Question 1

The financing business process provides the capital resources an enterprise needs to fund all aspects of its operations.

Accepted Answer

Enterprises may also acquire cash by equity financing.

Question 2

The only mechanism by which enterprises acquire cash is debt financing.

Accepted Answer

Enterprises can acquire cash through various mechanisms, including equity financing, revenue from operations, and asset sales, in addition to debt financing.

Question 3

With debt financing, an enterprise borrows cash from one or more external business partners for a specified time period and with the agreement that the enterprise will pay a specified interest rate in addition to the principal balance.

Accepted Answer

Debt financing involves borrowing funds from external sources with the obligation to repay the principal amount along with agreed-upon interest over a specified period.

Question 4

At the value system level, the financing process is the point of contact between an enterprise and its employees.

Accepted Answer

At the value system level the financing process is the point of contact between an enterprise and its investors and creditors.

Question 5

At the value chain level, cash is typically made available by the financing process to the revenue process.

Accepted Answer

The revenue process typically makes cash available to the financing process; the financing process typically makes cash available to the acquisition/payment and payroll processes

Question 6

Sufficient cash availability enables enterprises to purchase in quantity to obtain more favorable prices and to take advantage of cash discounts.

Accepted Answer

Having sufficient cash allows businesses to buy in bulk, which often results in lower prices per unit and the ability to take advantage of discounts offered for immediate or early payment.

Question 7

Cash is both the resource acquired and the resource given in the financing process.

Accepted Answer

Cash is the medium of exchange and is used to acquire resources and settle obligations. In the financing process, cash is both the resource acquired (when a company borrows money) and the resource given (when a company repays debt or pays dividends).

Question 8

In most enterprise systems, cash is represented as a type-level entity because it is normally not possible or practical to specifically identify each coin and piece of currency stored by the company at any given time.

Accepted Answer

In enterprise systems, cash is often treated as a type-level entity because it is impractical to track individual coins and bills, so it is managed as a collective asset.

Question 9

The only attribute that typically needs to be captured regarding a cash requisition event is the dollar amount of cash identified as needed.

Accepted Answer

The date and time of the requisition are also important attributes to capture

Question 10

New data entered as a result of a cash requisition event are typically entered into the cash requisition table and in the table that implements the proposition relationship between the cash requisition event and the cash resource.

Accepted Answer

In a database, a cash requisition event would update the cash requisition table and the table that manages the relationship between the event and the cash resource, ensuring both event details and resource allocation are recorded.

Question 11

In equity financing, the mutual commitment event is typically called a loan agreement and is represented by a promissory note or bond certificate.

Accepted Answer

Loan agreements are part of debt financing; the mutual commitment event in equity financing is a stock issuance commitment event and is represented by shares of stock.

Question 12

Shares of stock are guarantees of future cash flows to the shareholders that own them.

Accepted Answer

Shares of stock do not guarantee future cash flows; although they represent commitments for future cash flows, there is no guarantee.

Question 13

Once dividends are declared, the enterprise is required by law to actually pay the dividends

Accepted Answer

Once dividends are declared, the enterprise is legally obligated to pay them to shareholders.

Question 14

A stock certificate is used to represent one type of commitment event in the financing cycle.

Accepted Answer

A stock certificate represents ownership in a company, which is a commitment event in the financing cycle as it involves the issuance of equity to raise capital.

Question 15

The primary economic increment event in the financing process is the stock issuance event.

Accepted Answer

The primary economic increment event in the financing process is the cash receipt event. The stock issuance event is a commitment event.

Question 16

Cash disbursements are economic decrement events that decrease the enterprise's cash balance.

Accepted Answer

Cash disbursements involve the outflow of cash from an enterprise, which reduces the cash balance as payments are made for expenses, liabilities, or other financial obligations.

Question 17

The financing process is in essence a special case of the acquisition/payment cycle.

Accepted Answer

The financing process involves acquiring funds, which is a type of acquisition, and managing payments related to those funds, fitting within the broader acquisition/payment cycle.

Question 18

The outstanding principal balance of a loan on a specified date is an example of a Stockflow relationship query in the financing process.

Accepted Answer

The outstanding principal balance of a loan on a specified date is a duality relationship query

Question 19

To answer the question "Into which cash account was a cash receipt deposited?" one should examine the Duality relationship in the financing process.

Accepted Answer

One would want to examine the stockflow relationship

Question 20

Cash disbursements made via electronic funds transfer are typically stored as part of a different entity set than are cash disbursements made via paper checks.

Accepted Answer

The same information is typically tracked regarding electronic funds transfers and paper checks, therefore disbursements of both types are typically considered members of the same entity set called cash disbursements.

Quiz 13: The Financing Business Process