Question 1

Akiko realizes the importance of developing a for her interior design business. Akiko understands the importance of appropriately allocating resources in order to achieve the goals of her firm.
A) market prediction
B) financial forecast
C) budget
D) cash flow analysis

Accepted Answer

The term used in the statement is "allocating resources", which clearly indicates the need for a budget. Budgeting involves setting financial goals, estimating income and expenses, and allocating resources to achieve those goals. It helps businesses like Akiko's to plan their expenditures and avoid overspending while achieving their goals. Market prediction, financial forecast, and cash flow analysis are important financial tools as well, but they are not directly related to resource allocation.

Question 2

As a management consultant, Lamont knows that regardless of how good his firm's product might be, the business has little chance of success without a(n):
A) financial plan.
B) outside consultant.
C) auditor.
D) warranty.

Accepted Answer

A financial plan is crucial for the success of any business. It helps to project financial needs and helps to ensure that the business is making sound financial decisions. Without a financial plan, the firm may run out of money or make poor financial decisions that could lead to failure. While B, C, and D may be helpful, they are not essential for the success of the business.

Question 3

When Preferred Pet Care Inc, a mobile veterinary care company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to:
A) manage accounts receivable
B) manage accounts payable
C) develop tax strategies
D) audit the company ledgers

Accepted Answer

Hiring a finance professional to manage accounts receivable would help address the cash flow problem by ensuring that customers are paying their bills in a timely manner, which would improve the company's overall cash position. Managing accounts payable or developing tax strategies would not directly address the cash flow problem, and auditing the company ledgers would only provide information about past financial performance, not a solution to the current problem.

Question 4

The overall objective of financial planning is to:
A) forecast the impact of technological trends.
B) prepare financial statements for managers.
C) optimize the firm's profitability.
D) establish budgets for financial control.

Accepted Answer

The overall objective of financial planning is to optimize the firm's profitability by creating a strategic plan to manage its finances effectively, including forecasting cash flows, identifying opportunities for growth, and minimizing risks. Financial planning does not involve forecasting technological trends or preparing financial statements for managers, although it may involve establishing budgets for financial control.

Question 5

Which of the following shows a firm's spending plans on fixed assets such as large equipment?
A) Capital budget
B) Operating budget
C) Cash budget
D) Surplus budget

Accepted Answer

The capital budget is the budget that shows a firm's spending plans on fixed assets such as large equipment. Operating budget shows the firm's spending plans for day-to-day expenses, cash budget shows the firm's spending plans for cash inflows and outflows, and surplus budget is not a commonly used budget term.

Question 6

Robert intends to major in business. He has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. Robert should:
A) avoid finance courses and focus on subjects that he enjoys.
B) take a finance course to satisfy graduation requirements.
C) realize that his success in business requires an understanding of financial issues.
D) change majors and go into the arts.

Accepted Answer

While Robert may not enjoy finance courses, it is important for him to understand financial issues in order to succeed in business. It is possible for Robert to seek help and resources to improve his understanding and proficiency in finance, rather than avoiding it altogether. Avoiding finance courses may limit his potential job opportunities and hinder his overall success in the business field.

Question 7

An effective budget requires:
A) a successful advertising campaign.
B) accurate forecasts.
C) management approval.
D) stakeholder consensus.

Accepted Answer

An effective budget requires accurate forecasts, which help in determining the expected revenue and expenses, as well as identifying any potential risks or opportunities. While management approval and stakeholder consensus are important, they cannot guarantee an effective budget without accurate forecasts. A successful advertising campaign may be a part of the budget, but it is not the only factor that contributes to its effectiveness.

Question 8

The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period is called the budget.
A) capital
B) operating
C) cash
D) monetary

Accepted Answer

The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period, is called a cash budget. Option A, capital budget, reflects projected expenditures on long-term investments, such as property or equipment. Option B, operating budget, presents anticipated costs and revenue for a company's regular operations for a given period. Option D, monetary budget, does not exist as a term in the field of finance or accounting.

Question 9

In order to assist in revenue realization, a(n) allocates resources throughout the firm.
A) forecast
B) balance sheet
C) budget
D) income statement

Accepted Answer

A budget allocates resources throughout the firm in a specific period of time, which can aid in achieving revenue realization goals. The other options (forecast, balance sheet, income statement) do not directly allocate resources.

Question 10

As a finance manager at AllSports Communication, Charlie worries about the firm's borrowing requirements for the upcoming year. He knows the benefit of estimating AllSports' cash disbursements and short-term investment expectations. Facing these concerns, a(n) would provide Charlie with valuable information by providing a good estimation of whether the firm will need to do short-term borrowing.
A) operating budget
B) cash budget
C) capital budget
D) line item budget

Accepted Answer

A cash budget provides a projection of the firm's cash inflows and outflows for a given period, allowing managers like Charlie to estimate the need for short-term borrowing. Operating, capital, and line-item budgets are important but do not directly address Charlie's concern about cash disbursements and short-term investment expectations.

Question 11

The managers of Dakota Clothing regularly compare their actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. The management of Dakota Clothing is exercising financial:
A) derivatives.
B) control.
C) planning.
D) budgeting.

