

Q: The price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction is called a _____. A. fair market value B. disposal value C. replacement value D. book value

Q: _____ is the cost incurred to substitute one asset with an identical asset. A. Disposal value B. Replacement value C. Fair market value D. Book value

Q: _____ refers to the fixed and determinable value of an asset that will exist when the depreciation process is complete. A. Market value B. Book value C. Salvage value D. Disposal value

Q: _____ refers to the fixed, determinable period of utility of an asset. A. Useful life B. Salvage value C. Payback period D. Disposal value

Q: Depreciation is based on which of the following assumptions? A. The period of utility of an asset is not fixed or determinable. B. The value of an asset declines in a predictable manner over the period of utility. C. The salvage value of an asset will not exist when the depreciation process is complete. D. The value of an asset is not fixed or determinable.

Q: _____ is an arbitrary, but regular and systematic, method used to take asset value as an expense for the purpose of calculating net income or loss. A. Inventory valuation B. Capital budgeting C. Benchmarking D. Depreciation

Q: Which of the following is not generally considered to be very useful for any purpose other than accounting and income taxes? A. Book value B. Salvage value C. Replacement value D. Disposal value

Q: A _____ describes the difference between the original acquisition cost of capital assets and the amount of depreciation expense that has been recognized to date. A. fair market value B. disposal value C. book value D. replacement value

Q: The _____ methods define utility as being the net cash inflows that the asset will produce. A. residual income valuation B. discounted cash flow valuation C. inventory valuation D. pre-money valuation

Q: _____ are assets that are expected to provide economic benefits for periods of time greater than one year. A. Accounts receivables B. Hard assets C. Contingent assets D. Capital assets

Q: A _____ is a computer-readable tag that is unique to each item of the inventory.A. bar codeB. copyrightC. patentD. trademark

Q: Which of the following is a feature of the perpetual inventory system? A. It is the method with the lowest cost for maintaining records. B. It maintains a constant record of the receipt and sale of inventory. C. It requires very little time for constant record keeping. D. It is the process of physically counting inventories on a set schedule.

Q: A system of recording the receipt and sale of each item as it occurs is called a _____. A. micro inventory B. periodic inventory C. just-in-time inventory D. perpetual inventory

Q: Small businesses use the periodic inventory method because it: A. gives instant access to accurate inventory records. B. records the receipt and sale of each item as it occurs. C. meets the requirements of local and federal taxing agencies. D. uses bar codes that are unique to each item of inventory.

Q: A _____ is the process of physically counting business assets on a set schedule. A. periodic inventory B. perpetual inventory C. just-in-time inventory D. micro inventory

Q: The purchase of inventorytypical with Internet-based businessesonly after a sale is made is called a _____. A. periodic inventory B. micro inventory C. perpetual inventory D. point-of-sale system

Q: A just-in-time (JIT) inventory system attempts to reduce inventory levels to the absolute minimum by: A. purchasing and accepting inventory before it is sold to a customer. B. delaying the shipment of the completed product to the customer. C. keeping safety stock in case the estimate exceeds the demand. D. assembling the product in the absolute minimum time possible.

Q: The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer is termed as _____. A. perpetual inventory B. point-of-sale system C. just-in-time inventory D. optimum stocking level

Q: The practice of acquiring inventory only in response to a completed sale is called a(n) _____. A. pull-through system B. economic order quantity C. optimum stocking level D. point-of-sale system

Q: A(n) _____ is an amount of inventory carried to ensure that a business will not run out of inventory because of fluctuating levels of sales. A. micro inventory B. safety stock C. just-in-time inventory D. perpetual inventory

Q: An ideal situation is where a business receives new inventory just as the last unit of the previous order is sold. However, this rarely occurs because the: A. inventory level is not affected by demand. B. delivery times never fluctuate. C. sales volumes are not constant. D. estimate never exceeds demand.

