Question 1

_____ = Net Income/Owner's Equity

Accepted Answer

Return on Equity is the ratio of net income to owner's equity and measures the return a company is generating on the equity invested by its owners.

Question 2

Explain briefly the two broad options managers have with respect to control system.

Accepted Answer

The answer of Explain briefly the two broad options managers...

Question 3

Calculate owner's equity from the following information: Expenses $700,000
Return on equity 40%
Total Assets $2,050,000
Sales $1,500,000

Accepted Answer

Return on equity = Net income / Owner's equity40% = (Sales - Expenses) / Owner's equity40% = (1,500,000 - 700,000) / Owner's equity40% = 800,000 / Owner's equityOwner's equity = 800,000 / 40%Owner's equity = 2,000,000

Question 4

Shaun, a production manager at Taxener Inc., receives a complaint from the company's employees that raw materials were being used in an unorganized manner leading to production delays. Which of the following techniques will help Shaun to organize the flow of raw materials for production?

Accepted Answer

Just-in-time scheduling can help Shaun to organize the flow of raw materials by ensuring that they are delivered to the production line exactly when they are needed, minimizing waste and reducing delays. Breakeven point analysis, Pareto principle, and external control are not relevant to this issue, and business process reengineering would involve a complete overhaul of the production process rather than a specific solution to the issue of material flow.

Question 5

The CFO of a company wanted to analyze the financial strength of his company. He specifically asked for information on the company's assets and liabilities. Which of the following would provide the necessary information?

Accepted Answer

A balance sheet provides a snapshot of a company's financial position, including its assets and liabilities. The income statement shows revenue, expenses, and profit over a period of time, while the balanced scorecard and Gantt chart are performance management tools that are not specifically focused on financial strength. Breakeven analysis is a calculation of the level of sales needed to cover all costs, and does not provide the necessary information on assets and liabilities.

Question 6

What is a balanced scorecard?

Accepted Answer

A balanced scorecard is a strategic management tool that tallies an organization's performance in four areas: financial, customer service, internal process, and innovation and learning. It provides a comprehensive view of the organization's overall performance, rather than just focusing on financial results.

Question 7

Bill, a finance manager at Iridium Inc., desires to understand why the company's profitability fell in the past 6 months. He must use _____ to understand this issue.

Accepted Answer

The income statement, also known as the profit and loss statement, shows a company's revenues and expenses over a specific period of time, and can help finance managers like Bill understand why profitability has fallen in the past 6 months.

Question 8

Freddie, the CEO of MagTel Inc., found that employees are wasting time on unproductive tasks. To solve this issue, he measured one of his employees' performances and provided regular feedback. This helped the employee to improve his productivity. In doing so, Freddie found that "what gets measured happens." Therefore, in the context of project management and control, he must use _____ as a managerial review tool to improve financial performance and customer satisfaction of his company.

Accepted Answer

Balanced scorecards are a comprehensive performance management tool that includes financial, customer, internal process and learning/growth perspectives. It is commonly used as a managerial review tool to improve financial performance and customer satisfaction. MagTel Inc. can use this tool to identify and measure key performance indicators, set targets and provide regular feedback to employees to improve productivity and ultimately achieve organizational objectives. The other options are not directly related to performance management and control.

Question 9

Calculate return on equity from the following information: Sales = $400,000
Expenses = $100,000
Debts incurred = $120,000
Owner's equity = $180,000

Accepted Answer

The answer of Calculate return on equity from the following...

Question 10

Dillon, a senior operations manager, was assigned the task of implementing the control process for a particular production process. He first identified the performance objectives and in doing so, he identified the key results that were to be accomplished. Next, he set standards and measured the actual performance. He compared the results with the objectives and standards. Finally, as part of the corrective action step, he implemented _____, a practice that involved focusing attention on substantial differences between the actual and desired performances.

Accepted Answer

Management by exception is a control process that involves focusing attention on significant differences between actual and desired performance, and taking corrective action as needed. This is the appropriate step for Dillon to take in order to implement the control process effectively. Options A (economic order quantity), B (just-in-time scheduling), D (breakeven analysis), and E (critical path method) do not directly relate to the control process and are not the appropriate step for Dillon to take in this scenario.

