Introduction to Business Unit 4 Milestone Sophia Course
1
Which of the following is an example of a liability listed on a balance sheet?
Long term value of land owned by the company
Monetary value of the company's brand
Debt to be paid within the next year
Depreciation amount for a piece of equipment
CONCEPT
Financial Planning
2
Which of the following is a characteristic of an angel investor?
Assesses and evaluates risk more thoroughly before loaning money
Typically loans a business money for no longer than 10 years
Provides initial funding to a business from personal finances
Provides growth funding for a startup company to expand
CONCEPT
Investors and Private Placement
3
Which of the following is true about short term financing?
A lending institution usually requires a business to repay a short term loan within a year.
The need for short term financing by a business signals that the business is in distress.
Short term financing often requires a business to provide collateral to obtain the loan.
Short term financing tends to be a risky option for financial institutions.
CONCEPT
Trade Credit and Promissory Notes
4
Which of the following is true regarding risk management?
Speculative risks are usually associated with natural disasters.
Large and small companies need to manage issues with speculative risks.
Large companies are more likely to require risk management plans.
Pure risk typically results in potential gains for an organization.
CONCEPT
Risk Management
5
A large home improvement retail chain planned to expand its business to include several stores focused on high-end home furnishings and fixtures. The management knew the chosen financing option would be more expensive to administer and take more time to arrange. However, the company felt it could benefit from the longer repayment period of at least 20 years.
Which of the following types of financing did the company use?
Venture capitalist
Long term loan
Stock offering
Corporate bond
CONCEPT
Debt Financing
6
Which of the following scenarios illustrates a capital gain?
Warren bought 100 shares of stock for $10 per share. He sold the stock three months later for $8 per share.
Warren bought 100 shares of stock for $10 per share. He sold the stock three months later for $12 per share.
Warren was paid $.25 a share in cash at the end of the first quarter from the earnings the company posted.
Warren was paid an extra 15 shares in the company stock at the end of the second quarter based on the earnings the company posted.
CONCEPT
Equity Financing
7
Darren believed in saving money and followed a strict monthly budget. He wanted to invest his savings in a safe option that paid more than his savings account and he was content with earning a lower, consistent amount of money. He did not want to worry about losing any money with market changes.
Which type of investment below should Darren consider?
CDs
Junk bonds
Business startups
New stock offerings
CONCEPT
Investors and Private Placement
8
Which of the following best describes the earnings per share for a stock?
A company's net income is divided by the number of outstanding shares of stock
The portion of a company's profits that are paid to investors based on the number of shares each investor owns
A company's current assets are divided by the number of outstanding shares of stock
The portion of a company's net income that is reinvested into the company's current operations
CONCEPT
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Equity Financing
9
Which of the following would NOT be considered a part of the M1 money supply?
Personal checks
Certificates of deposit
Demand deposits
Debit card transactions
CONCEPT
How Money has Developed over Time
10
Select the item below that is commonly used as collateral by companies when obtaining short term financing.
Production supplies
Inventory on hand
Common stock
Accounts payable
CONCEPT
Secured Short Term Financing
11
Which of the following involves a business purchasing and obtaining goods from a supplier by agreeing to pay the supplier within 60 or 90 days?
Line of credit
Trade credit
Letter of credit
Promissory note
CONCEPT
Trade Credit and Promissory Notes
12
Which of the following best illustrates risk retention?
A company creates a reserve fund to handle possible financial problems that could occur.
A company makes a contractual agreement with another company to share the liability on a new project.
A company decides not to participate in a venture that has high risks.
A company installs fire detection devices in all of its office buildings.
CONCEPT
Risk Management
13
Which statement describes a savings and loan association?
Focuses primarily on earning a profit through taking deposits and offering loans.
Focuses primarily on serving the needs of its cooperative membership
Focuses primarily on commercial business loans
Focuses primarily on loans rather than deposits
CONCEPT
Financial Institutions and Their Services
14
Which of the following activities is overseen by the Federal Reserve?
