ESB 21-45

What is one impact that a company might experience as a result of an ethical violation?

• A minimization of the company's operational costs and expenses

• An opportunity to maximize profit

• Reputation damage and significant loss of customers' trust

• An increase in the opportunity to gain market share

An investor is comparing the income statements of two publicly traded companies. The amount of revenue is significantly higher for one than the other. The investor is wondering if the comparison between the two companies is valid.

Why should this investor feel comfortable with the validity of this information.

• Each company used its own accountant

• The same accountant is used by both companies.

• Public companies recognize revenue using the same rules

• The same bank is used by both companies

A plumber is analyzing the cash flow for the firm for the prior year. The beginning inventory balace was $5,350. New inventory purchases were $6,560. $4,760 of items were used on work for clients.

What was the ending inventory value?

• $7150

• $1,800

• $11,910

• $590

What is a drawback of equity funding?

• The entrepreneur must share profits with other equity investors

• Debt payments increase a business's fixed costs.

• Repayment reduces available cash.

• If payments are not made, the lender can force a business into bankruptcy.

The owner of a landscaping business has noticed that none of his competitors are designing or installing ponds or other water features for the gardens they create.

What should the owner do First to determine if offering water features is a good way to set his business apart from his competitors?

• Determine if there is a supply chain available

• Perform a financial audit to determine if there is enough money available to add the new service

• Contact the water department to see if they can support the extra demand for water

• Ask the customers in the area if they are interested in adding a water feature to their gardens

What is a benefit of buying a successful existing business?

• Adherence to standardized operations

• Guaranteed profits

• Ease of change implementation

• A proven operation

The owner of Alpha Cabinetry needs to interpret the company's annual financial statements, as well as parts of the income statement, including net sales, total cost of goods sold, gross profit, total expenses, pre-tax profit, and net profit.

What is the net sales?

• $59.060

• $60,560

• $72,620

• $73,620

The owner of Alpha Cabinetry needs to interpret the company's annual financial statements, as well as parts of the income statement, including net sales, total cost of goods sold, gross profit, total expenses, pre-tax profit, and net profit.

What is the Total Cost of Goods Sold

• $11,060

• $14,060

• $58,560

• $59,060

The owner of Alpha Cabinetry needs to interpret the company's annual financial statements, as well as parts of the income statement, including net sales, total cost of goods sold, gross profit, total expenses, pre-tax profit, and net profit.

What is the gross profit?

• $58,560

• $59,060

• $72,620

• $73,620

A professional wood worker that makes custom cabinets has decided to offer credit to customers with a credit card.

Why would the wood worker have to raise process after this decision?

• To broaden the firm's customer base

• To collect outstanding payments more quickly

• To ensure customers are qualified to buy via credit card

• To offset any relevant processing fees