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Ch. 14-16 Questions

Cash Flow
A short-term lender examines a firm’s _____ to assess its ability to repay a loan quickly with cash generated from sales
recording, measuring, and interpreting financial information
Accounting refers to the process of________
an organization’s profitability over a period of time
An income statement shows:
in the same account
Double-entry bookkeeping is a system of recording and classifying business transactions:
Certified Public Accountant
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:
Financial Statements
Potential investors typically study the _____ in a firm’s annual report to determine whether the company meets their investment requirements
Balance Sheet
The _____ presents a snapshot of an organization’s financial position at a given moment
The accounting equation and the double-entry bookkeeping system
What are the fundamentals of the accounting process?
Examine Source Documents
Which of the following is the first step in the accounting cycle?
Loan
Which of the following represents a firm’s liability?
True
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.”
False
In accounting, a ledger is a time-ordered list of accounting transactions.
True
Liquidity is judged by how easily an asset can be turned into cash.
True
Liquidity ratios show how fast a company can turn current assets into cash to pay off short-term debt.
False
Negative cash flow always indicates that a company is in financial trouble.
False
Only businesses use accounting information to demonstrate how their funds are being used.
False
Owners’ equity includes financial obligations to short-term creditors and amounts owed to suppliers to goods and services purchased on credit.
True
Owners’ equity includes owners’ contributions to their business along with income retained to finance growth and development.
False
Small businesses do not have a need for the financial information compiled by accountants.
False
The terms accounting and bookkeeping are interchangeable because they mean almost the same thing.
higher is its interest rate
In general, the longer the term of a certificate of deposit, the:
Bartering
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?
Time Deposits
Savings accounts are also known as:
through monetary policy
The Federal Reserve Board controls the amount of money available in the economy:
creating a stable environment for economic growth
The Federal Reserve Board is primarily responsible for:
Acceptability
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?
Durable
To be used as a medium of exchange, money must be:
Inimitability
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?
Store of Value
When money serves as a way to accumulate wealth, money primarily functions as a:
Certificates of Deposit
_____ charge a penalty for withdrawing money prematurely.
True
Credit cards have become an increasingly popular substitute for money because of their convenience and acceptance by merchants around the world.
False
Finance companies buy and sell stocks and bonds for their customers.
False
Investment bankers offer short-term loans at substantially higher interest rates than banks.
False
Most experts believe that banks will continue to consolidate and get larger over time.
True
Mutual funds spread the risk of investing across many securities.
True
The most important characteristic of money is its acceptability for purchase of goods and services.
True
The U.S. government created the Troubled Asset Relief Program (TARP) in an effort to prevent economic collapse during the most recent financial recession.
False
When currency is stable, it provides no incentive to save.
False
When the Fed buys securities, it decreases the money in circulation.
False
When the Fed raises the discount rate, it is easier to borrow money.
Factor
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:
Current assets
Cash, investments, accounts receivable, and inventory are:
line of credit
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 _____.
it helps them increase the speed of collections and disbursements to one day
More and more companies are now using electronic funds transfer systems to pay and collect bills online because:
prime rate
The _____ is the interest rate commercial banks charge their best customers for short-term loans.
marketable securities
U.S. Treasury bills, certificates of deposit, commercial paper, and eurodollar deposits are examples of:
accounts payable
Which of the following is money that an organization owes to suppliers for goods and services?
It is used to better manage inventory by tracking inventory shipments.
Which of the following is one of the utilities of the radio frequency identification (RFID) technology?
It is backed only by the name and reputation of the issuing company.
Which of the following is true of commercial paper?
financing small business enterprises
It is backed only by the name and reputation of the issuing company.
False
Commercial paper is issued by large companies and backed by collateral.
False
Common stock is a safer investment than preferred.
True
Fixed assets, such as production facilities, are expected to last for many years.
True
One aspect of financial management involves managing cash flow for a business on a daily, weekly, monthly, and yearly basis.
True
Retained earnings may be used to finance long-term assets.
True
Securities markets provide liquidity.
True
The over-the-counter market is a network and does not have a central location for trading.
False
The par value is the interest rate on a bond.
False
The principal is the amount of money a business pays to use a bank’s funds.
True
Two common means of financing with long-term liabilities are equity financing and debt financing.

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