98 Multiple choice questions
- -Examines the riskiness of a company's capital structure by looking at the amount of debt that it has relative to total equity.
- The cost of using someone else's money
- -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)
- -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)
- Small teams of workers handle all aspects of building a component, a "family of components," or even a finished product.
- -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
- -Compares current assets to current liabilities
-Provides a measure of a company's ability to meet current liabilities.
- -How efficiently your assets are being managed
-Ex. inventory turnover
- -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
- -The period for which a bank loan is issued
-Match the loan to its purpose, consider the ability of the business to repay it
- -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
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
-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.
- Goods are made to customer specifications
- Income statement, statement of owner's equity, balance sheet, and statement of cash flows
- Classifies assets and liabilities into separate categories
- -Process transactions and transmit purchasing documents.
-Has helped simplify the purchasing function
- Process, product, cellular, and fixed-position.
- -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)
- -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.
- A financial institution that specializes in issuing securities
- Used to assess a firm's financial strength
- -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.
- Issued for one to five years
- -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.
- Used by managers to schedule jobs
- Shows revenues/sales and expenses (the cost of doing business; divided into cost of goods sold and operating expenses)
- Cash flows come from the day-to-day operations of your main line of business
- High volumes of goods are made and held in inventory for later sale
- Just-in-time (JIT) production, and material requirements planning (MRP)
- -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.
- Cash flows result from buying or selling long-term assets
- Issued for less than a year
- liabilities that you'll pay off within one year
- -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.
- -Produce tangible, generally standardized products
-In manufacturing, operations managers focus on scheduling the activities needed to produce goods
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.
- You don't have to put up collateral, but banks don't usually give these to new business ventures
- - Make-to-order strategy
-Mass production or make-to-stock strategy
- -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?)
- The positive difference between gross profit and operating expenses
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.
it communicates so much of the information that owners, managers, and
investors need to evaluate a company's financial performance.
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
- -Shows income figures for year 2 and year 1
-Accountants generally put numbers for the most recent year in the inside column
- The costs of operating your business except for the costs of things that you've sold
- Compares net profit to total assets to determine whether the company generated a reasonable profit on the assets invested in it
- -Assets that you intend to hold for more than a year (ex. equipment and furniture)
- Wealthy individuals willing to invest in startup ventures they believe will succeed
- Issued for five or more years
- Issued by banks; allow you to borrow up to a specified amount as the need arises (like a limit on a credit card)
- -The general level of interest rates
-The size of the loan
- Shows anticipated expenditures for major equipment
- -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)
- -How quickly assets can be converted into cash
-On a classified business sheet, assets are listed in order of liquidity
- -Calculates the amount of funds that a company needs for a specified period
-Details a strategy for obtaining those funds
- -Assets that you intend to convert into cash within a year (ex. cash and inventory)
- Two of the most common graphical tools used by operations managers to diagram the activities involved in producing goods.
- liabilities that don't become due for more than one year
- The positive difference between sales and cost of goods sold
outside vendors manufacture components or even entire products or
provide services, such as information-technology support or service
-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.
- -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.
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).
- -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.
- Cash flows result from obtaining or paying back funds used to finance your business
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.
goods are produced in assembly-line fashion—that is, a series of
workstations at which already-made parts are assembled.
- Details changes in owner's equity for the reporting period
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
- Business or personal assets that you pledge in order to guarantee repayment
- Uses computer programming to determine material needs.
- Used to make large items (such as ships or buildings) that stay in one place while workers and equipment go to the product.
- -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.
- -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
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
- -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).
- Encompasses materials purchasing, inventory control, and work scheduling.
- How equipment, machinery, and people will be arranged to make the production process as efficient as possible
- All the activities involved in planning for, obtaining, and managing a company's funds
- Materials arrive just in time to enter the manufacturing process
- -Measures a firm's efficiency in selling its inventory by looking at the relationship between sales and inventory
- The schedule by which you'll reduce the balance of your debt
- A set of accounting principles for companies headquartered outside the US
- -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.
- Records of cash that you owe to the suppliers of products that you use (pay bills on time, but not ahead of time)
- Offering an initial sale of stock
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
- Credit given by your suppliers; you'll buy supplies with this while you generate accounts payable
- -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.
- An easy-to-use graphical tool that helps operations managers determine the status of projects.
- -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?)
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
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)
- High volumes of customized goods are made
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)
- Projects cash flows
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
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.
- -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)