Question 1

The __________ plans future investments in major assets to be depreciated over several years.
A) capital budget
B) balance sheet budget
C) cash budget
D) revenue budget
E) profit budget

Accepted Answer

A capital budget typically outlines the expenditures for long-term assets such as land, buildings, equipment, and vehicles that are expected to last for multiple years and will be depreciated over their useful lives. The other budget types listed are focused on short-term financial planning and do not include major asset investments.

Question 2

The ability of the organization to meet its current debt obligations is indicated by a(n) __________ ratio.
A) activity
B) liquidity
C) profitability
D) conversion
E) growth

Accepted Answer

The liquidity ratio measures the ability of a company to meet its short-term debt obligations, primarily by using its current assets, such as cash, accounts receivable, and inventory. This ratio indicates the company's ability to pay off its current debts as they become due.

Question 3

The firm's financial position with respect to assets and liabilities at a specific point in time is shown by its
A) activity ratio.
B) profitability ratio.
C) income statement.
D) liquidity ratio.
E) balance sheet.

Accepted Answer

The balance sheet reports a company's assets, liabilities, and equity at a specific point in time, providing a snapshot of the firm's financial position. The other options - activity ratio, profitability ratio, income statement, and liquidity ratio - all provide information about different aspects of a company's financial performance but do not specifically present a snapshot of its assets and liabilities.

Question 4

Kurt's work group consistently exceeds the goals the members set for themselves some months ago. In an attempt to better motivate the group, Kurt thought it would be a good idea to set new goals. This is an example of Kurt exercising control by
A) comparing performance to standards.
B) developing adequate measures of performance.
C) taking corrective action.
D) all of these
E) comparing performance to standards and developing adequate measures of performance only.

Accepted Answer

Kurt is taking corrective action by setting new goals to better motivate the group after they have consistently exceeded their previous goals.

Question 5

__________ is a ratio that measures the firm's internal performance with respect to key activities defined by management.
A) A liquidity ratio
B) An activity ratio
C) Return on total assets
D) A current ratio
E) Profit margin on sales

Accepted Answer

An activity ratio measures how efficiently a company is using its resources to generate revenue. It reflects the firm's internal performance with respect to key activities defined by management, such as inventory management, accounts receivable collection, and asset utilization. Activity ratios include inventory turnover, accounts receivable turnover, and asset turnover ratios. The other options listed are all different types of financial ratios but do not specifically measure internal performance with respect to key activities defined by management.

Question 6

Melissa has been assigned to work on the development of a budget that plans future investments in major assets such as buildings and heavy machinery. Melissa is working on a(n)
A) cash budget.
B) capital budget.
C) revenue budget.
D) operating budget.
E) expense budget.

Accepted Answer

Melissa is working on a capital budget, which is specifically focused on long-term investments in major assets such as buildings and heavy machinery. A cash budget, revenue budget, operating budget, and expense budget are all focused on different aspects of a company's financial planning and management.

Question 7

Joey is a department manager at IronRods.com. His sole role in the budget process is to implement the budget that is developed for him. This is an example of
A) strategic budgeting.
B) operational budgeting.
C) top-down budgeting.
D) management by objectives.
E) bottom-up budgeting.

Accepted Answer

In top-down budgeting, higher management creates the budget and lower-level managers, like Joey, are responsible for implementing it.

Question 8

In most organizations, managers must rely on quantitative measures and __________ in order to exert effective control.
A) numerical indicators
B) profits
C) their own judgment
D) goal achievement
E) employees' words

Accepted Answer

Managers often need to use their own judgment in conjunction with quantitative measures to make informed decisions and exert effective control, as not all situations can be fully captured by numbers alone.

Question 9

__________ is a financial budget that estimates cash flows on a daily basis or weekly basis to ensure that the company can meet its obligations.
A) Capital expenditure budget
B) Balance sheet budget
C) Cash budget
D) Revenue budget
E) Profit budget

Accepted Answer

A cash budget estimates the inflows and outflows of cash on a daily or weekly basis to ensure that the company has enough cash to meet its financial obligations. The other budgets listed, such as capital expenditure budget, balance sheet budget, revenue budget, and profit budget, do not focus specifically on cash inflows and outflows.

