Free Printable Introduction to business

1.

which statement is FALSE?

a)

Accounting provides financial information that can be useful to owners, creditors, suppliers, employees, and competitors of an organization.

b)

Accounting involves both the recording and the interpreting of financial events

c)

Accounting provides information about the financial condition and operating performance of a firm.

d)

The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better pricing decisions.

2.

A(n) __________ provides accounting services to individuals or firms on a fee basis.

a)

independent accountant

b)

private accountant

c)

contract accountant

d)

public accountant

3.

The three important financial statements prepared by accountants are:

a)

ledger,

journal, and trial balance.

b)

cash budget, capital

budget, and master budget.

c)

revenue

summary, expense summary, and consolidation statement.

d)

balance sheet,

income statement, and statement of cash flows.

4.

The _____ shows the assets, liabilities, and owners' equity of a firm, at a specific point in time.

a)

income

statement

b)

balance sheet

c)

statement of

cash flows

d)

trial balance

5.

A firm's ________ reports the profit or loss for the firm over a specified time period.

a)

income

statement

b)

balance sheet

c)

statement of

cash flows

d)

bank statement

6.

A ___________ provides a summary of cash coming into and money going out of a firm from operations activities, financing activities, and investing activities

a)

cash budget

b)

statement of cash flows

c)

cash receivables and payables report

d)

income statement

7.

Debts that are due in one year or less are classified on the balance sheet as:

a)

current liabilities.

b)

bonds payable.

c)

callable bonds.

d)

immediate expenses.

8.

The _____ account on the balance sheet shows profits that the firm has reinvested in the company.

a)

retained earnings

b)

stockholder's

equity

c)

stockholder's equity

d)

notes payable

9.

Lisa is preparing her homework for her accounting class. She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements. Which of the following is correct?

a)

Patents and copyrights are included with the firm's long-term liabilities on the balance sheet.

b)

Patents and copyrights are included with the firm's cost of goods sold on the income statement.

c)

Patents and copyrights are included with the firm's fixed assets on the balance sheet.

d)

Patents and copyrights are included with the firm's intangible assets on the balance sheet.

10.

________ examine the data prepared by ________ and then make recommendations to top management regarding strategies for improving the firm.

a)

Accountants; financial managers

b)

Accountants; bankers

c)

Financial managers; accountants

d)

Financial managers; bankers

11.

Which of the following companies is undercapitalized?

a)

A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries

b)

A new company struggling because it has insufficient start-up funds

c)

A medium-sized company that has decided to buy out a smaller competitor

d)

An electric utility that has recently experienced a significant increase in the cost of coal and labor

12.

Which of the following activities is most likely to be performed by a financial manager?

a)

design of a marketable product that satisfies an unmet need

b)

identification of specific target markets for a firm's goods

c)

preparation of the balance sheet and income statement for the firm

d)

analysis of the tax implications of various managerial decisions

13.

Which of the following shows a firm's spending plans on fixed assets such as large equipment?

a)

Capital budget

b)

Operating budget

c)

Cash budget

d)

Surplus budget

14.

The concept time value of money indicates:

a)

the value of a Rupiah decreases over time as prices increase.

b)

the prices of goods and services will fluctuate over time due to inflation and higher costs of production

c)

monetary systems tend to become more sophisticated over time.

d)

a rupiah received today is worth more than a rupiah received a year from today.

15.

If a firm sells shares of stock, it is financing with ____

a)

debt

b)

liabilities

c)

spectator

capital

d)

equity

16.

If a company secures a three-year bank loan, this is considered _________.

a)

asset funding

b)

short-term

financing

c)

liability

funding

d)

long-term

financing

17.

If a company secures a one-year bank loan this is considered ______.

a)

short-term

financing

b)

asset funding

c)

liability

funding

d)

long-term

financing

18.

Which of the following would normally involve long-term financing?

a)

Workers'

salaries

b)

Unanticipated

emergencies

c)

Purchase of

modern equipment

d)

Expanding

current inventory

19.

Long-term financing would normally be used to purchase:

a)

supplies.

b)

inventory

c)

buildings

d)

highly liquid assets.

20.

Businesses acquire long-term financing from two major sources:

a)

debt financing

and government funds.

b)

equity

financing and trade credit.

c)

retained

earnings and commercial paper.

d)

debt financing

and equity financing.

21.

A _________ represents a long-term debt obligation issued by a corporation or a government

a)

share of stock

b)

commercial note

c)

certificate of

deposit

d)

bond

22.

Through equity financing, stockholders become _________ of the firm

a)

creditors

b)

employees

c)

suppliers

d)

owners

23.

Which of these is a common source of long-term financing for a corporation?

a)

a revolving

credit agreement

b)

commercial

paper

c)

a bond issue

d)

trade credit

24.

Which of these statements about corporate bonds is correct?

a)

Bonds provide

equity financing.

b)

Issuing new

bonds dilutes the existing ownership in the firm.

c)

Interest paid

to bondholders represents a tax-deductible business expense.

d)

Debenture bonds

require assets pledged as collateral.

25.

All statements below are correct, EXCEPT..

a)

The secondary market is where investors (both individuals and companies) go to find someone who is interested in selling their investments to them.

b)

Corporations sell a new issuance of securities in the Primary Market.

c)

The primary market allows an investor to purchase financial securities from other investors.

d)

In a secondary market sale of stock, the proceeds go to the investor selling the stock, not to the corporation.

26.

Corporations benefit from securities markets primarily by:

a)

creating an efficient mechanism to invest in stocks and bonds.

b)

obtaining the capital they need to finance their operations.

c)

securing memberships on various stock exchanges.

d)

participating in the mutual funds of investment bankers.

27.

A ________ certificate provides evidence of ownership in a specific corporation

a)

stock

b)

bond

c)

debt

d)

capital

28.

The disadvantages of selling stock to obtain long-term financing include:

a)

the legal

obligation to pay dividends if the company is profitable.

b)

the funds

contributed by stockholders must be repaid from after-tax profits.

c)

a reduction in

the market value of the firm's products.

d)

a possible

change in management and policies in the company.

29.

Another name for the fixed rate of interest attached to a bond is the:

a)

Yield to

maturity

b)

Dividend

c)

Coupon rate

d)

Security rate

30.

Which of the following accurately describes an advantage of selling bonds to raise long-term capital?

a)

Interest is a

legal obligation.

b)

Face value must

be repaid.

c)

Bondholders

have voting rights.

d)

Interest is a

tax-deductible expense.

31.

Which of the following represents a disadvantage of issuing bonds?

a)

Bonds are

permanent debt on the firm's balance sheet.

b)

Dividends are

legally required.

c)

Bonds increase

the firm's debt.

d)

Bondholders

receive voting rights.

32.

The term ________ refers to investors who anticipate increases in stock prices.

a)

bears

b)

bulls

c)

dogs

d)

lions

33.

Choose the CORRECT statement

a)

Although companies that issue bonds are required to pay interest, companies issuing stock are not required to pay dividends.

b)

Both stocks and bonds represent temporary sources of funding for a firm. Eventually they must be repaid.

c)

When acquiring funds through the sale of a bond, the business incurs a legal obligation to pay regular interest payments.

d)

By issuing bonds, a firm's debt level increases, which may adversely affect the firm's image in the financial community.

Introduction to business - Finance

Total questions: 33

Worksheet time: 43mins

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