Accepted Answer

The managers of Dakota Clothing are exercising financial control by comparing actual profits with projected profits and taking corrective action when necessary. Financial control involves monitoring and adjusting financial performance to ensure that goals and objectives are met. The use of budgets and financial statements are common tools for financial control. The other options, derivatives, planning, and budgeting, do not accurately describe the management's actions in comparing actual and projected profits.

Question 12

Liberty Electronics wants to predict how much money it can make this coming year. Liberty would benefit from developing a:
A) master budget.
B) consolidated income statement.
C) short-term forecast.
D) statement of cash flows.

Accepted Answer

The answer of Liberty Electronics wants to predict how much...

Question 13

refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses.
A) Factor analysis
B) Forecasting
C) Financial planning
D) Financial control

Accepted Answer

Financial control involves comparing actual results to projected results in order to identify variances and take corrective action if necessary. Factors analysis and forecasting may be part of the financial planning process, but they do not specifically address the identification of variances.

Question 14

A forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year.
A) cash flow
B) short-term
C) capital expenditures
D) long-term

Accepted Answer

Long-term forecasts project expected outcomes for a time period exceeding one year. This includes projections of the revenues, costs, and expenses a firm will incur over a longer horizon, which is critical for strategic planning and capital budgeting decisions.

Question 15

Carlos wants to know the income potential for his computer consulting business during the next five years. Which of the following would be most helpful?
A) cash flow forecast
B) long-term forecast
C) short-term forecast
D) capital budget forecast

Accepted Answer

A long-term forecast would provide information on the income potential of the business over the next five years, which is what Carlos is interested in. The other options focus on shorter time frames or different financial aspects of the business.

Question 16

A forecast predicts the future cash inflows and outflows in future periods.
A) money based
B) short-term
C) cash flow
D) long-term

Accepted Answer

A forecast predicts the future cash inflows and outflows in future periods, making it cash flow focused.

Question 17

Carolina Financial Services is considering the purchase and installation of an expensive computer network. This is the type of expenditure that would be included in a (n):
A) capital budget.
B) cash budget.
C) operating budget.
D) asset budget.

Accepted Answer

Capital budgeting involves long-term investments in assets or projects that have a useful life beyond one year. Purchasing and installing a computer network would fit into this category as it is a significant expense that will benefit the company over a number of years. A cash budget forecasts a company's cash inflows and outflows for a given period of time, an operating budget outlines a company's day-to-day operating expenses, and an asset budget typically refers to how a company plans to acquire and manage its assets.

Question 18

A forecast predicts the revenues, costs, and expenses a firm will incur for a period of one year or less.
A) near-horizon
B) short-term
C) capital expenditures
D) tactical

Accepted Answer

A forecast that predicts the revenues, costs, and expenses for a period of one year or less is typically considered a short-term forecast.

Question 19

Drew's work in the finance department of his firm consists of checking accounting records and financial statements to verify that proper procedures are followed. Drew serves his company as a(n):
A) internal auditor.
B) comptroller.
C) CPA.
D) financial advisor.

Accepted Answer

Drew's work of checking accounting records and financial statements to ensure proper procedures are followed aligns with the job description of an internal auditor.

Question 20

The first step in the financial planning process is:
A) forecasting financial needs.
B) preparing financial statements.
C) developing budgets.
D) establishing financial control.

Accepted Answer

Forecasting financial needs is the first step in the financial planning process because it involves analyzing past financial data and predicting future financial needs. This information is crucial for developing budgets, setting financial goals and making informed decisions about investments and expenditures. Once forecasting is complete, financial statements can be prepared to provide an overview of the organization's financial position, followed by developing budgets to allocate resources appropriately and establishing financial control to monitor progress towards financial goals.

Quiz 18: Financial Management

Akiko realizes the importance of developing a for her interior design business. Akiko understands the importance of appropriately allocating resources in order to achieve the goals of her firm.

As a management consultant, Lamont knows that regardless of how good his firm's product might be, the business has little chance of success without a(n) :

When Preferred Pet Care Inc, a mobile veterinary care company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to:

The overall objective of financial planning is to:

Which of the following shows a firm's spending plans on fixed assets such as large equipment?

Robert intends to major in business. He has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. Robert should:

An effective budget requires:

The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period is called the budget.

In order to assist in revenue realization, a(n) allocates resources throughout the firm.

The managers of Dakota Clothing regularly compare their actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. The management of Dakota Clothing is exercising financial:

Liberty Electronics wants to predict how much money it can make this coming year. Liberty would benefit from developing a:

refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses.

A forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year.

Carlos wants to know the income potential for his computer consulting business during the next five years. Which of the following would be most helpful?

A forecast predicts the future cash inflows and outflows in future periods.

Carolina Financial Services is considering the purchase and installation of an expensive computer network. This is the type of expenditure that would be included in a (n) :

A forecast predicts the revenues, costs, and expenses a firm will incur for a period of one year or less.

Drew's work in the finance department of his firm consists of checking accounting records and financial statements to verify that proper procedures are followed. Drew serves his company as a(n) :

The first step in the financial planning process is: