Question 1

A divisional manager's performance is evaluated on the basis of the difference between the sales revenues generated by that division and the cost of making those goods and services. The divisional manager is being evaluated using the _______ budget approach.
A) profit
B) revenue
C) cost
D) expense

Accepted Answer

In a profit budget approach, managers are evaluated on the difference between the revenues generated by the sales of goods and services and the budgeted cost of making those goods and services.

Question 2

The financial ratio that indicates whether or not the organization is capable of paying off its short-term debts without having to sell its inventory is the ________ ratio.
A) quick
B) current
C) days sales outstanding
D) profit

Accepted Answer

The quick ratio tells whether managers have the resources available to meet the claims of short-term creditors without selling inventory.

Question 3

The financial ratio that measures the ability of the organization to pay its short-term debts is the ________ ratio.
A) leverage
B) liquidity
C) activity
D) profit

Accepted Answer

Liquidity ratios measure how well managers have protected organizational resources to be able to meet short-term obligations. The current ratio (current assets divided by current liabilities) tells managers whether they have the resources available to meet the claims of short-term creditors.

Question 4

When a manager is evaluated on the difference between sales revenue and the budgeted cost of making those goods and services, this is an example of a(n) ________ budget approach.
A) revenue
B) cash flow
C) expense
D) profit

Accepted Answer

Managers of a division may be given a fixed budget for resources and be evaluated on the amount of goods or services they can produce using those resources. This is a cost or expense budget approach.

Question 5

The manager of a profit center is evaluated on the basis of the amount of sales that have been generated from the goods or services produced in his/her division. The divisional manager is being evaluated using the _______ budget approach.
A) expense
B) cash flow
C) revenue
D) profit

Accepted Answer

In a revenue budget approach, managers are asked to maximize the revenues from the sales of goods and services produced. Managers are then remunerated on the basis of the net sales generated by the division.

Question 6

The managers of a division are given a fixed budget and are then evaluated on the basis of their ability to produce goods or services. This is an example of a(n) ________ budget approach.
A) expense
B) profit
C) cash flow
D) revenue

Accepted Answer

Managers of a division may be given a fixed budget for resources and be evaluated on the amount of goods or services they can produce using those resources. This is a cost or expense budget approach.

Question 7

The financial ratio that measures how well the managers of the organization are creating value from the organization's assets is the ________ ratio.
A) leverage
B) liquidity
C) current
D) activity

Accepted Answer

Activity ratios provide measures of how well managers are creating value from organizational assets.

Question 8

The ratio that is computed by dividing the difference between current assets and inventory by current liabilities is the ________ ratio.
A) inventory turnover
B) quick
C) current
D) debt-to-assets

Accepted Answer

Quick ratio = (current assets - inventory)/current liabilities.Refer: Table 8.1

Question 9

When a manager is told to maximize the revenues from the sales of goods and services produced, this is an example of a(n) ________ budget approach.
A) profit
B) revenue
C) expense
D) cash flow

Accepted Answer

With a revenue budget, managers are asked to maximize the revenues from the sales of goods and services produced.

Question 10

Calculate the return on investment from the information given below. Net Income = $18,000; Advertising Expenses = $220,000; Total Liabilities = $120,000; Total Assets = $160,000; Gross Margin = $80,000; Taxes Paid = $2,000
A) 16.67 percent
B) 15 percent
C) 11.25 percent
D) 12.5 percent

Accepted Answer

ROI = net profit before taxes + taxes paid/total assets = ($18,000 + $2,000)/$160,000 = .125 = 12.5 percent.Refer: Table 8.1

Question 11

When a divisional manager is evaluated based on the operating income of his division, this is an example of a(n) ________ budget approach.
A) capital
B) revenue
C) expense
D) profit

Accepted Answer

With a profit budget, managers are evaluated on the difference between revenues generated by the sale of goods and services and budgeted cost of making those goods and services, which is the operating income.

Question 12

Calculate the current ratio of the organization from the information given below. Sales = $200,000; Gross Profit = $40,000; Total Assets = $450,000; Current Assets = $250,000; Current Liabilities = $300,000
A) 0.44
B) 0.56
C) 0.67
D) 0.83

Accepted Answer

Current ratio = current assets/current liabilities = $250,000/$300,000 = .83.Refer: Table 8.1

Question 13

The financial ratio that indicates the degree to which the organization uses debt or equity to finance its ongoing operations is the ________ ratio.
A) leverage
B) liquidity
C) activity
D) profit

Accepted Answer

Leverage ratios, such as the debt-to-assets ratio and the times-covered ratio, measure the degree to which managers use debt (borrow money) or equity (issue new shares) to finance ongoing operations.

