Test 936 FINANCIAL ANALYSIS 2
1. A group of individuals organized by a charter and permitted to form a business that functions as a legal entity is known as a
A. partnership. C. licensing arrangement.
B. corporation. D. sole proprietorship.
2. A person with a disability is entitled to service in a restaurant based on the Americans with Disabilities Act (ADA) which focuses on
A. immigration and document verification. C. age discrimination.
B. affirmative action. D. public accommodations and employment.
3. What is the Environmental Protection Agency allowed to do if it suspects a business that distributes or sells pesticides is in violation of the law?
A. Collect samples from the business C. Ask the business to relocate
B. Temporarily close the business D. Tell the business to sell a different product
4. What should employees keep in mind when trying to be objective while defending their ideas?
A. The result might be office conflict. C. Others may have different opinions.
B. Managers may be too busy to ask questions. D. It might be difficult to explain the data.
5. Why is it important for business employees to identify the audience before developing an oral presentation?
A. To determine the schools attended C. To include appropriate information
B. To select a comfortable seating area D. To send invitations to the event
6. Which of the following information should be included in the inside address section of a business letter:
A. Subject C. Date
B. Title D. Message
7. Which of the following is an example of a simple written report that a business might prepare on a regular basis:
A. Findings of a major investigation C. Minutes of a staff meeting
B. Results of a research study D. Analysis of a publicity campaign
8. Which of the following is a communication skill that employees need in order to provide quality service:
A. Training to understand operations C. Talent to perform job functions
B. Desire to cooperate with coworkers D. Ability to interact with customers
9. To handle customer inquiries about specific products in a large business, the sales staff should
A. know the location of products within the business.
B. be informed about all products in stock.
C. know why products are not carried by the business.
D. be able to solve customers' problems.
10. Which of the following guidelines should you use when dealing with difficult customers:
A. Remain calm and courteous. C. Press the customer to decide.
B. Speak and act very quickly. D. Try to control the conversation.
11. Which of the following is a characteristic of a loose money supply:
A. Less investing C. Lower interest rates
B. Less borrowing D. Lower employment rates
12. One of the roles of the Federal Reserve System in the financial services industry is to
A. sell bonds. C. open accounts.
B. clear checks. D. control savings.
13. Which of the following statements is true about inflation as it relates to financial institutions:
A. Inflation directly affects interest rates.
B. Inflation does not impact interest rates.
C. Inflation has little effect on the economy.
D. Inflation doesn't directly affect personal financial planning.
14. Transmitting information globally, transferring funds globally, and buying and selling in a global
e-commerce marketplace are examples of transactions that are global
A. trade patterns. C. exchange services.
B. strategic partnerships. D. economic systems.
15. Why are resources considered limited?
A. Everyone has resources, and they change.
B. Entrepreneurs do not invest enough in them.
C. There are not enough so that everyone can have as much of them as desired.
D. There are so many that people must decide which ones to choose at any one time.
16. The price at which the quantity of goods that sellers are willing to sell and the quantity that customers are willing to purchase are exactly the same is called the ______price.
A. break-even C. market
B. equilibrium D. demand
17. On the box of the McDonald's Happy Meals, there is a warning label indicating that children under a certain age should not play with the enclosed toy because they may choke on it. This is an example of McDonald's being socially responsible to
A. its employees. C. the company.
B. product users. D. the community.
18. Harbor Towers Restaurant is considering hiring a new chef and changing its menu in an effort to increase sales. Which of the business activities should be considered first?
A. Human resources management C. Marketing
B. Financial analysis D. Operations management
19. Which of the following would be a public good that is provided by the government:
A. New automobiles C. Interstate highways
B. Marketing research D. Private schools
20. One of the main functions of a country's monetary policy is to
A. issue new currency. C. regulate the economy.
B. supervise the banking system. D. monitor government spending.
21. Which of the following is a way in which business profits benefit society:
A. Profits encourage business owners to conserve resources.
B. Profits indicate trends in consumer preferences.
C. Profits provide an incentive to entrepreneurs.
D. Profits enable businesses to compete with other businesses.
22. A business offering delivery service and new products not offered by other markets is an example of ______competition.