Question 10

An advantage of the bottom-up budgeting process is
A) its emphasis on bureaucratic control.
B) lower managers are more involved.
C) top managers control the information flow.
D) top managers are often not committed to achieving budget targets.
E) all of these.

Accepted Answer

The advantage of the bottom-up budgeting process is that lower-level managers are more involved, which can lead to more accurate and realistic budgets. Option A is incorrect as bureaucratic control is not an advantage, but rather a potential disadvantage of this process. Option C is incorrect as the information flow is controlled by lower-level managers in the bottom-up process. Option D is also incorrect as top managers must be committed to achieving budget targets regardless of the budgeting process used. Option E is incorrect as only option B is correct.

Question 11

Your department has absenteeism standards, a way to measure absenteeism, and, based on your investigation, you have concluded that your department has an excessive absenteeism rate. What should your next step be?
A) Set new absenteeism standards
B) Develop new measures of absenteeism
C) Terminate three employees for excessive absenteeism
D) All of these would be good examples of taking corrective action.
E) None of these

Accepted Answer

The best choice would be to take a multi-faceted approach in addressing the excessive absenteeism rate by setting new absenteeism standards, developing new measures of absenteeism, and taking targeted corrective action by terminating employees who have excessive absenteeism. This comprehensive approach ensures that the root cause of the absenteeism issue is addressed, and that steps are taken to prevent it from persisting in the future.

Question 12

The __________ is purchase orders divided by customer inquiries.
A) current ratio
B) inventory turnover ratio
C) conversion ratio
D) profit margin on sales
E) none of these

Accepted Answer

The given formula is the formula for calculating the conversion ratio.

Question 13

Arbor Tree Corporation has a detailed set of organizational goals and management information system that delivers timely and accurate information. Arbor Tree still has control problems, however, because its managers refuse to act on the information they receive. Arbor Tree's control process has flaws in which of the following areas?
A) Its performance standards
B) Its management information systems
C) Its ability to take corrective action when necessary
D) Its measurement systems
E) None of these

Accepted Answer

Arbor Tree Corporation has a detailed set of goals and a management information system that delivers timely and accurate information. Therefore, the control problem seems to be stemming from the fact that the managers refuse to act on the information they receive. The control process, therefore, needs to improve in terms of its ability to take corrective action when necessary.

Question 14

Juanita is an area manager at Home Theater, Inc. She anticipates her area's needs and formulates a proposed budget every quarter. She then sends this proposal to her manager. This is an example of
A) top-down budgeting.
B) strategic budgeting.
C) revenue budgeting.
D) bottom-up budgeting.
E) none of these.

Accepted Answer

This is an example of bottom-up budgeting, where lower-level managers like Juanita create budgets based on their area's needs and submit them to higher management for approval.

Question 15

Jena is a production manager at Scooby Snacks. She is concerned that too much money is being wasted on inventory that is sitting in the warehouse too long. She should calculate a(n)
A) current ratio.
B) inventory turnover ratio.
C) conversion ratio.
D) profitability ratio.
E) leverage ratio.

Accepted Answer

Jena should calculate the inventory turnover ratio to determine how efficiently the company is selling its inventory. It will give her an idea of how long inventory is sitting in the warehouse and how often it's being sold within a given time. By doing so, she can identify any inefficiencies and take corrective measures.

Question 16

Any organizational department or unit under the supervision of a single person who is responsible for its activity is called a(n)
A) independent center.
B) responsibility center.
C) analysis center.
D) control center.
E) budgeting center.

Accepted Answer

A responsibility center is a specific unit or department within an organization that is responsible for a particular activity or set of activities. It is headed by a single person who is accountable for the results of that center's activities. Other options such as independent center, analysis center, control center, budgeting center do not accurately describe this type of organizational unit.

