Deck 7: Planning, Budgeting, and Controlling

Question 1

What is a NOT a source of growth funds?

A) new equity
B) investing more in capital assets
C) debt financing
D) profit for the year

Answer 1

investing more in capital assets

Question 2

What does the strategic plan help managers to accomplish?

A) preparation of financial statements
B) harmonization of a business with its environment
C) formulation of schedules and regulations
D) consolidation of capital budgets

Answer 2

harmonization of a business with its environment

Question 3

What does economy determine?

A) management guidelines
B) the acquisition of resources
C) the setting of priorities
D) the SWOT analysis

Answer 3

the acquisition of resources

Question 4

What does efficiency refer to?

A) doing things urgently
B) doing things in teams
C) doing things right
D) doing the right things

Question 5

Which of the following is an effectiveness indicator?

A) telephone response time
B) cost per unit
C) return on revenue
D) number of minutes to process a document

Question 6

What business activity includes the SWOT analysis?

A) budgeting
B) financial projections
C) controlling
D) planning

Question 7

Which projected financial statement should be prepared first?

A) the statement of cash flows
B) the statement of retained earnings
C) the statement of income
D) the statement of financial position

Question 8

What is an important advantage of budgeting?

A) It determines planning guidelines.
B) It sets corporate plans.
C) It pinpoints managerial objectives.
D) It improves communication.

Question 9

What is an important prerequisite to the budgeting process?

A) creating projected financial statements
B) making the master budget
C) planning assumptions
D) making the sales budget

Question 10

Which of the following is an operating budget?

A) the sales budget
B) the cash budget
C) the capital budget
D) the consolidated budget

Question 11

Which department often uses flexible budgets?

A) the manufacturing department
B) the human resources department
C) the research and development department
D) the finance department

Question 12

Who is responsible for coordinating the operating budgets and preparing the master budget?

A) the controller
B) the operations manager
C) the treasurer
D) the systems manager

Question 13

Which of the following is NOT a key rule for sound budgeting?

A) Encourage participation.
B) Be inflexible.
C) Relate costs to benefits.
D) Link budgeting to monitoring.

Question 14

What are used to help prepare financial projections?

A) operating budgets
B) projected statements of operations
C) projected cash flow statements
D) projected statements of financial position

Question 15

What is one of the benefits of incremental budgeting?

A) The previous year's figures cannot be inflated.
B) It is not difficult to relate to specific objectives.
C) The previous year's expenses will not be missed.
D) Past activities are questioned.

Question 16

Which of the following is a projected financial statement?

A) the statement of income
B) the overhead statement
C) the capital expenditures statement
D) the sales statement

Question 17

Which ratio is NOT included in the sustainable growth formula?

A) profit for the year to revenue
B) current liabilities to current assets
C) reinvested income to profit before dividends
D) total liabilities to equity

Question 18

What element is most often used to calculate Altman's Z-score?

A) shareholders' equity
B) revenue
C) total assets
D) working capital

Question 19

What determines how an organizational unit should be measured?

A) budget standards
B) performance indicators
C) output standards
D) budget indicators

Question 20

Which controls help to guide actions toward intended results?

A) concurrent controls
B) corrective controls
C) preventive controls
D) feedback controls

Question 21

What is one of the benefits that results from budgeting?

A) budgeting improves miscommunications
B) all financial managers will be accountable for results
C) budgeting improves individual decision-making
D) budgeting improves coordination

Question 22

Which of the following is a performance indicator?

A) occupancy rate for a hotel as is a measure of effectiveness
B) the number of bills paid incorrectly divided by total bills paid as a measure of economy
C) salaries paid to sales clerks as a measure of effectiveness
D) share of market as a measure of economy

Question 23

A company sells $ 60,000 of goods in January, 80% in cash and 20% paid in full after 30 days. How much cash will be collected in March for the sales made in January?

A) $ 0
B) $ 12,000
C) $ 48,000
D) $ 60,000

Question 24

Review the following sales information. How much cash will the company collect in February?
January sales are $ 60,000
February sales are $ 70,000
80% of sales are made on a cash basis
20% of sales are collected after 30 days

A) $ 56,000
B) $ 60,000
C) $ 68,000
D) $ 70,000

Question 25

Which of the following is an effectiveness indicator?

A) return on equity
B) number of tests per day
C) share of market
D) return on revenue

Question 26

Which controls help to monitor performance while work is being done?

A) proactive controls
B) feedforward controls
C) preventive controls
D) screening controls

Question 27

Which controls help to focus on variations of past performance?

A) screening controls
B) preventive controls
C) feedforward controls
D) feedback controls

Question 28

What type of tool is a job description?

A) a concurrent control tool
B) a screening control tool
C) a preventive control tool
D) a corrective control tool

Question 29

Which controls are NOT used in manufacturing plants?

A) feedback controls
B) screening controls
C) preventive controls
D) strategic controls

Question 30

What is the purpose of preparing a business plan?

