Test Prep - Finance 1

Pedro Sanchez works as a loan processor for the MON Company, which is located in Smithsville. Pedro has recently approved an application to extend a $10,000 line of credit to Mrs. Jones. Who is the creditor in this situation?

• Pedro Sanchez
• MON Company
• Mrs. Jones
• City of Smithsville

Answer explanation

MON Company. The debtor is the individual or business that owes money to another individual or business, which is the creditor. In the situation presented, MON Company is the creditor because the company has the finances to extend credit to Mrs. Jones (the debtor), allowing her to pay later. Pedro Sanchez is an employee of the creditor. The location of the company is not a factor in determining the debtor-creditor relationship.

Which of the following is most likely to be a benefit of proactive compliance plans for businesses?

• Minimized costs and a reduction in senior management
• A competitive advantage and a reduction in senior management
• A competitive advantage and minimized costs
• Increased government scrutiny and minimized costs

Answer explanation

A competitive advantage and minimized costs. By developing a proactive compliance plan, a business is likely to create a competitive advantage for itself and enhance its reputation. At the same time, a proactive approach to compliance can help the business to minimize costs and reduce risks. Rather than waiting for a problem or instance of noncompliance to occur, many businesses choose to do things properly—in compliance—from the start. Most proactive businesses have grown their senior management to address increasing compliance and risk concerns. This senior level position, often known as a chief compliance officer, is responsible for ensuring corporate compliance with government and industry laws and regulations. By avoiding noncompliance issues, proactive companies are likely to receive less government scrutiny than those that wait to react to instances of noncompliance.

While reviewing a business's general ledger, a virtual auditor identified two identical journal entries within the same accounting period. What reasoning technique did the virtual auditor use?

• Contextual
• Symbolic
• Comparative
• Cross-source

Answer explanation

Symbolic. A virtual auditor uses several different reasoning techniques to evaluate financial activities. Symbolic reasoning looks for "signatures"—clues—of noncompliance as well as patterns of events such as duplicate journal entries within one accounting period. Contextual reasoning involves determining the seriousness of the noncompliance incident identified by symbolic reasoning. Comparative reasoning identifies and compares similar transactions and information. It does not focus on identical transactions such as duplicate journal entries. Cross-source reasoning inspects transactions within multiple financial systems

Brandon has been given a 385-page report and does not have time to review the entire document, but he does need to understand specific information that is included in the report. What section of the report will guide Brandon to the information he needs?

• Bibliography
• Appendices
• Analysis
• Table of contents

Answer explanation

Table of contents. When trying to locate specific information from a lengthy document or a book, it often saves time to first look at the table of contents. The table of contents is the portion of the text in which the sections are listed with their page numbers for easy access. For example, if Brandon wants to obtain information about industry trends, he can look at the table of contents, find the section that discusses trends, and turn to the designated page of the document to read the desired information. The bibliography contains the citations or sources used to construct the primary document. The appendices are the segments added to the end of the primary document that include supporting information. Some research reports contain an analysis of the document's contents or research. By looking at the table of contents, the reader can determine if the desired information is included in the appendices or analysis sections of the report

If an employee needs to do some research to answer a customer's telephone inquiry, the best action for the employee to take is to obtain the customer's telephone number and then

• put the customer on hold until the research has been completed.
• ask the sales manager to call the customer back.
• send the customer literature about the business and its products
• follow-up with the customer after obtaining the requested information

Answer explanation

Follow-up with the customer after obtaining the requested information. When employees do not know the answer to their customers' questions, they should take steps to get the answers. This often involves researching the problem or issue. When extensive research is required, an employee should obtain the customer's contact information and call him/her back with the requested information after the research has been completed. The nature of the inquiry determines if literature should be sent to the customer or if another employee or manager should answer the customer's inquiry. For example, a question about a bill may be better answered by an accounts-receivable employee than a purchasing agent. And, in this situation, it would be inappropriate to send product information.

Anna, a new employee with Turbo Electronics, must write a letter to a customer. Because Anna does not know which letter format to use, she should

• develop the letter in several formats and send the letter that her supervisor likes best
• select the block format because it is the mostly widely used.
• select the simplified format because it is impersonal.
• ask her supervisor which letter format the company uses.

Answer explanation

Ask her supervisor which letter format the company uses. Companies may prefer that their employees format business correspondence in a specific way to ensure consistency within the organization. To save time and effort, Ann should ask her supervisor which letter format the company uses, such as the blo

What is an important aspect of a customer-centric business?

• Being satisfied with the status quo
• Limiting the employees' decision making
• Aligning business activities with customer needs
• Reducing the number of touch points with customers

Answer explanation

Aligning business activities with customer needs. A customer-centric business focuses on customer needs and wants. To focus on the customers' needs and wants, the business must ensure that its business objectives and activities align with its customers' needs and wants. A customer-centric business must continuously improve its processes and products to accommodate its customers' changing needs and wants—the business cannot be satisfied with the status quo. A customer-centric business allows its employees to provide input and make decisions in relation to customer relationships. Touch points are all of the opportunities that businesses have to connect with customers and reinforce their brand value. A customer-centric business is not likely to reduce the number of customer touch points.

When providing product information to clients, finance professionals should use

• standard responses.
• technical terms
• financial acronyms.
• simple explanations.

Answer explanation

Simple explanations. When providing product information to clients, finance professionals should keep the clients' point-of-view in mind. Clients may not be familiar with finance industry jargon, technical terms, or acronyms. Therefore, finance professionals should use simple, clear language that clients understand. While standard responses are sometimes helpful to finance professionals, it is usually better to keep individual clients in mind when providing product information since different clients are likely to have different knowledge bases.

A stock broker is using Customer Relationship Management (CRM) technology to learn more about his typical customer's purchasing pattern. The stock broker is using CRM technology to analyze the typical customer

• duration
• trajectory
• vintage
• touch point.

Answer explanation

Trajectory. CRM technology is frequently used to measure and analyze a business's typical customer trajectory, which is a pattern of purchases. Duration is the length of time that a customer stays a customer. A vintage is a group of customers that are similar in some way. For instance, they might be grouped together because they all became a business's customers in the same year. Touch points are all of the opportunities that a business has to connect with customers and reinforce its brand image.

A business is behaving unethically if it

• obtains information about its competitors.
• misinterprets a customer's requests.
• misrepresents its capabilities to customers
• partners with another business for financial gain

Answer explanation

Misrepresents its capabilities to customers. A business that intentionally misrepresents its capabilities to customers is exhibiting dishonest and unethical behavior. Customers are unlikely to return to a business that is dishonest. Misinterpreting a customer's request is a miscommunication problem and doesn't present an ethical issue. Partnering with another business is a common practice. There is not enough information to determine if the partnership has engaged in unethical activities or if the business obtained information about its competitors in an unethical way.