Q: The _____ is also called the reorder point. A. replacement value B. disposal value C. optimum stocking level D. economic order quantity

Q: A(n) _____ is the amount of inventory that results in the minimum cost, considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory. A. optimum stocking level B. periodic inventory C. economic order quantity D. micro inventory

Q: Economic order quantity (EOQ) helps a business to think in terms of: A. factoring receivables. B. ordering costs and carrying costs. C. pledging receivables. D. ordering costs and operating lease.

Q: Which of the following is a statistical technique that determines the size of inventory that a business must hold to minimize total inventory cost? A. Benchmarking B. Factoring C. Pull-push strategy D. Economic order quantity

Q: Which of the following is the largest current asset that most manufacturing, wholesale, and retail firms generally have? B. Equipment Inventory D. Patent Inventory is the largest current asset that most manufacturing, wholesale, and retail firms have. Manufacturing firms, wholesalers, and retailers simply cannot operate effectively without a minimum level of inventory on hand.

Q: A(n) _____ refers to the products that are held for sale to customers. A. inventory B. layaway C. plant D. lock box

Q: Describe the goals of financial management in preparation for a business exit.

Q: What are the four broad categories of financial ratios? Give an example of each.

Q: What are the benefits of borrowing money for capital investment?

Q: Describe the different forms of personal gifts.

Q: What are the different types of institutional gifts? Explain how a business can benefit from them.

Q: What is a credit reporting agency (CRA)?

Q: Identify the Four Cs of Borrowing.

Q: What are the advantages of using equity capital in a business?

Q: What are the different legal forms of businesses where ownership can be sold?

Q: What are the different sources of financing available for small businesses?

Q: After successfully operating for five years, Tina plans to sell her computer service center. Which of the following would be Tina's main financial management need as she exits the business through sale? A. Obtaining increasing amounts of cash inflows B. Building her wealth and conserving assets C. Optimizing capital structure for profits D. Conserving the money that the business has

Q: After being in business for 24 months, Paul's auto spare parts company Chromson Inc. grows to a relatively stable size. Which of the following would be Paul's primary financial management need at this stage? A. Building owner's wealth B. Clearing all debts C. Implementing bootstrapping techniques D. Establishing internal control over assets

Q: Jacob has started a graphic design company called Interon Graphics. As Interon Graphics moves into the growth phase, which of following would be Jacob's dominant financial management need? A. Obtaining increasing amounts of cash inflows B. Establishing internal control over assets C. Conserving the money that the business has D. Clearing all debts

Q: Tammy has just opened a donut shop called The Rabbit Hole. Given that The Rabbit Hole is in its start-up phase, which of these would be Tammy's immediate financial management need? A. Building owner's wealth B. Conserving what little money the business has C. Obtaining increasing amounts of cash inflows D. Minimizing debt and increasing asset value

Q: If the owner plans to _____ a business, he or she should be removing all surplus cash and tightening the cash-to-cash cycle to the shortest time possible. A. transfer B. sell C. terminate D. start

Q: For an owner, the main financial management emphasis while transferring a business to family members must be to: A. increase the cash-to-cash cycle to the highest time possible. B. increase asset value. C. optimize capital structure for profits. D. maximize debt.

Q: Which of the following is true of financial management for a business exit? A. Its main emphasis is on conserving what little cash the business has. B. Its main emphasis is on maximizing the value of the business for successors. C. Its main emphasis is to obtain increasing amounts of cash inflows to pay for added inventory. D. Its main emphasis is on increasing amounts of cash inflows to pay for added inventory, productive assets, and employees.

Q: At the _____ stage of a business, the emphasis of financial management is to build owner wealth, to conserve assets, to match cash inflows to outflows, and to maximize the return on capital assets by making optimal investing decisions. A. operations B. exit C. growth D. start-up

Q: The emphasis of financial management during the _____ phase is to obtain increasing amounts of cash inflows to pay for added inventory, productive assets, and employees. A. start-up B. exit C. growth D. operations

Q: During the start-up phase of a business, the emphasis is on: A. finishing all outstanding projects, collecting all money due, disposing of all business assets, and finally paying off any outstanding debt. B. removing all surplus cash and tightening the cash-to-cash cycle to the shortest time possible. C. piggybacking with other successful firms. D. conserving what little cash the business has.

