1. Which one of the following statements about accrual accounting is incorrect?
a. It is appropriate for the not-for-profit sector
b. Revenues are not deferred
c. Expenses can be deferred
d. It is not appropriate for larger companies
2. Skywire telecommunications equipment company has invested heavily in the past fiscal year to upgrade its manufacturing equipment so that the company can take advantage of newer and more efficient technology. In Skywire’s year-end income statement, the upgrade expenditure is presented as:
a. Cost of goods sold
b. Operating Expense
c. Depreciation Expense
d. Interest Expense
3. Which one of the following would be recorded as a liability on your company’s balance sheet?
a. Wages paid to the staff at the distribution plant
b. Purchase price of the plant’s forklist trucks
c. The inventory at the plant
d. The company’s working capital
4. Gerry is chief financial officer of Worldwide Semiconductor. In reviewing World wide’s latest cash flow projections, he learns that cash is going to be tight. In seeking ways to revamp operations to improve future cash flow, Gerry asks a senior manager to assemble relevant financial reports and statements. Later, he notices that one of the documents sent to him is not appropriate for his requirements. Which item is not useful to him?
a. Information on a division’s inventory
b. Information on all equipment purchases
c. Profit-and-loss statement
d. Information on stock issues and dividends
5. Geordie is head of operations for a bulk-food and consumer-goods retail company. When he returns to work from a vacation, he wants to acquaint himself with the company’s current financial; position. Which financial statement should Geordie look at?
a. Income Statement
b. Cash flow statement
c. Balance Sheet
d. SWOT analysis
6. James is North American sales director for a warehpuse-style clothing and office-supply retailer. James relies on the fast sales of his limited number of products to maintain his low prices and sustain a healthy cash flow. Which of the following operating ratios is most useful to James?
a. Asset turnover
b. Days inventory
c. Days Payables
d. Quick ratio
7. A retreat of departmental managers to sort out conflicts that arise from competition over limited resources could occur as part of…
a. Bottom-up budgeting
b. SWOT analysis
c. Top-down budgeting
8. Which of the following scenarios illustrates a best practice for preparing a budget?
a. Derek is research manager for Global Discoveries. In preparing his department’s budget, Derek finds it useful to work in the evening, free of distracting interactions with colleagues.
b. Bonnie has a filed entitles “Budget Diary.” Where she stores paperwork pertaining to her budget deliberations and assumptions
c. Ira plans to boost sales by reducing the retail price to its lowest level ever. Beacause the new price is substantially lower than last year’s, Ira decides not to base his budgetary assumptions and scenario’s on last year’s sales results.
d. In order to develop sound budgetary assumptions and projections, Wolfgang, a senior production manager at Mississauga Advertising, relies on his own extensive industry knowledge rather than depending on input from less experienced workers and subordinates.
9. The facility manager of Grand Auto Manufacturing is considering re-equipping the New Jersey assembly plant. The $90 million cost will produce an annual savings of $15 million over the eight-year expected lifetime of the machines. What is the payback period?
a. Two years
b. Three years
c. Six years
d. Nine years
10. When you evaluate a potential investment you need to get a more realistic picture of the anticipated benefits. Which of the following would you use to calculate the time value of money?
a. Payback period
b. Net present value
c. Return on investment
d. Cost/benefit analysis
11. As chief executive officer of Giant Chemical Corp., Manfred is contemplating acquiring a company that manufactures artificial he art valves and hip joints. To reach his decision, Manfred undertakes a breakeven analysis. Which of the following determinations represents the contribution portion of his analysis?
a. Money that can be used to pay the fixed costs.
b. Costs that are in dependent of product sales
c. Opportunity Cost
d. Variable costs
12. As a financial officer with an aircraft manufacturer, Rob begins tracking the financial performance of a new model of business jet. He notes an increase in equipment failure on the new assembly line in March. When the situation has not improved by June, Rob redirects funds available for other assembly lines towards the new jet’s assembly line. When Rob issues the next quarterly budget in September showing a decrease in expected performance of the new assembly line, senior managers express concerns. What is the likely reason behind senior management’s reaction? Rob failed to…
a. Ascertain whether the line problem was an aberration or a long-term issue.
b. Readjust his budget in light of new information.
c. Communicate with upper management
d. Regularly reassess the budget forecast