Question 1

The manager of a fast-food restaurant,Triks Burgers,keeps track of the number of customers served at different periods of the day in an attempt to plan a schedule for workers that matches the demand for the restaurant's products.Which of the following control systems is being used by Triks Burgers?
A) Output control
B) Bureaucratic control
C) Input control
D) MBO control
E) Feedforward control

Accepted Answer

Triks Burgers is tracking an output (number of customer served) and will adjust its production process to try to match demand. This is a form of output control. All managers develop a system of output control for their organizations. First they choose the goals that they think will best measure efficiency, quality, innovation, and responsiveness to customers. Then they measure to see whether the performance goals and standards are being achieved at the corporate, divisional, functional, and individual employee levels of the organization.

Question 2

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.On the basis of which of the following budget approaches is the divisional manager being remunerated?
A) Expense budget approach
B) Cash flow budget approach
C) Revenue budget approach
D) Profit budget approach
E) Operating profit budget approach

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 3

Which of the following ratios is computed by dividing the difference between current assets and inventory by current liabilities?
A) Inventory turnover ratio
B) Days sales outstanding ratio
C) Quick ratio
D) Current ratio
E) Debt-to-assets ratio

Accepted Answer

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

Question 4

Which type of financial ratio measures how well the managers of the organization are creating value from the organization's assets?
A) Leverage ratio
B) Liquidity ratio
C) Profit ratio
D) Current ratio
E) Activity ratio

Accepted Answer

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

Question 5

Which of the following types of financial ratios indicates the degree to which the organization uses debt or equity to finance its ongoing operations?
A) Leverage ratios
B) Liquidity ratios
C) Activity ratios
D) Profit ratios
E) Inventory turnover ratios

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 6

Which of the following types of financial ratios measures the ability of the organization to pay its short-term debts?
A) Leverage ratios
B) Liquidity ratios
C) Activity ratios
D) Profit ratios
E) Inventory turnover ratios

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 7

Before remuneration,a divisional manager is told to maximize the sales of his division.On the basis of which of the following budget approaches will the divisional manager be remunerated?
A) Profit budget approach
B) Revenue budget approach
C) Expense budget approach
D) Cash flow budget approach
E) Capital budget approach

Accepted Answer

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

Question 8

From the information given below,calculate the organization's return on investment (ROI). 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
E) 15 percent

Accepted Answer

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

Question 9

Which of the following types of performance ratios measures the efficiency of the organization in terms of how well the resources of the organization have been used to generate profit?
A) Activity ratios
B) Leverage ratios
C) Profit ratios
D) Liquidity ratios
E) Inventory turnover ratios

Accepted Answer

Profit ratios measure how efficiently managers are using the organization's resources to generate profits.

Question 10

The manager of Inkman,a convenience store,keeps track of the average sale amount for each customer as a way of deciding on the product mix to be carried in the store.This is an example of:
A) bureaucratic control.
B) feedforward control.
C) output control.
D) input control.
E) MBO control.

Accepted Answer

Inkman is tracking an output (sales per customer) and will alter its product mix accordingly. This is a form of output control.

Question 11

Calculate the return on investment (ROI)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
E) 50 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 12

Which type of financial ratio indicates whether or not the organization is capable of paying off its short-term debts without having to sell its inventory?
A) Quick ratio
B) Current ratio
C) Days sales outstanding ratio
D) Inventory turnover ratio
E) Profit ratio

Accepted Answer

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

Question 13

Which of the following is the MOST commonly used financial performance measure that allows managers of one organization to compare performance with that of other organizations?
A) Gross profit margin
B) Debt-to-assets ratio
C) Days sales outstanding ratio
D) Inventory turnover ratio
E) Return on investment

Accepted Answer

Return on investment (ROI) is the most commonly used financial performance measure because it allows managers of one organization to compare performance with that of other organizations. ROI lets managers assess an organization's competitive advantage.

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
E) 1.25

Accepted Answer

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

Question 15

Which of the following is a mechanism of control for organizational culture?
A) Direct supervision
B) Management by objectives
C) Socialization
D) Organizational goals
E) Operating budgets

Accepted Answer

Mechanisms of control for organizational culture include values, norms, and socialization.

Question 16

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
E) 1.2

Accepted Answer

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

Question 17

Management by objectives is a mechanism of control for which of the following types of organizational control systems?
A) Input control
B) Clan control
C) Organizational culture
D) Output control
E) Behavior control

Accepted Answer

Management by objectives is a mechanism of control for behavior control.

Question 18

Which of the following results when an organization's net income before taxes is divided by the total assets of the organization?
A) Gross profit margin
B) Return on investment
C) Debt-to-assets ratio
D) Days sales outstanding
E) Inventory turnover ratio

Accepted Answer

Return on investment = Net income before taxes/Total assets.Refer: Table 8.1

Question 19

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.Which of the following budget approaches is being implemented by the organization?
A) Expense budget approach
B) Profit budget approach
C) Operating profit budget approach
D) Cash flow budget approach
E) Revenue budget approach

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 20

Which of the following types of financial ratios indicates how efficiently the managers of the organization are collecting the revenue due to the organization from the sale of its products or services?
A) Debt-to-assets ratio
B) Quick ratio
C) Current ratio
D) Days sales outstanding ratio
E) Profit ratio

Accepted Answer

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

Quiz 8: Control, Change, and Entrepreneurship

The manager of a fast-food restaurant,Triks Burgers,keeps track of the number of customers served at different periods of the day in an attempt to plan a schedule for workers that matches the demand for the restaurant's products.Which of the following control systems is being used by Triks Burgers?

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.On the basis of which of the following budget approaches is the divisional manager being remunerated?

Which of the following ratios is computed by dividing the difference between current assets and inventory by current liabilities?

Which type of financial ratio measures how well the managers of the organization are creating value from the organization's assets?

Which of the following types of financial ratios indicates the degree to which the organization uses debt or equity to finance its ongoing operations?

Which of the following types of financial ratios measures the ability of the organization to pay its short-term debts?

Before remuneration,a divisional manager is told to maximize the sales of his division.On the basis of which of the following budget approaches will the divisional manager be remunerated?

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

Which of the following types of performance ratios measures the efficiency of the organization in terms of how well the resources of the organization have been used to generate profit?

The manager of Inkman,a convenience store,keeps track of the average sale amount for each customer as a way of deciding on the product mix to be carried in the store.This is an example of:

Calculate the return on investment (ROI) 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

Which type of financial ratio indicates whether or not the organization is capable of paying off its short-term debts without having to sell its inventory?

Which of the following is the MOST commonly used financial performance measure that allows managers of one organization to compare performance with that of other organizations?

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

Which of the following is a mechanism of control for organizational culture?

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

Management by objectives is a mechanism of control for which of the following types of organizational control systems?

Which of the following results when an organization's net income before taxes is divided by the total assets of the organization?

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.Which of the following budget approaches is being implemented by the organization?

Which of the following types of financial ratios indicates how efficiently the managers of the organization are collecting the revenue due to the organization from the sale of its products or services?