Question 14

From the information given below, calculate the organization's current ratio. Total Liabilities = $750,000; Current Liabilities = $220,000; Total Assets = $700,000; Current Assets = $176,000
A) 0.25
B) 0.93
C) 0.29
D) 0.80

Accepted Answer

Current ratio = current assets/current liabilities = $176,000/$220,000 = .80.Refer: Table 8.1

Question 15

With management by objectives, the first things established are ________.
A) evaluations
B) organizational objectives
C) management goals
D) subordinate goals

Accepted Answer

Management by objective starts when top managers establish overall organizational objectives such as specific financial performance targets.

Question 16

The most immediate and potent form of behavior control is ________.
A) direct supervision
B) clan control
C) bureaucratic control
D) socialization

Accepted Answer

The most immediate and potent form of behavior control is direct supervision by managers who actively monitor and observe the behavior of their subordinates, teach subordinates the behaviors that are appropriate and inappropriate, and intervene to take corrective action as needed.

Question 17

The financial ratio that indicates how efficiently the managers of the organization are collecting the revenue due to the organization from the sale of its products or services is the ________ ratio.
A) debt-to-assets
B) quick
C) current
D) days sales outstanding

Accepted Answer

Days sales outstanding provides information on how efficiently managers are collecting revenue from customers to pay expenses.

Question 18

From the information given below, calculate the organization's return on investment. Total Liabilities = $300,000; Total Assets = $600,000; Gross Margin = $200,000; Net Income Before Taxes = $30,000; Total Expenses = $240,000
A) 50 percent
B) 5 percent
C) 10 percent
D) 12.5 percent

Accepted Answer

ROI = net profit before taxes/total assets = $30,000/$600,000 = .05 = 5 percent.Refer: Table 8.1

Question 19

The CEO of a company would like to know whether his managers can pay off claims of short-term creditors without selling inventory. What ratio will help him understand the company's liquidity?
A) Inventory turnover ratio
B) Quick ratio
C) Current ratio
D) Debt-to-assets ratio

Accepted Answer

The quick ratio shows whether managers can pay these claims without selling inventory.Refer: Table 8.1

Question 20

The current assets of Global Acorn are valued at 25 million dollars and its current liabilities are at 6 million dollars. If its inventory is worth 1 million dollars, what is its quick ratio?
A) 4
B) 0.25
C) 0.14
D) 3.6

Accepted Answer

Quick ratio = (current assets - inventory)/current liabilities; refer: Table 8.1.Therefore, quick ratio = (25 - 1)/6 = 24/6 = 4.

Quiz 8: Control, Change, and Entrepreneurship

A divisional manager's performance is evaluated on the basis of the difference between the sales revenues generated by that division and the cost of making those goods and services. The divisional manager is being evaluated using the _______ budget approach.

The financial ratio that indicates whether or not the organization is capable of paying off its short-term debts without having to sell its inventory is the ________ ratio.

The financial ratio that measures the ability of the organization to pay its short-term debts is the ________ ratio.

When a manager is evaluated on the difference between sales revenue and the budgeted cost of making those goods and services, this is an example of a(n) ________ budget approach.

The manager of a profit center is evaluated on the basis of the amount of sales that have been generated from the goods or services produced in his/her division. The divisional manager is being evaluated using the _______ budget approach.

The managers of a division are given a fixed budget and are then evaluated on the basis of their ability to produce goods or services. This is an example of a(n) ________ budget approach.

The financial ratio that measures how well the managers of the organization are creating value from the organization's assets is the ________ ratio.

The ratio that is computed by dividing the difference between current assets and inventory by current liabilities is the ________ ratio.

When a manager is told to maximize the revenues from the sales of goods and services produced, this is an example of a(n) ________ budget approach.

Calculate the return on investment from the information given below. Net Income = $18,000; Advertising Expenses = $220,000; Total Liabilities = $120,000; Total Assets = $160,000; Gross Margin = $80,000; Taxes Paid = $2,000

When a divisional manager is evaluated based on the operating income of his division, this is an example of a(n) ________ budget approach.

Calculate the current ratio of the organization from the information given below. Sales = $200,000; Gross Profit = $40,000; Total Assets = $450,000; Current Assets = $250,000; Current Liabilities = $300,000

The financial ratio that indicates the degree to which the organization uses debt or equity to finance its ongoing operations is the ________ ratio.

From the information given below, calculate the organization's current ratio. Total Liabilities = $750,000; Current Liabilities = $220,000; Total Assets = $700,000; Current Assets = $176,000

With management by objectives, the first things established are ________.

The most immediate and potent form of behavior control is ________.

The financial ratio that indicates how efficiently the managers of the organization are collecting the revenue due to the organization from the sale of its products or services is the ________ ratio.

From the information given below, calculate the organization's return on investment. Total Liabilities = $300,000; Total Assets = $600,000; Gross Margin = $200,000; Net Income Before Taxes = $30,000; Total Expenses = $240,000

The CEO of a company would like to know whether his managers can pay off claims of short-term creditors without selling inventory. What ratio will help him understand the company's liquidity?

The current assets of Global Acorn are valued at 25 million dollars and its current liabilities are at 6 million dollars. If its inventory is worth 1 million dollars, what is its quick ratio?