Financial Management Process - CPA Business Environment and Concepts (BEC)
Card 0 of 96
All of the following are valid reasons for a business to hold cash and marketable securities, except to:
All of the following are valid reasons for a business to hold cash and marketable securities, except to:
The three primary motives for holding cash are transaction demand, precautionary demand, and speculative demand.
The three primary motives for holding cash are transaction demand, precautionary demand, and speculative demand.
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A company has total costs of \$100,000, of which 40% is variable costs. What is the operating leverage?
A company has total costs of \$100,000, of which 40% is variable costs. What is the operating leverage?
Operating leverage is calculated as fixed costs divided by variable costs. If 40% of \$100,000 are variable costs, the remaining \$60,000 must be fixed costs. Thus, $60,000/$40,000=1.5.
Operating leverage is calculated as fixed costs divided by variable costs. If 40% of \$100,000 are variable costs, the remaining \$60,000 must be fixed costs. Thus, $60,000/$40,000=1.5.
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As a company becomes more conservative with respect to working capital policy, it would tend to have a(n):
As a company becomes more conservative with respect to working capital policy, it would tend to have a(n):
An increase in the ratio of current assets to non-current assets would be indicative of an increasingly conservative working capital policy.
An increase in the ratio of current assets to non-current assets would be indicative of an increasingly conservative working capital policy.
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A corporation issues quarterly interim financial statements and uses the lower cost or market method to value its inventory in its annual financial statements. Which of the following statements is correct regarding how the corporation should value its inventory in its interim financial statements?
A corporation issues quarterly interim financial statements and uses the lower cost or market method to value its inventory in its annual financial statements. Which of the following statements is correct regarding how the corporation should value its inventory in its interim financial statements?
Using the IFRS lower of cost or market process would entail recognizing inventory losses during interim periods.
Using the IFRS lower of cost or market process would entail recognizing inventory losses during interim periods.
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What is the cost of ending inventory given the following factors? Beginning Inventory = \$5,000 Total Production Costs = \$60,000 Cost of Goods Sold = \$55,000 Direct Labor = \$40,000.
What is the cost of ending inventory given the following factors? Beginning Inventory = \$5,000 Total Production Costs = \$60,000 Cost of Goods Sold = \$55,000 Direct Labor = \$40,000.
$5,000 + $60,000 - $55,000 = $10,000
$5,000 + $60,000 - $55,000 = $10,000
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What was ABC company's cost of goods manufactured if cost of goods sold is \$43,000, ending finished goods inventory is \$21,000, beginning finished goods inventory is \$16,000 and net income is \$19,000.
What was ABC company's cost of goods manufactured if cost of goods sold is \$43,000, ending finished goods inventory is \$21,000, beginning finished goods inventory is \$16,000 and net income is \$19,000.
COGM = $43,000 + $21,000 - $16,000 = $48,000
COGM = $43,000 + $21,000 - $16,000 = $48,000
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The moving average method requires ____, while the weighted average method requires ______.
The moving average method requires ____, while the weighted average method requires ______.
Both the weighted average method and moving average methods are alternatives to LIFO and FIFO.
Both the weighted average method and moving average methods are alternatives to LIFO and FIFO.
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A stock priced at \$50 per share is expected to pay \$5 in dividends and trade for \$60 per share in one year. What is the expected return on this stock?
A stock priced at \$50 per share is expected to pay \$5 in dividends and trade for \$60 per share in one year. What is the expected return on this stock?
The expected return is \$15, which consists of \$5 in dividends and the \$10 increase in stock value from \$50 to \$60. A \$15 return on a \$50 investment yields a return of 30%.
The expected return is \$15, which consists of \$5 in dividends and the \$10 increase in stock value from \$50 to \$60. A \$15 return on a \$50 investment yields a return of 30%.
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An analyst is reviewing a company with no net earnings. If the analyst wants to use a price multiples approach to valuation rather than a DCF method, the analyst would most likely select:
An analyst is reviewing a company with no net earnings. If the analyst wants to use a price multiples approach to valuation rather than a DCF method, the analyst would most likely select:
Price-sales ratio projection approaches can provide meaningful information in the event that net earnings data is not available.
Price-sales ratio projection approaches can provide meaningful information in the event that net earnings data is not available.