A. price C. unfair
B. nonprice D. indirect
23. How will the economy be affected if the inflation rate is 6% and businesses give their employees a 5% raise?
A. Take-home pay remains the same. C. Employment levels fluctuate.
B. Interest rates decrease. D. Purchasing power decreases.
24. Why might businesses decide to hold on to products to sell later when the economy is experiencing high levels of inflation?
A. Cash will be in short supply. C. Prices will continue to rise.
B. Taxes will limit production. D. Income will remain constant.
25. An increase in the amount of goods produced is an indication of economic
A. stagnation. C. growth.
B. depression. D. recession.
26. When leading change, it is important to realize that there will be some type of
A. compromise. C. resistance.
B. ambiguity. D. negotiation.
27. Which of the following is not a benefit of effective human relations at work:
A. Low productivity C. Good business image
B. High employee morale D. Increased cooperation
28. Team members should try to keep their emotions under control because that will
A. maintain an informal atmosphere. C. improve their morale.
B. help them to be objective. D. prevent them from feeling anger.
29. A manager who has a reputation of being knowledgeable and experienced usually has the ability to ______employees.
A. dominate C. terminate
B. persuade D. analyze
30. One reason why it is often unethical for business employees to spread workplace gossip is because they are communicating
A. illegal messages. C. harmful information.
B. positive feedback. D. helpful solutions.
31. A manager giving an employee sincere praise, compliments, and positive feedback is an example of providing
A. training. C. support.
B. rewards. D. recognition.
32. What should a bank teller do if a customer disputes a charge for overdrawing a checking account?
A. Refer the customer to the main office. C. Ask a manager to remove the charge.
B. Politely explain the bank's policy. D. Offer to balance the customer's account.
33. A business that analyzes a customer's income and employment status before granting credit is considering the customer's
A. capacity to pay. C. level of assets.
B. payment history. D. social standing.
34. A customer wants to purchase a complete bedroom set and pay part of the cost at intervals until the furniture is paid for. Which type of credit would best serve this customer's need?
A. Unsecured loan C. Installment credit account
B. Secured loan D. Revolving credit account
35. What type of investment involves several people pooling their money to purchase stocks and bonds?
A. Mutual funds C. Secure
B. Money market accounts D. Elective
36. When a business's insurance premiums are high, it is most often because the
A. security is optimal. C. threats are minimal.
B. liability is low. D. risk is high.
37. A decrease in the availability of raw materials needed by a business is an example of ______risk.
A. obsolescence C. labor
B. human D. economic
38. What do businesses often need to do in order to continue operating if they experience negative cash flow?
A. Increase prices C. Hire employees
B. Borrow funds D. Stop discounts
39. Which of the following is an appropriate starting point for a business in preparing a sales forecast:
A. Obtaining government reports C. Studying the competition
B. Studying past sales D. Analyzing current changes
40. A business's total debt is $325,000, and its total assets amount to $850,000. Calculate the business's debt ratio.
A. 38% C. 42%
B. 33% D. 45%
41. Which of the following factors is a cost consideration for a business that is reviewing a cost/benefit analysis:
A. Insurance rates C. Income sources
B. Potential customers D. Selling procedures
42. Which of the following might maximize wealth on a long-term basis while reducing short-term profit:
A. Paying taxes C. Making investments
B. Offering discounts D. Increasing salaries
43. Which of the following actions, taken by itself, does not improve profit margin:
A. Decreasing general and administrative C. Decreasing cost of sales
expenses
B. Increasing sales D. Increasing operating efficiency
44. Which of the following is not an activity companies perform to improve employee turnover at the executive level:
A. Allow executives to motivate themselves C. Conduct regular audits to identify talent
B. Provide retention bonuses D. Focus on the care of executives
45. An investor buys 100 shares of the ABC Corporation for $14 per share because a financial analyst predicted that the stock would triple in value in two years. If that prediction is true, what will the shares be worth at that time?
