question

A short-term lender examines a firm's _____ to assess its ability to repay a loan quickly with cash generated from sales

answer

Cash Flow

question

Accounting refers to the process of________

answer

recording, measuring, and interpreting financial information

question

An income statement shows:

answer

an organization's profitability over a period of time

question

Double-entry bookkeeping is a system of recording and classifying business transactions:

answer

in the same account

question

Evelyn is a self-employed, state-certified accountant who provides the following accounting services - filing tax returns, preparing financial records, auditing corporate financial records. She is known as a:

answer

Certified Public Accountant

question

Potential investors typically study the _____ in a firm's annual report to determine whether the company meets their investment requirements

answer

Financial Statements

question

The _____ presents a snapshot of an organization's financial position at a given moment

answer

Balance Sheet

question

What are the fundamentals of the accounting process?

answer

The accounting equation and the double-entry bookkeeping system

question

Which of the following is the first step in the accounting cycle?

answer

Examine Source Documents

question

Which of the following represents a firm's liability?

answer

Loan

question

At the end of each accounting period, the dollar amounts in all the revenue and expense accounts on the income statement are moved into an account called "Retained Earnings."

answer

True

question

In accounting, a ledger is a time-ordered list of accounting transactions.

answer

False

question

Liquidity is judged by how easily an asset can be turned into cash.

answer

True

question

Liquidity ratios show how fast a company can turn current assets into cash to pay off short-term debt.

answer

True

question

Negative cash flow always indicates that a company is in financial trouble.

answer

False

question

Only businesses use accounting information to demonstrate how their funds are being used.

answer

False

question

Owners' equity includes financial obligations to short-term creditors and amounts owed to suppliers to goods and services purchased on credit.

answer

False

question

Owners' equity includes owners' contributions to their business along with income retained to finance growth and development.

answer

True

question

Small businesses do not have a need for the financial information compiled by accountants.

answer

False

question

The terms accounting and bookkeeping are interchangeable because they mean almost the same thing.

answer

False

question

In general, the longer the term of a certificate of deposit, the:

answer

higher is its interest rate

question

Ryan traded his tablet PC for a cellphone. Since both were of the same value, there was no exchange of money. Which of the following concepts does this scenario illustrate?

answer

Bartering

question

Savings accounts are also known as:

answer

Time Deposits

question

The Federal Reserve Board controls the amount of money available in the economy:

answer

through monetary policy

question

The Federal Reserve Board is primarily responsible for:

answer

creating a stable environment for economic growth

question

To be effective, money must be readily received for the purchase of goods and services and for the settlement of debts. Which of the following characteristics of money does this statement reflect?

answer

Acceptability

question

To be used as a medium of exchange, money must be:

answer

Durable

question

U.S. money includes subtle colors in addition to the traditional green, as well as enhanced security features, such as a watermark, security thread, and color-shifting ink. Which of the following characteristics of money is being protected by these measures?

answer

Inimitability

question

When money serves as a way to accumulate wealth, money primarily functions as a:

answer

Store of Value

question

_____ charge a penalty for withdrawing money prematurely.

answer

Certificates of Deposit

question

Credit cards have become an increasingly popular substitute for money because of their convenience and acceptance by merchants around the world.

answer

True

question

Finance companies buy and sell stocks and bonds for their customers.

answer

False

question

Investment bankers offer short-term loans at substantially higher interest rates than banks.

answer

False

question

Most experts believe that banks will continue to consolidate and get larger over time.

answer

False

question

Mutual funds spread the risk of investing across many securities.

answer

True

question

The most important characteristic of money is its acceptability for purchase of goods and services.

answer

True

question

The U.S. government created the Troubled Asset Relief Program (TARP) in an effort to prevent economic collapse during the most recent financial recession.

answer

True

question

When currency is stable, it provides no incentive to save.

answer

False

question

When the Fed buys securities, it decreases the money in circulation.

answer

False

question

When the Fed raises the discount rate, it is easier to borrow money.

answer

False

question

A finance company that buys other companies' accounts receivable for less than they are worth and assumes the responsibility for collecting the debt is known as a:

answer

Factor

question

Cash, investments, accounts receivable, and inventory are:

answer

Current assets

question

Maria wants to start a restaurant of her own. As she does not have any savings, she approaches her bank for money and enters an agreement with the bank. According to the agreement, the bank agrees to lend her $5000 upon request provided it has sufficient funds to loan the amount. In this scenario, the type of funding obtained by Maria can be regarded as a _____.

answer

line of credit

question

More and more companies are now using electronic funds transfer systems to pay and collect bills online because:

answer

it helps them increase the speed of collections and disbursements to one day

question

The _____ is the interest rate commercial banks charge their best customers for short-term loans.

answer

prime rate

question

U.S. Treasury bills, certificates of deposit, commercial paper, and eurodollar deposits are examples of:

answer

marketable securities

question

Which of the following is money that an organization owes to suppliers for goods and services?

answer

accounts payable

question

Which of the following is one of the utilities of the radio frequency identification (RFID) technology?

answer

It is used to better manage inventory by tracking inventory shipments.

question

Which of the following is true of commercial paper?

answer

It is backed only by the name and reputation of the issuing company.

question

It is backed only by the name and reputation of the issuing company.

answer

financing small business enterprises

question

Commercial paper is issued by large companies and backed by collateral.

answer

False

question

Common stock is a safer investment than preferred.

answer

False

question

Fixed assets, such as production facilities, are expected to last for many years.

answer

True

question

One aspect of financial management involves managing cash flow for a business on a daily, weekly, monthly, and yearly basis.

answer

True

question

Retained earnings may be used to finance long-term assets.

answer

True

question

Securities markets provide liquidity.

answer

True

question

The over-the-counter market is a network and does not have a central location for trading.

answer

True

question

The par value is the interest rate on a bond.

answer

False

question

The principal is the amount of money a business pays to use a bank's funds.

answer

False

question

Two common means of financing with long-term liabilities are equity financing and debt financing.

answer

True

Ch. 14-16 Questions – Flashcards

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