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98 Multiple choice questions

  1. -Examines the riskiness of a company's capital structure by looking at the amount of debt that it has relative to total equity.
  2. The cost of using someone else's money
  3. -Tells you where your cash came from and where it went.
    -Furnishes information about three categories of activities that cause cash either to come in (cash inflows) or to go out (cash outflows)
  4. -Show how much of each sales dollar is left after certain costs are covered
    -Ex: gross profit margin (how much of each sales dollar remains after paying for the goods sold)
    -Ex. net profit margin (shows how much of each sales dollar remains after all costs are covered)
  5. Small teams of workers handle all aspects of building a component, a "family of components," or even a finished product.
  6. -Most companies prepare financial statements on a twelve-month basis
    -A company generally picks a fiscal-year end date that coincides with the end of its peak selling period
  7. -Compares current assets to current liabilities
    -Provides a measure of a company's ability to meet current liabilities.
  8. -How efficiently your assets are being managed
    -Ex. inventory turnover
  9. -A preliminary financial plan for a given time period, usually a year
    -At the end of each stated period, you compare actual and projected results and then you investigate any significant discrepancies
  10. -The period for which a bank loan is issued
    -Match the loan to its purpose, consider the ability of the business to repay it
  11. -Both provide business expertise and financing, and wind up becoming partners in the businesses they finance
    -They only accept the most promising opportunities, and in return for their money, will want a say in how you manage the business
  12. -Determines how much money the company needs, how and where it will get the necessary funds, and how and when it will repay the money that it has borrowed.
    -Decides what the company should do with its funds—what investments should be made in plant and equipment, how much should be spent on research and development, and how excess funds should be invested.
  13. Goods are made to customer specifications
  14. Income statement, statement of owner's equity, balance sheet, and statement of cash flows
  15. Classifies assets and liabilities into separate categories
  16. -Process transactions and transmit purchasing documents.
    -Has helped simplify the purchasing function
  17. Process, product, cellular, and fixed-position.
  18. -A system in which the accountant records a transaction when it occurs, without waiting until cash is paid out or received.
    -Revenue from a sale is recognized on the income statement when the sale takes place, regardless of when cash is collected.
    -An expense is recognized on the income statement when it's incurred, regardless of when payment is made.
    -An item manufactured for later sale or bought for resale becomes part of inventory and appears on the balance sheet until it's actually sold; at that point, it goes on the income statement under cost of goods sold.
    -Long term asset - will be used for several years (its cost = depreciation expense)
  19. -Principles that help companies achieve the goal of delivering quality goods and services to customers
    -Companies focus on customer satisfaction, engage all members of the organization in quality efforts, and strive for continuous improvement in the design, production, and delivery of goods and services.
    -They also benchmark other companies to find ways to improve their own performance.
  20. A financial institution that specializes in issuing securities
  21. Used to assess a firm's financial strength
  22. -A technique used to identify areas for improvement
    -Monitors quality by testing to see whether a sample of output is being made to predetermined specifications.
  23. Issued for one to five years
  24. -Provide intangible products that are often customized to satisfy specific needs.
    -Unlike manufactured goods, many services are bought and consumed at the same time.
    -Operational efficiency is just as important in service industries as it is in manufacturing.
    -Operations managers in the service sector make many decisions that are similar to those made by manufacturers: they decide which services to offer, how to provide these services, where to locate their businesses, what their facilities will look like, and what the demand will be for their services.
    -Service providers that produce goods can, like manufacturers, adopt either a make-to-order approach (in which products are made to customer satisfaction) or make-to-stock approach (in which products are made for inventory) to manufacturing them.
    -They focus on scheduling workers to ensure that enough people are available to handle fluctuating customer demand.
  25. Used by managers to schedule jobs
  26. Shows revenues/sales and expenses (the cost of doing business; divided into cost of goods sold and operating expenses)
  27. Cash flows come from the day-to-day operations of your main line of business
  28. High volumes of goods are made and held in inventory for later sale
  29. Just-in-time (JIT) production, and material requirements planning (MRP)
  30. -Locations that minimize shipping costs,
    -Have an ample supply of skilled workers,
    -Provide a favorable community for workers and their families,
    -Offer resources at low cost, and
    -Have a favorable business climate.
  31. Cash flows result from buying or selling long-term assets
  32. Issued for less than a year
  33. liabilities that you'll pay off within one year
  34. -Used to create models representing the design of a product.
    -Many companies link CAD systems to the manufacturing process through computer-integrated manufacturing (CIM) systems that not only determine the steps needed to produce components but also instruct machines to do the necessary work.
    -A CAD/CAM system can be expanded by means of computer-integrated manufacturing (CIM), which integrates various operations (from design through production) with functional activities ranging from order taking to shipping.
    -CIM system is a common element in a flexible manufacturing system (FMS), in which computer-controlled equipment can easily be adapted to produce a variety of goods.
  35. -Produce tangible, generally standardized products
    -In manufacturing, operations managers focus on scheduling the activities needed to produce goods
  36. -More difficult for a service business than for a manufacturer. Service providers can't store their services for later use: services must be delivered on an as-needed basis.
  37. You don't have to put up collateral, but banks don't usually give these to new business ventures
  38. - Make-to-order strategy
    -Mass production or make-to-stock strategy
    -Mass customization
  39. -Owners (Did we make a satisfactory profit this year?)
    -Managers (Can we afford to pay a dividend to stockholders this year? Can we afford to give employees raises this year?)
    -Government Agencies (Did the company report correct income to investors?)
    -Investors and creditors (Did the company generate satisfactory revenues this year?)
    -Employees (Did the company contribute to the pension fund this year?)
  40. The positive difference between gross profit and operating expenses
  41. -Used to diagram the activities required to produce a good, specify the time required to perform each activity in the process, and organize activities in the most efficient sequence.
    -A PERT chart identifies a critical path—the sequence of activities that will entail the greatest amount of time.
  42. Because it communicates so much of the information that owners, managers, and investors need to evaluate a company's financial performance.
  43. -Tell how effective management is at running the business and measure overall company performance by comparing net profit to some measure of the amount of capital used in the business
    -Ex. return on assets ratio
  44. -Shows income figures for year 2 and year 1
    -Accountants generally put numbers for the most recent year in the inside column
  45. The costs of operating your business except for the costs of things that you've sold
  46. Compares net profit to total assets to determine whether the company generated a reasonable profit on the assets invested in it
  47. -Assets that you intend to hold for more than a year (ex. equipment and furniture)
  48. Wealthy individuals willing to invest in startup ventures they believe will succeed
  49. Issued for five or more years
  50. Issued by banks; allow you to borrow up to a specified amount as the need arises (like a limit on a credit card)
  51. -The general level of interest rates
    -The size of the loan
  52. Shows anticipated expenditures for major equipment
  53. -Owners' personal assets (Lenders expect owners to put up some of their own money)
    -Loans from families and friends (Even when borrowing from them, you should set up a formal loan agreement (includes interest rate))
    -Bank loans (including those from the Small Business Development Center)
  54. -How quickly assets can be converted into cash
    -On a classified business sheet, assets are listed in order of liquidity
  55. -Calculates the amount of funds that a company needs for a specified period
    -Details a strategy for obtaining those funds
  56. -Assets that you intend to convert into cash within a year (ex. cash and inventory)
  57. Two of the most common graphical tools used by operations managers to diagram the activities involved in producing goods.
  58. liabilities that don't become due for more than one year
  59. The positive difference between sales and cost of goods sold
  60. -Having outside vendors manufacture components or even entire products or provide services, such as information-technology support or service center operations.
    -A cost-saving approach
    -An appealing option for companies without the expertise in producing everything needed to make a product or those that want to take advantage of low labor costs in developing countries.
  61. -Includes the income statement, the statement of owner's equity, the balance sheet, and the statement of cash flows
    -Summarizes a company's past performance and evaluates its current financial condition.
  62. Managers determine how goods will be produced (production process), where production will take place (site selection), and how manufacturing facilities will be laid out (layout planning).
  63. -Which measures the number of times a firm's operating income can cover its interest expense
    -Assesses a company's ability to make interest payments on outstanding debt.
  64. Cash flows result from obtaining or paying back funds used to finance your business
  65. -The basic principles for financial reporting issued by an independent agency called the Financial Accounting Standards Board (FASB).
    -Users want to be sure that financial statements have been prepared according to GAAP because they want to be sure that the information reported in them is accurate. They also know that they can compare the statements issued by one company to those of another company in the same industry.
