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98 True/False questions

  1. Unsecured loansYou don't have to put up collateral, but banks don't usually give these to new business ventures

          

  2. Master production schedule (MPS).Used by managers to schedule jobs

          

  3. Material requirements planning (MRP)Uses computer programming to determine material needs.

          

  4. Budget-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

          

  5. Accounting equation-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).

          

  6. Who uses managerial accounting info?-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?)

          

  7. Cellular layoutHow equipment, machinery, and people will be arranged to make the production process as efficient as possible

          

  8. Generally Accepted Accounting Principles (GAAP)Uses computer programming to determine material needs.

          

  9. Initial public offering (IPO)Used to assess a firm's financial strength

          

  10. Who uses financial accounting info?-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?)

          

  11. Debt-to-equity ratioCompares net profit to total assets to determine whether the company generated a reasonable profit on the assets invested in it

          

  12. Accountants prepare four financial statements:Income statement, statement of owner's equity, balance sheet, and statement of cash flows

          

  13. Service firms-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.

          

  14. Estimating capacity needs-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.

          

  15. Production planningManagers 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).

          

  16. Financial condition ratiosUsed to assess a firm's financial strength

          

  17. AmortizationHigh volumes of customized goods are made

          

  18. Financial Statement-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.

          

  19. Ratio Analysis-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)

          

  20. In selecting the appropriate production process, managers compare three basic methods:-The general level of interest rates
    -The size of the loan

          

  21. MaturityHow equipment, machinery, and people will be arranged to make the production process as efficient as possible

          

  22. Current ratioThe schedule by which you'll reduce the balance of your debt

          

  23. Fiscal year-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

          

  24. Drawbacks of angels and venture capitalists-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

          

  25. Capital budgetShows anticipated expenditures for major equipment

          

  26. Long Term Assets-Assets that you intend to hold for more than a year (ex. equipment and furniture)

          

  27. Financing ActivitiesCash flows result from buying or selling long-term assets

          

  28. Commonly used inventory control methods-Measures a firm's efficiency in selling its inventory by looking at the relationship between sales and inventory

          

  29. Balance sheet reports-Assets that you intend to hold for more than a year (ex. equipment and furniture)

          

  30. Layout-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

          

  31. FinanceWealthy individuals willing to invest in startup ventures they believe will succeed

          

  32. Electronic data interchange (EDI)-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.

          

  33. Total quality management (TQM).-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.

          

  34. Management efficiency ratios-How efficiently your assets are being managed
    -Ex. inventory turnover

          

  35. Production layout choicesHigh-volume goods are produced in assembly-line fashion—that is, a series of workstations at which already-made parts are assembled.

          

  36. Computer-aided design software (CAD)-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.

          

  37. Statement of owner's equityDetails changes in owner's equity for the reporting period

          

  38. Gantt chart-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

          

  39. Cash flow management-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

          

  40. Gantt and PERT chartsAn easy-to-use graphical tool that helps operations managers determine the status of projects.

          

  41. International Financing Report Standards (IFRS)A set of accounting principles for companies headquartered outside the US

          

  42. Financial Plan-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.

          

  43. Mass production/make-to-stock strategyHigh volumes of goods are made and held in inventory for later sale

          

  44. Financial Accounting-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

          

  45. Accounts receivableMoney 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)

          

  46. PERT charts-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.

          

  47. OutsourcingThe cost of using someone else's money

          

  48. AngelsThe cost of using someone else's money

          

  49. Operations management-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.

          

  50. Return on assets ratioCompares net profit to total assets to determine whether the company generated a reasonable profit on the assets invested in it

          

  51. Why is accounting often called "the language of business?"Because it communicates so much of the information that owners, managers, and investors need to evaluate a company's financial performance.

          

  52. Profit Margin Ratios-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)

          

  53. Make-to-order strategy-Measures a firm's efficiency in selling its inventory by looking at the relationship between sales and inventory

          

  54. In choosing the site for a company's manufacturing operations, managers look for-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.

          

  55. Process layout-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.

          

  56. Accounting-How quickly assets can be converted into cash
    -On a classified business sheet, assets are listed in order of liquidity

          

  57. Management Accounting-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

          

  58. Short term loanIssued for five or more years

          

  59. Accounts payableMoney 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)

          

  60. InterestThe cost of using someone else's money

          

  61. Vertical Percentage Analysis-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

          

  62. Operating activitiesCash flows come from the day-to-day operations of your main line of business

          

  63. Just-in-time (JIT) productionMaterials arrive just in time to enter the manufacturing process

          

  64. Product layout-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.

          

  65. Current Assets-Assets that you intend to convert into cash within a year (ex. cash and inventory)

          

  66. LiquidityAll the activities involved in planning for, obtaining, and managing a company's funds

          

  67. ManufacturersThe cost of using someone else's money

          

  68. Intermediate loanIssued for one to five years

          

  69. Net income/profitThe positive difference between gross profit and operating expenses

          

  70. Venture capitalists-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

          

  71. Financial Manager-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.

          

  72. Lines of creditCredit given by your suppliers; you'll buy supplies with this while you generate accounts payable

          

  73. Long Term Liabilitiesliabilities that don't become due for more than one year

          

  74. Operating expensesThe costs of operating your business except for the costs of things that you've sold

          

  75. Statement of cash flows-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)

          

  76. Interest coverage ratio-Examines the riskiness of a company's capital structure by looking at the amount of debt that it has relative to total equity.

          

  77. Managers estimate the quantity of products to be produced by...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.

          

  78. New businesses are usually funded by some combination of-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)

          

  79. Mass customization-Compares current assets to current liabilities
    -Provides a measure of a company's ability to meet current liabilities.

          

  80. Classified balance sheetClassifies assets and liabilities into separate categories

          

  81. Management effectiveness ratios-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

          

  82. Materials management-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.

          

  83. Accrual Accounting-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)

          

  84. Comparative Income Statement-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.

          

  85. Breakeven Analysis-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)

          

  86. Current Liabilitiesliabilities that you'll pay off within one year

          

  87. Trade creditCredit given by your suppliers; you'll buy supplies with this while you generate accounts payable

          

  88. Investment banking firmA financial institution that specializes in issuing securities

          

  89. Statistical process control (SPC),-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.

          

  90. Gross profit/gross marginThe positive difference between sales and cost of goods sold

          

  91. Income statementThe cost of using someone else's money

          

  92. Cash budgetShows anticipated expenditures for major equipment

          

  93. Collateral-The period for which a bank loan is issued
    -Match the loan to its purpose, consider the ability of the business to repay it

          

  94. Long term loanIssued for five or more years

          

  95. Investing activitiesCash flows result from buying or selling long-term assets

          

  96. Inventory turnover-Measures a firm's efficiency in selling its inventory by looking at the relationship between sales and inventory

          

  97. Rate of interest on a loan varies with several factors-The general level of interest rates
    -The size of the loan

          

  98. Fixed-position layoutUsed to make large items (such as ships or buildings) that stay in one place while workers and equipment go to the product.