Question 11

Calculate the expenses incurred if the net income is $500,000 and sales is $1,500,000.

Accepted Answer

Expenses are calculated as Sales - Net Income. Therefore, $1,500,000 - $500,000 = $1,000,000.

Question 12

Calculate return on assets from the following information: Net income $1,800,000
Current Assets $350,000
Land and building $250,000

Accepted Answer

Return on assets (ROA) is calculated by dividing net income by total assets.

ROA = Net Income / Total Assets

Total assets = Current assets + Land and building = $350,000 + $250,000 = $600,000

Therefore,

ROA = $1,800,000 / $600,000 = 3

The ratio can be expressed as 3:1.

Hence, the best choice is (E) 3:1.

Question 13

Bake-It, a Spanish bread and biscuits producer, gave out a free batch of cookies to a few customers. These customers were then asked for suggestions to improve the cookies in terms of quality, taste, and variety. Which of the following types of control was implemented by Bake-It?

Accepted Answer

Feedback control involves gathering information after a process has been completed and using that information to make improvements. In this scenario, Bake-It is gathering feedback from customers about their product in order to improve it, making it an example of feedback control.

Question 14

Dilma, a finance manager at FinTel Inc., needs to understand the current financial position of the company in terms of meeting its short-term financial obligations. Dilma must calculate the _____ to accomplish this task.

Accepted Answer

In order to assess the company's ability to meet short-term financial obligations, Dilma would need to calculate the acid test ratio, which measures a company's ability to pay off its current liabilities with its current assets, excluding inventory. A high acid test ratio indicates greater liquidity and a stronger ability to meet short-term obligations. The other options listed do not specifically focus on short-term financial obligations.

Question 15

Briefly explain the four step control process.

Accepted Answer

The answer of Briefly explain the four step control process....

Question 16

Calculate net income from the following information: ROA = 35%
Sales = $250,000
Current assets = $30,000
Fixed assets = $70,000

Accepted Answer

Net income can be calculated using the formula: Net Income = ROA * Total Assets. Total Assets = Current Assets + Fixed Assets = $30,000 + $70,000 = $100,000. Therefore, Net Income = 35% * $100,000 = $35,000.

Question 17

Rachel, the CEO of Telexon Inc., finds that her company's current ratio is 1:3. In this context, which of the following statements is true?

Accepted Answer

A current ratio of 1:3 indicates that the company has lesser liquid assets than liabilities, which means that the company may face difficulties in meeting its short-term obligations. Therefore, the correct option is D. Option A cannot be correct, as the current ratio is low and not high. Option B is incorrect, as the current ratio does not indicate anything about revenues and costs. Option C is incorrect as leverage is not related to the current ratio. Option E cannot be inferred from the current ratio.

Question 18

Antonio has been working very hard since the establishment of his retail business. He is not far from the time when his revenues will match his expenses. Which of the following would best represent the time described?

Accepted Answer

The scenario described suggests that Antonio is nearing his breakeven point, which is the point at which his revenues cover all of his expenses.

Question 19

Cycle times, engineering efficiency, and new product time are sample measures of _____.

Accepted Answer

Cycle times, engineering efficiency, and new product time are all measures that relate to internal process improvement. They are used to assess how efficiently an organization is operating and if there is room for improvement in their processes.

Question 20

Drelex, a jute bag manufacturing company, checks the consistency and quality of all the raw materials before forwarding them to the production department. This is done to ensure that the bags produced are tough and strong. Which of the following types of control is being implemented by the company?

Accepted Answer

Drelex is implementing feedforward control as it is checking the consistency and quality of raw materials before they are forwarded to the production department. This type of control focuses on preventing problems before they occur by ensuring that inputs are correct and of high quality. In this case, the company is taking steps to ensure that the raw materials used in production are of high quality and consistent, which will lead to the production of strong and tough jute bags.

Quiz 9: Control Processes and Systems