Question 17

__________ refers to funding activities with borrowed money.
A) ROA
B) Leverage
C) Liquidity
D) Profitability
E) Activity

Accepted Answer

Leverage refers to the use of borrowed funds to increase the potential return on investment. It is a common strategy used by companies to finance their operations and investments.

Question 18

Net income divided by sales is the correct formula for calculating
A) return on total assets.
B) a current ratio.
C) a liquidity ratio.
D) profit margin on sales.
E) a corporate evaluation.

Accepted Answer

The formula "net income divided by sales" is used to calculate profit margin on sales, which is the percentage of sales that is converted into profit after all expenses are deducted.

Question 19

A(n) __________ includes anticipated and actual expenses for a responsibility center.
A) revenue budget
B) cash budget
C) capital budget
D) expense budget
E) operating budget

Accepted Answer

An expense budget is a financial plan that lists anticipated and actual expenses for a particular area of responsibility, such as a department or cost center. It helps to track and control costs, allocate resources effectively, and achieve organizational goals. The other options refer to different types of budgets: Revenue budget projects future income or sales, Cash budget forecasts cash inflows and outflows, Capital budget estimates long-term investments in assets, and Operating budget summarizes all revenues and expenses of an enterprise.

Question 20

Bureaucratic control is most consistent with
A) bottom-up budgeting.
B) top-down budgeting.
C) operational budgeting.
D) revenue budgeting.
E) horizontal budgeting.

Accepted Answer

Bureaucratic control involves a centralized and hierarchical approach to management, which is most consistent with top-down budgeting. This approach involves senior management setting the overall budget and then delegating individual budgets to lower-level managers to ensure that resources are used in accordance with organizational policies and goals. Bottom-up budgeting involves the participation of lower-level employees in the budgeting process, which is not consistent with a bureaucratic management approach. Operational and revenue budgeting are types of budgeting methods that can be used within the context of bureaucratic control, but they do not necessarily define the overall approach to management. Horizontal budgeting is a more collaborative approach to budgeting, which is not consistent with the centralized and hierarchical approach of bureaucratic control.

Quiz 19: Managerial and Quality Control

The __________ plans future investments in major assets to be depreciated over several years.

The ability of the organization to meet its current debt obligations is indicated by a(n) __________ ratio.

The firm's financial position with respect to assets and liabilities at a specific point in time is shown by its

Kurt's work group consistently exceeds the goals the members set for themselves some months ago. In an attempt to better motivate the group, Kurt thought it would be a good idea to set new goals. This is an example of Kurt exercising control by

__________ is a ratio that measures the firm's internal performance with respect to key activities defined by management.

Melissa has been assigned to work on the development of a budget that plans future investments in major assets such as buildings and heavy machinery. Melissa is working on a(n)

Joey is a department manager at IronRods.com. His sole role in the budget process is to implement the budget that is developed for him. This is an example of

In most organizations, managers must rely on quantitative measures and __________ in order to exert effective control.

__________ is a financial budget that estimates cash flows on a daily basis or weekly basis to ensure that the company can meet its obligations.

An advantage of the bottom-up budgeting process is

Your department has absenteeism standards, a way to measure absenteeism, and, based on your investigation, you have concluded that your department has an excessive absenteeism rate. What should your next step be?

The __________ is purchase orders divided by customer inquiries.

Juanita is an area manager at Home Theater, Inc. She anticipates her area's needs and formulates a proposed budget every quarter. She then sends this proposal to her manager. This is an example of

Jena is a production manager at Scooby Snacks. She is concerned that too much money is being wasted on inventory that is sitting in the warehouse too long. She should calculate a(n)

Any organizational department or unit under the supervision of a single person who is responsible for its activity is called a(n)

__________ refers to funding activities with borrowed money.

Net income divided by sales is the correct formula for calculating

A(n) __________ includes anticipated and actual expenses for a responsibility center.

Bureaucratic control is most consistent with