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An investor wants to buy shares of XYZ Corporation. If the investor uses a zero growth model, a desired rate of return of 20%, and a dividend of \$10, what was XYZ's price?
An investor wants to buy shares of XYZ Corporation. If the investor uses a zero growth model, a desired rate of return of 20%, and a dividend of \$10, what was XYZ's price?
Using a zero growth model, the price of a company's stock is equal to the dividend divided by the discount rate. P=D/R. In this case P=$10/20%. P=$50.
Using a zero growth model, the price of a company's stock is equal to the dividend divided by the discount rate. P=D/R. In this case P=$10/20%. P=$50.
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Which of the following transactions does not change the current ratio or total current assets?
Which of the following transactions does not change the current ratio or total current assets?
This does not change the current assets or the current ratio because the reduction of cash is offset by an increase in A/R.
This does not change the current assets or the current ratio because the reduction of cash is offset by an increase in A/R.
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The collection of A/R can be accelerated by the use of:
The collection of A/R can be accelerated by the use of:
Lockbox systems are mailboxes in many locations where customers send payments. The bank checks these frequently.
Lockbox systems are mailboxes in many locations where customers send payments. The bank checks these frequently.
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The general formula for return on investment is calculated as:
The general formula for return on investment is calculated as:
To calculate the return on something purchased, whether a stock, machine or employee, divide the cash inflows divided by the cash outflows.
To calculate the return on something purchased, whether a stock, machine or employee, divide the cash inflows divided by the cash outflows.
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The amount of inventory that a company would tend to hold in safety stock would increase as the:
The amount of inventory that a company would tend to hold in safety stock would increase as the:
The amount of inventory that a company would tend to hold in stock would increase as the cost of carrying inventory decreases.
The amount of inventory that a company would tend to hold in stock would increase as the cost of carrying inventory decreases.
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When selecting suppliers before implementing a just-in-time (JIT) purchasing system, a company must take extreme care because a JIT purchasing system:
When selecting suppliers before implementing a just-in-time (JIT) purchasing system, a company must take extreme care because a JIT purchasing system:
JIT does not entail keeping a significant amount of inventory on hand. So, suppliers must be ready to provide products as soon as there is need.
JIT does not entail keeping a significant amount of inventory on hand. So, suppliers must be ready to provide products as soon as there is need.
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Which of the following characteristics is a primary benefit of a just-in-time inventory system for raw materials?
Which of the following characteristics is a primary benefit of a just-in-time inventory system for raw materials?
JIT is designed to minimize the amount of time inventory is kept on hand before it is utilized. Thus, it eliminates non value added operations.
JIT is designed to minimize the amount of time inventory is kept on hand before it is utilized. Thus, it eliminates non value added operations.
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What amount of annual sales must a company achieve to break even if the following information is given: Fixed Costs per month \$2,500, Unit Selling Price \$100, Variable cost as a percentage of sales 60%
What amount of annual sales must a company achieve to break even if the following information is given: Fixed Costs per month \$2,500, Unit Selling Price \$100, Variable cost as a percentage of sales 60%
\$2,500 * 12 months = \$30,000. 100% - 60% = 40% CM of sales. $30,000/40% = $75,000
\$2,500 * 12 months = \$30,000. 100% - 60% = 40% CM of sales. $30,000/40% = $75,000
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Which one of the following represents methods for converting A/R to cash?
Which one of the following represents methods for converting A/R to cash?
These are methods for converting A/R to cash.
These are methods for converting A/R to cash.
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The reorder point for a firm is the point at which the firm should reorder more inventory and it is calculated as:
The reorder point for a firm is the point at which the firm should reorder more inventory and it is calculated as:
The formula for reorder point needs to consider the amount of safety stock required by the firm, as well as the time it would take to acquire more inventory.
The formula for reorder point needs to consider the amount of safety stock required by the firm, as well as the time it would take to acquire more inventory.
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All of the following are valid reasons for a business to hold cash and marketable securities, except to:
All of the following are valid reasons for a business to hold cash and marketable securities, except to:
The three primary motives for holding cash are transaction demand, precautionary demand, and speculative demand.
The three primary motives for holding cash are transaction demand, precautionary demand, and speculative demand.
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