Q: Which of the following is true of the debt-to-equity ratio? A. It measures the relative risk that a business setback could cause bankruptcy. B. It is calculated using the formula: Total Liabilities/Total Assets. C. If the ratio is lower, it indicates lesser solvency. D. If the ratio is greater, it indicates increased business risk.

Q: _____ measures the extent to which a business can meet its obligations for the long haul. A. Profitability ratio B. Current ratio C. Return on investment D. Debt-to-equity ratio

Q: _____ is a measure of how much money can be made available to pay obligations within the fiscal year. A. Current ratio B. Return on investment C. Return on equity D. Profitability ratio

Q: _____ measure a management's effectiveness in using the invested capital of the business to provide profits. A. Profitability ratios B. Gross margin ratios C. Return on investments D. Return on equity

Q: _____ ratios measure the relative risk that a business setback could cause bankruptcy. A. Liquidity B. Gross margin C. Leverage D. Profitability

Q: _____ ratios measure the business's ability to pay debts and expenses that are due in the current accounting period. A. Liquidity B. Profitability C. Activity D. Leverage

Q: _____ ratios measure management effectiveness in creating wealth from sales and from invested funds. A. Liquidity B. Activity C. Leverage D. Profitability

Q: _____ ratios measure how productive a particular asset is in producing sales movement. A. Current B. Profitability C. Activity D. Leverage

Q: Restrictions imposed by loan contracts on the operations of a business, such as requiring that a specific minimum net worth be maintained, a specific debt-to-equity ratio not be exceeded, no dividends be paid to stockholders and so on, are known as _____. A. loan amortizations B. loan yields C. loan covenants D. credit assurance

Q: Borrowing money is a better alternative to investing additional personal funds because obtaining equity investment from others: A. reduces the potential loss for any single investor. B. allows lesser debt to be included in the capital mix. C. increases the cost of capital for the business. D. increases the weighted average cost (WAC) of the business.

Q: The ratio of profits to owner investment in a business is referred to as _____. A. return on equity B. return on assets C. return on sales D. return on inventory

Q: Which of the following ways does borrowing help increase potential profits? A. By increasing the weighted average cost (WAC) of the business B. By allowing less debt to be included in the capital mix C. By providing capital funds for additional business opportunities D. By increasing the cost of capital of the business

Q: Which of the following is the formula for calculating owner's return on equity (ROE)? A. Net Income/Average Investment B. Net Income/Owner's Equity Investment C. Total Liabilities/Total Owner's Equity D. Total Liabilities/Total Assets

Q: Uncertainty of returns in a business is referred to as _____. A. financial risk B. accelerated cash-out C. overpayment D. collateral

Q: The ratio of debt to equity that provides the maximum level of profits is called _____. A. cost of capital B. declining financial leverage position C. optimum capital structure D. weighted average cost

Q: When debt increases as a percentage of total investment, the value of the firm: A. increases at a decreasing rate. B. decreases at an accelerated rate. C. increases at an accelerated rate. D. decreases at a decreasing rate.

Q: _____ is a measure of the amount of debt relative to total investment. A. Cost of capital B. Financial leverage C. Optimum capital structure D. Financial risk

Q: The weighted average cost (WAC) refers to: A. a legal reduction in taxes by the government. B. the average equity capital costs incurred by a firm per year. C. the percentage cost of obtaining future funds. D. the expected average future cost of funds.

Q: _____ refers to the percentage expense of obtaining future funds. A. Risk B. Cost of capital C. Rate on investment D. Return on investment

Q: Crowdfunding refers to: A. approaching several foundations to acquire grants to fund a business. B. approaching several commercial banks to fund a business. C. funding a business through partnerships with several companies. D. funding a business online through gifts made to the business.

Q: _____ refers to a type of formal gift where someone buys something on behalf of the entrepreneur's business and lets the entrepreneur benefit from it. A. Overpayment B. Accelerated cash-out C. Picking up the tab D. Piggybacking