  66. High-volume goods are produced in assembly-line fashion—that is, a series of workstations at which already-made parts are assembled.
  67. Details changes in owner's equity for the reporting period
  68. -Pool funds from private and institutional sources (such as pension funds and insurance companies) and invest them in an existing business with strong growth potential
    -They're usually willing to invest larger sums but often want to cash out more quickly than angels
  69. Business or personal assets that you pledge in order to guarantee repayment
  70. Uses computer programming to determine material needs.
  71. Used to make large items (such as ships or buildings) that stay in one place while workers and equipment go to the product.
  72. -Oversees the process of transforming resources into goods and services.
    -The role of operations managers in the manufacturing sector includes production planning, production control, and quality control.
  73. -Away of comparing two income statements
    -Reveals the relationship of each item on the income statement to a specified base (generally sales) by expressing each item as a percentage of that base
    -The percentages help you to analyze changes in the income statement items over time
  74. -The process of measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other decision makers.
    -Two fields - management and financial accounting
  75. -What the balance sheet is based on
    -Assets = liabilities + owner's equity
    -Highlights the fact that a company's assets came from somewhere: either from loans (liabilities) or from investments made by the owners (owner's equity).
  76. Encompasses materials purchasing, inventory control, and work scheduling.
  77. How equipment, machinery, and people will be arranged to make the production process as efficient as possible
  78. All the activities involved in planning for, obtaining, and managing a company's funds
  79. Materials arrive just in time to enter the manufacturing process
  80. -Measures a firm's efficiency in selling its inventory by looking at the relationship between sales and inventory
  81. The schedule by which you'll reduce the balance of your debt
  82. A set of accounting principles for companies headquartered outside the US
  83. -Provides information and analysis to decision makers inside the organization in order to help them run it.
    -Reports are tailored to the needs of individual managers, and the purpose of such reports is to supply relevant, accurate, and timely information
    -In preparing, analyzing, and communicating such information, accountants work with individuals from all the functional areas of the organization—human resources, operations, marketing, and finance.
  84. Records of cash that you owe to the suppliers of products that you use (pay bills on time, but not ahead of time)
  85. Offering an initial sale of stock
  86. -Monitoring cash inflows and outflows to ensure that your company has sufficient (but not excessive) cash on hand to meet its obligations
    -Cash flows indicate future shortage - go to bank for additional funds
    -Idle cash - invest it and earn a return for your company
  87. Credit given by your suppliers; you'll buy supplies with this while you generate accounts payable
  88. -Groups together workers or departments that perform similar tasks.
    -At each position, workers use specialized equipment to perform a particular step in the production process.
  89. An easy-to-use graphical tool that helps operations managers determine the status of projects.
  90. -Owners (Should we sell some of our assets this year?)
    -Managers (Did our prices optimize our profits this year? Can we afford to expand capacity next year?)
  91. -Furnishes information to individuals and groups both inside and outside the organization in order to help them assess its financial performance.
    -Responsible for preparing the organization's financial statement
  92. -Used to assess a company's performance and financial condition over time and to compare one company to similar companies or to an overall industry
    -Ratios show the relationship of one number to another (ex. gross profit to sales, or net profit to total assets)
    -Categories (profit margin; management efficiency; management effectiveness; debt-to-equity)
  93. High volumes of customized goods are made
  94. -A technique used to determine the level of sales needed to break even—to operate at a sales level at which you have neither profit nor loss.
    -Determine fixed costs ( the total cost doesn't change as the quantity of goods sold changes)
    -Identify variable costs ( costs that vary, in total, as the quantity of goods sold changes but stay constant on a per-unit basis)
    -Determine contribution margin per unit (selling price per unit minus variable cost per unit)
    -Calculate your breakeven point in units (fixed costs ÷ contribution margin per unit)
  95. Projects cash flows
  96. Money that you'll receive from customers to whom you've sold your service (make an effort to collect them on a timely basis and keep nonpayment to a minimum)
  97. Forecasting demand for their product and then calculating the capacity requirements of the production facility—the maximum number of goods that it can produce over a given period under normal working conditions.
  98. -Assets (The resources from which it expects to gain some future benefit)
    -Liabilities (The debts that it owes to outside individuals or organizations)
    -Owner's equity (your investment in your business)