Deck 9: Financial Management

Question 1

Which of the following best describes the use of manual accounting systems in Canada today?

A) Small retail businesses with less than ten employees use manual accounting systems.
B) Very few small businesses use manual accounting systems.
C) Nearly one million small businesses use manual accounting systems.
D) All small businesses use manual accounting systems.

Answer 1

C

Question 2

An income statement can show a profit:

A) in times of increasing demand.
B) if selling prices remain competitive.
C) as long as sales prices are greater than cost to produce.
D) even though a business's cash position may have deteriorated.

Answer 2

D

Question 3

Payback method measures:

A) how quickly a business repays bank financing.
B) the frequency with which a supplier reimburses a business for increasing its purchases of merchandise.
C) the number of years it takes for a capital investment to pay for itself.
D) speed of repayment of a small business's founder's original cash investment.

Answer 3

C

Question 4

Rate-of-return measures:

A) the sales returns and allowances experience.
B) poor credit experience indicated by returned bounced) cheques from credit customers.
C) how quickly first-time customers return to a store and make a second purchase.
D) the financial soundness of a capital investment decision.

Question 5

Double-entry recording in accounting means that the amounts of each transaction are recorded:

A) once.
B) twice.
C) three times.
D) four times.

Question 6

The break-even point is when:

A) sales dollars equal the total of fixed and variable costs.
B) total sales match the total sales of a business's major competitor.
C) is the point at which all existing customer demands have been satisfied.
D) total costs do not exceed the sum of borrowed and invested capital.

Question 7

Productivity ratios measure:

A) employee satisfaction.
B) total manufacturing output.
C) efficiency.
D) quality of life.

Question 8

Financial ratios are:

A) helpful for isolating and analyzing weaknesses in a business.
B) mostly used by lenders.
C) usually not meaningful because businesses differ from one another.
D) used to define management responsibilities.

Question 9

Outsourcing financial activities:

A) is rarely satisfactory.
B) often is found to be too expensive for small businesses.
C) is dangerous because of loss of control.
D) can be less costly than doing it in-house.

Question 10

A statement of changes in financial position:

A) presents the extent to which sales changed from the previous fiscal period.
B) summarizes a business's changes in its market position.
C) presents changes in balance sheet accounts from one period to the next.
D) is the same as a cash flow statement.

Question 11

Variance analysis refers to:

A) an investigation of differences between budget and actual numbers.
B) calculations of the extent of different kinds of activities.
C) understanding how a business's performance differs from that of its competitors.
D) degrees of tolerance limits in manufacturing.

Question 12

Inventory turnover refers to:

A) customer handling of merchandise on display frequency in a retail operation.
B) number of times inventory is sold in a year.
C) the need to replace old inventory with fresh product.
D) the frequency with which new models are brought to the market.

Question 13

The expense ratio is:

A) expenses divided by profit.
B) expense item divided by assets.
C) expense item divided by sales.
D) expenses divided by equity.

Question 14

Which is not a financial activity that businesses commonly outsource?

A) Payroll
B) Budgeting
C) Accounts payable
D) Sales

Question 15

Balance sheet items are generally listed in order of:

A) age.
B) liquidity.
C) frequency of the underlying transactions.
D) quantum.

Question 16

Which of the following best describes accounting systems?

A) Small businesses use several different types of accounting systems.
B) The number of transactions are not a relevant factor when choosing a computer-based accounting system.
C) Affordability is the most important factor in choosing an accounting system.
D) Most accounting systems are appropriate for many different sizes of business.

Question 17

A ledger is an):

A) running balance of accounts.
B) record of salaries and wages paid to employees.
C) accounting record of banking transactions.
D) book that records customer contacts.

Question 18

One key advantage of offering credit is:

A) interest on overdue accounts is a major source of income.
B) it is a social responsibility to operate a business.
C) it results in increased sales.
D) it creates sales volume which can then be used to borrow more funds from a bank.

Question 19

The accounting cycle consists of:

A) sale, collection, and banking.
B) recording, classifying, and summarizing.
C) purchasing, presenting, and selling.
D) investing, selling, and collecting.

Question 20

Which is not an advantage of accounting software applications?

A) Increased operating costs
B) Improved service to customers
C) Increased speed and accuracy of maintaining records
D) Improved and more timely information for managers

Question 21

Credit cards and online banking:

A) are universally used by consumers of all ages.
B) surpass the use of cash and cheques in Canada.
C) depend on the belief that cash on hand is at high risk for in-store robbery and theft.
D) are not favoured by small business due to bank charges.

Question 22

A credit collection policy is likely to include:

A) various actions to be taken after a debt has been outstanding for 30, 45, 60, 75, or 90 days.
B) public announcements which identifies the customer who has refused to pay their debt.
C) physical intimidation after customer refusals to pay.
D) forced jail time if debts are not paid.

Question 23

Credit bureaus are used to:

A) justify bank borrowing.
B) build a new business's reputation.
C) obtain borrowed funds.
D) evaluate customers before granting them credit.