A) to force managers to be realistic about their projections
B) to help competitors determine the type of business they face
C) to help customers evaluate an organization
D) to force employees to be more efficient and effective

Question 31

What is the first item in a typical business plan?

A) the profile of the management team
B) a description of the industry
C) a description of the business
D) an executive summary

Question 32

Which of the following is NOT a financial indicator?

A) asset-management ratios
B) employee turnover ratios
C) liquidity ratios
D) debt/coverage ratios

Question 33

Who prepares tactical plans?

A) strategic managers
B) divisional managers
C) the management committee
D) the board of directors

Question 34

What does a performance indicator describe?

A) how an organizational unit should be measured
B) financial ratios
C) a specific norm
D) both efficiency and effectiveness standards

Question 35

What do planning assumptions establish?

A) boundaries
B) weaknesses
C) opportunities
D) goals

Question 36

What does a cash budget track?

A) depreciation
B) future income taxes
C) cash receipts
D) deferred revenue

Question 37

What does a statement of income planning assumptions address?

A) inventory turnover
B) inflation
C) aging of trade receivables
D) investments in non-current assets

Question 38

Which of the following is a section of the cash budget?

A) operating section
B) shareholders' section
C) cash receipts section
D) asset section

Question 39

Planning is the process of formulating goals and outlining actions plans to realize the goals.

Question 40

The first step in the planning process is to formulate the mission statement and the value goals.

Question 41

A strategic plan involves the process of developing detailed plans and budgets.

Question 42

Effectiveness indicators measure the goal-related accomplishments of an organization.

Question 43

Telephone repose time and percentage of defects are considered efficiency indicators.

Question 44

The SWOT analysis helps to diagnose a company's internal budgets and external plans.

Question 45

Opportunities are elements of the internal environment that offer a company certain avenues for expansion.

Question 46

Planning assumptions are boundaries upon which priorities, goals, plans, budgets and financial projections are based.

Question 47

There are two categories of planning assumptions: internal assumptions and external assumptions.

Question 48

"What is the aging of our trade receivables" could be considered a statement of income planning assumption.

Question 49

Budgeting is the process that translates corporate intentions into specific tasks, and identifies the resources needed by managers to carry them out.

Question 50

Budgeting helps managers to formulate strategic objectives and plans.

Question 51

Preparing the projected financial statements can improve vertical and horizontal communication between managers who are responsible for organizational units.

Question 52

Budgeting involves setting standards that are central to managerial accountability.

Question 53

Operating managers usually prepare operating budgets.

Question 54

Typical operating budgets include investment budgets, cash budgets and pro-forma financial budgets.

Question 55

Overhead unit managers usually prepare flexible or variable budgets

Question 56

Incremental budgeting has two key flaws: first, it is difficult to relate the budget to specific goals and plans and second, corporate priorities may get lost in the shuffle.

Question 57

Zero-based budgeting is NOT an effective budgeting method for managers responsible for overhead units.

Question 58

Product budgets and program budgets that present data differently and in some detail help to complement the operating budgets.

Question 59

Item-of-expenditure budgeting is the most common or popular method for preparing operating budgets.

Question 60

Zero-based budgeting is based on the premise that every budget dollar requires justification.

Question 61

Cash budgets are used in large measure to communicate between operating managers.

Question 62

A capital budget reveals how much is required to invest in assets such as buildings, modernization and research and development.

Question 63

To make budgeting an effective management exercise, it is important for the controller to prepare budgeting guidelines and to communicate them to operating managers.

Question 64

The treasurer is the personal responsible for coordinating the preparation of the operating budgets.

Question 65

Top-level managers should be actively involved in the budgeting process in order to avoid budgeting pitfalls.

Question 66

It is NOT important for NFP organizations to prepare cash budgets.

Question 67

A business plan is a document that gives a complete picture about an organization's goals, plans, operating activities, financial needs and financing requirements.

Question 68

A typical business plan usually starts with the formulation of corporate strategies.

Question 69

Projected financial statements are basically projected statements of income, statements of financial position and statements of cash flows.

Question 70

The sustainable growth rate can be defined as the rate of increase in revenue a company can attain without depleting financial resources, excessive borrowing and the issue of new capital stock.

Question 71

An effective way to achieve growth is by improving the ratio between profit for the year and revenue.

Question 72

The Z-score is an excellent way to determine how fast a company should grow.

Question 73

Total assets are the item that appears most often in the five measures that helps to calculate the overall financial health score of a business.

Question 74

Performance indicators are "quantitative measures" used as benchmarks to compare results with performance.

Question 75

Categories of performance standards include time, output, cost and quantity.

Question 76

A 17% return on investment can be considered a performance standard.

Question 77

Preventive control is a system that helps managers monitor performance while work is being done.

Question 78

Job descriptions can be used as a preventive control tool.

Question 79

A bank statement can be used as a screening control tool for controlling purposes.

Question 80

A key objective of the three control systems (preventive, screening, and feedback) is to take corrective action in order to reach stated goals.