Question 1

Credit cards and online banking

Accepted Answer

According to a report by Payment Canada in 2019, credit cards and online banking have surpassed the use of cash and cheques in Canada.

Question 2

Variance analysis refer to

Accepted Answer

Variance analysis involves comparing budgeted or expected numbers with actual numbers in order to identify differences and determine the reasons for these variances. It is often used in budgeting and cost control processes to track how well a business is performing against expectations. Therefore, the best choice is C - an investigation of differences between budget and actual numbers.

Question 3

Rate-of-return measures

Accepted Answer

Rate-of-return measures are financial metrics used to assess the profitability and soundness of capital investment decisions. Examples of rate-of-return measures include internal rate of return (IRR), return on investment (ROI), and net present value (NPV). Option A refers to customer retention, option C refers to sales returns and allowances, and option D refers to credit risk management.

Question 4

Balance sheet items are generally listed in order of

Accepted Answer

Balance sheet items are generally listed in order of their liquidity, that is, how easily they can be converted into cash. The most liquid assets are listed first, followed by less liquid assets and then liabilities in the order of the date they are due. This allows investors and analysts to quickly assess the company's ability to meet its short-term obligations.

Question 5

Payback method measures

Accepted Answer

The payback method measures the number of years it takes for a capital investment to pay for itself, making choice D the best option. Choices A, B, and C are not accurate descriptions of the payback method.

Question 6

Inventory turnover refers to

Accepted Answer

Inventory turnover measures how many times a company sells and replaces its inventory within a given period, usually a year. It is calculated by dividing the cost of goods sold by the average inventory during the same period. Therefore, choice C, "number of times inventory is sold in a year," is the correct answer. The other options are not related to inventory turnover.

Question 7

The break-even point is when

Accepted Answer

The break-even point is the level of sales at which the company's total revenues equal its total costs. At this point, there is no profit or loss. Therefore, option A, "sales dollars equal the total of fixed and variable costs" is the correct choice.

Question 8

Financial ratios are

Accepted Answer

Financial ratios are helpful tools for analyzing a business's financial health and identifying areas of weakness. By comparing a business's ratios to industry benchmarks and historical trends, stakeholders can gain insights into the company's performance and make informed decisions about its future.

Question 9

When using a service bureau

Accepted Answer

A service bureau provides specialized services, such as payroll processing, but the small business must still perform its own bookkeeping functions to track and record financial transactions.

Question 10

Credit bureaus are used to

Accepted Answer

Credit bureaus are used by lenders to evaluate a potential customer's creditworthiness before granting them credit. The credit report provided by the credit bureau is used to assess the risk associated with lending money to an applicant.

Question 11

Which of the following best describes accounting systems?

Accepted Answer

Small businesses often use different types of accounting systems tailored to their specific needs, such as cash-based or accrual-based systems, depending on their size, complexity, and industry.

Question 12

An income statement can show a profit

Accepted Answer

An income statement can show a profit even if a business's cash position has deteriorated because it reflects revenues and expenses, not cash flow.

Question 13

A credit collection policy is likely to include

Accepted Answer

A credit collection policy is designed to outline the steps that will be taken to collect outstanding debts. It is unlikely that a policy would include forced jail time or physical intimidation, as these actions would be illegal. Instead, the policy would typically outline the specific actions that will be taken after certain time periods have elapsed, such as sending reminders, making phone calls, or referring the debt to a collection agency. Public announcements would also be unlikely, as these could damage the reputation of the company and potentially violate privacy laws.

Question 14

The accounting cycle consist of

Accepted Answer

The accounting cycle consists of three main steps: recording, classifying, and summarizing. Recording involves recording transactions, classifying involves sorting transactions into categories, and summarizing involves creating financial statements based on the classified transactions. Choices B, C, and D do not accurately describe the steps of the accounting cycle.

Question 15

A ledger is a(n)

Accepted Answer

A ledger is primarily used in accounting to maintain a running balance of all financial accounts, tracking debits and credits, assets, liabilities, revenue, and expenses.

Question 16

One key advantage of offering credit is

Accepted Answer

Offering credit can result in increased sales as it enables customers to defer payments and make purchases they might otherwise not be able to afford. This can ultimately lead to higher sales volume and increased revenue for the business.

Question 17

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

Accepted Answer

The answer of Which of the following best describes the...

Question 18

A statement of changes in financial position

Accepted Answer

A statement of changes in financial position presents changes in balance sheet accounts from one period to the next, such as changes in assets, liabilities, and equity. It is not the same as a cash flow statement, which presents the inflows and outflows of cash during a specific period of time. It also does not present the extent to which sales changed from the previous fiscal period, nor does it summarize a business's changes in its market position.

Question 19

Outsourcing financial activities

Accepted Answer

Outsourcing financial activities can often be less costly than doing it in-house since the external service provider can provide economies of scale and access to specialized expertise. However, it is important to carefully choose a reputable outsourcing partner and maintain oversight to prevent loss of control.

Question 20

Productivity ratios measure

Accepted Answer

Productivity ratios measure the efficiency of a business in utilizing its resources to generate output. Therefore, the best choice is D, efficiency. A measures total manufacturing output, not necessarily efficiency. B and C are not directly related to productivity ratios.

Quiz 9: Financial Management