Printing of money
Public trading of stocks
Approval of business mergers
Purchasing corporate bonds
CONCEPT
Federal Reserve
15
Colin was a manager for EST Corporation, and the company wanted to expand into a new region. Colin analyzed data to determine how much money the company could make from the expansion within two years.
Which responsibility of financial management below did Colin demonstrate?
Evaluated short term financing options for the expansion
Evaluated trends in the market the company would enter
Prepared the income statement for external users to review
Evaluated immediate cash flow issues from different departments
CONCEPT
Financial Accounting as Compared to Managerial Accounting
16
Which of the following is the basis for financial management?
Minimize risks taken by a business
Determine the current and future needs of a business
Fund potential investment opportunities for a business
Develop accounting documentation for a business
CONCEPT
Role of Financial Management
17
A company would want a low debt to owner's equity ratio for which of the following reasons?
It shows a company is aggressive in expanding into new markets
It shows a company uses little debt to finance its operations.
It shows a company relies on long term loans to fund its operations.
It shows a company effectively avoids risks in doing business.
CONCEPT
Budgeting
18
Meredith created organic soaps and lotions and sold them at her local farmers' market. She originally only accepted cash or checks from her customers, but she recently updated her booth space so that her customers could make electronic payments using debit or credit cards.
Which of the following types of service did Meredith begin using?
Automated clearing house
Electronic check conversion
Automatic teller machine
Point of sale terminal
CONCEPT
Financial Institutions and Their Services
19
Which of the following activities would be performed as a part of managerial accounting?
Provide financial information to creditors
Prepare the income statement for a business
Compare a company's assets and liabilities for investors
Provide financial information to managers
CONCEPT
Financial Accounting as Compared to Managerial Accounting
20
Which of the following correctly describes a discount rate control?
The amount charged to businesses that borrow from banks
The amount charged to banks that borrow from the Federal Reserve
The amount charged to businesses that borrow from the Federal Reserve
The amount charged to consumers that borrow from banks
CONCEPT
Federal Reserve
1
A company created a set of policies and procedures for a manufacturing facility to reduce the likelihood of workplace accidents.
Which of the types of risk management below does this scenario describe?
Risk retention
Risk avoidance
Risk transfer
Risk control
CONCEPT
Risk Management
2
Which of the following describes a speculative risk?
A restaurant burns to the ground because of a grease fire.
A farmer loses all of his crops due to a season-long drought.
An investor loses money after investing in a startup business.
A retail store loses all inventory as a result of a flood.
CONCEPT
Risk Management
3
A budget is used to manage the finances for a business for which of the following reasons?
To value the assets a business maintains
To make sure spending is planned and controlled
To identify the losses a business could incur
To accurately assess the investments of a business
CONCEPT
Role of Financial Management
4
When a credit-worthy business takes on an unsecured, short term loan, which kind of interest rate below will it likely be charged?
Discount rate
Prime percentage rate
Prime percentage rate plus a percent
Annual percentage rate
CONCEPT
Trade Credit and Promissory Notes
5
Which statement describes a savings and loan association?
Focuses primarily on serving the needs of its cooperative membership
Focuses primarily on loans rather than deposits
Focuses primarily on earning a profit through taking deposits and offering loans.
Focuses primarily on commercial business loans
CONCEPT
Financial Institutions and Their Services
6
Darren believed in saving money and followed a strict monthly budget. He wanted to invest his savings in a safe option that paid more than his savings account and he was content with earning a lower, consistent amount of money. He did not want to worry about losing any money with market changes.
Which type of investment below should Darren consider?
Business startups
CDs
New stock offerings
Junk bonds
CONCEPT
Investors and Private Placement
7
Which of the following would NOT be considered a part of the M1 money supply?
Certificates of deposit
Demand deposits
Personal checks
Debit card transactions
CONCEPT
How Money has Developed over Time
8
Stan was recently hired by a large corporation as a financial manager.
Which of the following is NOT considered to be one of his primary responsibilities?
Stan forecasted hiring needs due to turnover.
Stan analyzed returns for long-term investments.
Stan obtained funding to make needed investments.