A. $1,400 C. $2,800
B. $4,200 D. $3,600
46. When income is not subject to withholding, taxpayers are required to pay which type of taxes:
A. Inheritance C. Sales
B. Property D. Estimated
47. To determine a client's financial situation, a financial advisor might
A. track how many clients need urgent financial assistance.
B. research how many others are in a similar financial situation.
C. ask the client to fill out a questionnaire regarding his/her finances.
D. advise the client to follow a strict budget.
48. Professionals in information technology who want to adhere to an information-storage compliance plan can utilize a business process called information ______management.
A. storage C. lifecycle
B. retrieval D. technology
49. Determining the optimal capital budget is important to businesses because the funds in this budget are for
A. managing cash flow. C. long-term investments.
B. current operating expenses. D. paying the employees.
50. A business evaluating the cost of purchasing certain assets in the hope that these assets will have significantly more value in the future is an example of assessing
A. risk-return tradeoffs. C. profit-margin requirements.
B. cash-flow projections. D. short-term objectives.
51. The business function that determines what funds the company needs is
A. financing. C. pricing.
B. data processing. D. purchasing.
52. One reason why many businesses conduct a trend analysis is to compare their financial ratios with
A. variable expenses. C. operating standards.
B. current liabilities. D. industry averages.
53. Leverage refers to the amount of debt used to finance a firm's assets. Using the debt-to-equity ratio, determine how much a company with total liabilities of $5,320,000 and total stockholders' equity of $17,767,000 is leveraged.
A. 40.2% C. 29.9%
B. 3.33% D. 10.5%
54. How do businesses often plan to use an excess of cash?
A. Buy more inventory C. Issue a stock dividend
B. Set up an emergency fund D. Reduce operating expense
55. It is helpful to a small business to factor accounts receivable when
A. hiring a credit department is too costly. C. spontaneous funds are not required.
B. the prime interest rate rises. D. the risk of default is low.
56. Imagine an inventory with just four items. The two items purchased first cost $1,000 each, the third item cost $2,000, and the fourth item cost $3,000. If half of the items have been sold, what is the value of the remaining inventory using the FIFO (first-in-first-out) method of inventory management?
A. $1,000 C. $3,000
B. $5,000 D. $2,000
57. One reason why some small business owners decide to obtain additional capital by taking out a home equity loan is because
A. they do not have a business partner. C. they are unable to obtain debt financing.
B. this is a type of unsecured loan. D. this generates significant income.
58. When allocating funds among projects/uses, businesses consider the length of time it will take to regain their money, which is known as the
A. payback period. C. stock split.
B. preferred stock. D. selling phase.
59. The only revenues and expenses that are relevant to short-term decisions made by managers are those that
A. are common to all the alternatives.
B. are expected to differ among alternatives.
C. were generated during the most recent budget period.
D. were generated by each alternative over its entire history.
60. Stating each item on an income statement as a dollar amount as well as a percentage of sales is an example of ______analysis.
A. horizontal C. ratio
B. vertical D. operating
61. You've just won the lottery! You have to choose between receiving $10,000 today or $50,000 in twenty years. Using a present value table, you find that the present value of $1 received 20 years from now with an interest rate of 10% is .149. What is the present value of the $50,000?
A. Approximately $10,000, depending on the form of the payments
B. More than $10,000
C. Exactly equal to $10,000
D. Less than $10,000
62. What is the current yield on a $1,000 par value bond with a 14% coupon rate that is selling for $1,200?
A. 10% C. 15.9%
B. 14% D. 11.7%
63. What is the annual percentage rate of an investment that pays 8%, compounded quarterly?
A. 24% C. 12.5%
B. 8.24% D. 9.88%