Stan assisted in the risk evaluation process.
CONCEPT
Financial Accounting as Compared to Managerial Accounting
9
Which of the following correctly describes the market value of a stock?
The price an investor initially paid to purchase the stock
The price at which an investor sold a stock
The current price of the stock in open markets
The amount of money an investor would earn from selling a stock
CONCEPT
Equity Financing
10
Meredith created organic soaps and lotions and sold them at her local farmers' market. She originally only accepted cash or checks from her customers, but she recently updated her booth space so that her customers could make electronic payments using debit or credit cards.
Which of the following types of service did Meredith begin using?
Point of sale terminal
Electronic check conversion
Automatic teller machine
Automated clearing house
CONCEPT
Financial Institutions and Their Services
11
Jenna and the partners in her firm met with an entrepreneur who owned a company that needed funding. Jenna led her team in closely evaluating the company's financial documents to determine if the project would be too risky to invest in. Jenna's group was interested in helping a company grow rather than just getting it started.
Which of the types of investor below is described in this scenario?
Venture capitalist
Lending institution
Personal investor
Angel investor
CONCEPT Hwacer.com
Investors and Private Placement
12
Which of the following can investors use to evaluate a company's potential earning power?
Current ratio
Asset to liabilities ratio
Debt to owner's equity ratio
Earnings per share
CONCEPT
Equity Financing
13
Which of the following companies is more likely to use a loan secured by inventory for its short term financing?
An accounting firm that provides tax preparation and financial planning services
A home repair company that needs a long repayment period to pay back a loan
A struggling web development company with no options for collateral
A grocery store chain that keeps large quantities of products on hand
CONCEPT
Secured Short Term Financing
14
A balance sheet provides which of the following?
A record of the company's operating expenses
The amount of cash going in and out of a business
The money earned or lost by a business for a set time period
A snapshot of a company's financial situation
CONCEPT
Financial Planning
15
Which of the following does a high debt to owner's equity ratio signal?
The company is not credit worthy.
The company assumes too much risk.
The company is able to pay off current debts.
The company relies too much on debt.
CONCEPT
Budgeting
16
Which of the types of short term loans below requires the borrower to pay a specific amount of money to the lender on a specific date?
Mortgage bond
Debenture bond
Trade credit
Promissory note
CONCEPT
Trade Credit and Promissory Notes
17
A large home improvement retail chain planned to expand its business to include several stores focused on high-end home furnishings and fixtures. The management knew the chosen financing option would be more expensive to administer and take more time to arrange. However, the company felt it could benefit from the longer repayment period of at least 20 years.
Which of the following types of financing did the company use?
Corporate bond
Long term loan
Venture capitalist
Stock offering
CONCEPT
Debt Financing
18
Which of the following is an indicator to the Federal Reserve that the economy is healthy?
Steady inflation rates
High reserve requirements
Low inflation rates
High investment rates
CONCEPT
Federal Reserve
19
Which of the following is true regarding discount rate controls?
The lower the discount rate a bank has to pay, the more difficult it becomes for consumers to borrow money.
The higher the discount rate a bank has to pay, the less willing a bank will be to lend money.
The higher the discount rate a bank has to pay, the more money there is in supply.
The lower the discount rate a bank has to pay, the more likely the health of the economy has declined.
CONCEPT
Federal Reserve
20
Which of the following is the purpose of managerial accounting?
Report financial activities to potential investors
Support decision-making processes within an organization
Follow financial guidelines created by the SEC
Create factual reports about the past performance of a company
CONCEPT
Financial Accounting as Compared to Managerial Accounting
Which of the types of financial institution below is set up by a local government and allows borrowers and depositors to be members?
Savings and loan association
Mutual savings bank
Commercial bank
Credit union
Green Opt Inc. needed long term funding for a major expansion into the European market. The company was financially strong with an excellent credit rating and had no need to provide collateral to obtain funding. It also had time to develop the best funding option to meet its expansion needs.
Which type of financing option below will Green Opt Inc. likely use?
Debenture bond
Long term loan
Mortgage bond
Trade credit
Which of the following is true about retained earnings?
Higher retained earnings means investors receive lower dividends.
Lower retained earnings makes a company more attractive to investors.
Higher retained earnings means investors receive higher dividends.
Lower retained earnings cause a decrease in the stock price.
A financial institution and a business establish an arrangement that defines a maximum loan balance the institution allows the business to maintain.
What banking service is this an example of?
Letter of credit
Certificate of deposit
Revolving credit
Line of credit
Which of the following does a low current ratio indicate about a business?
The business will have difficulty repaying debts.
The business will exceed its financial goals.
The business will increase its spending power.
The business will accept low levels of risk.
Anita was trying to build her investment portfolio. She was willing to assume more risk if it meant she would earn more money.
Which type of investment below will Anita likely be interested in making?
Buying shares of an unproven stock
Buying several certificates of deposit
Buying a corporate bond
Buying a government bond
Kirsten was the financial manager for a chain of ladies' apparel stores. She reviewed the weekly operating activities, such as buying inventory, paying employees to work in retail stores and paying rent on the retail spaces.
Which responsibility of a financial manager below does this scenario describe?
Overseeing day-to-day financial activities
Managing risks taken by the business
Getting funds for investment opportunities
Determining long term investments
Financial accounting is different from managerial accounting in which of the following ways?
Financial accounting provides financial information to people outside of an organization.
Financial accounting sets the performance goals for every division within a business.
Financial accounting is used by an organization to make financial plans for the future.
Financial accounting involves creating financial documents for people to use within an organization.
Which of the following is true about short term financing?
Short term financing often requires a business to provide collateral to obtain the loan.
The need for short term financing by a business signals that the business is in distress.
A lending institution usually requires a business to repay a short term loan within a year.
Short term financing tends to be a risky option for financial institutions.
Which of the types of companies below is more likely to use secured short term financing?
A company with a poor credit rating
A company that provides services rather than products
A company with an excellent credit history
A company that has little collateral to provide to obtain a loan
Select the item below that would NOT be included in the M2 money supply.
Cash
Common stock
Certificate of deposit
Savings account
Speculative risks and pure risks have which of the following in common?
Both can be managed using risk avoidance.
Both can result in a gain to a business.
Both can be managed using risk transfer.
Both can result in a loss for a business.
Select the institution below that provides loan services but does NOT accept deposits.
Credit union
Security and investment dealer
Mutual savings bank
Commercial bank
Which of the following correctly describes short term financing?
Is more risky for the amount of money
Is less risky for the amount of time
Is repaid within a year and a half
Is harder to get than long term financing
Which of the following best describes the Federal Reserve?
It serves as a bank for the government.
It provides loans to different organizations.
It backs insurance policies that protect businesses.
It takes deposits from consumers.
A financial institution and a business establish an arrangement that defines a maximum loan balance the institution allows the business to maintain.
What banking service is this an example of?
Letter of credit
Line of credit
Certificate of deposit
Revolving credit
The financial manager of a company decided not to buy any stock-based investments so that the company would not lose any money to changes in the stock market.
Which of the following types of risk management did the financial manager use?
Risk avoidance
Risk retention
Risk control
Risk transfer
Which of the following is true, regarding the risk return relationship?
A conservative investment is more likely to have the highest return.
A conservative investment is the riskiest type of investment.
An aggressive investment is likely to have the highest return.
An aggressive investment is less likely to involve a lot of risk.
Which of the following does a high debt to owner's equity ratio signal?
The company is not credit worthy.
The company relies too much on debt.
The company assumes too much risk.
The company is able to pay off current debts.
Stan was recently hired by a large corporation as a financial manager.
Which of the following is NOT considered to be one of his primary responsibilities?
Stan assisted in the risk evaluation process.
Stan analyzed returns for long-term investments.
Stan obtained funding to make needed investments.
Stan forecasted hiring needs due to turnover.
Which of the types of financial institution below is set up by a local government and allows borrowers and depositors to be members?
Credit union
Commercial bank
Mutual savings bank
Savings and loan association
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