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120 True/False questions

  1. Investing activitiesCash flows result from obtaining or paying back funds used to finance your business

          

  2. Financing Activities-Calculates the amount of funds that a company needs for a specified period
    -Details a strategy for obtaining those funds

          

  3. Total quality management (TQM).-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.

          

  4. Management effectiveness ratiosUsed to assess a firm's financial strength

          

  5. Characteristics of ethical organizations-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.

          

  6. Despite all the good arguments in favor of doing the right thing, some businesspeople still act unethically (at least at times). Sometimes they use one of the following rationalizations to justify their conduct:-The behavior isn't really illegal or immoral.
    -The action is in everyone's best interests.
    -No one will find out what I've done.
    -The company will condone my action and protect me.

          

  7. 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.

          

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

          

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

          

  10. Vertical Percentage Analysis-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)

          

  11. Capital budgetProjects cash flows

          

  12. Who uses financial 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?)

          

  13. Whistle-blowerIssued for less than a year

          

  14. Financial AccountingCash flows result from obtaining or paying back funds used to finance your business

          

  15. Finance-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

          

  16. Companies have the following functions:-Provide jobs
    -Pay taxes
    -Support local education, health, and recreation activities
    -Donate funds to community projects
    -Encourage employees to volunteer their time
    -Donate equipment and products for a variety of activities

          

  17. 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.

          

  18. Steps to solve an ethical dilemma-A morally problematic situation in which you must choose between two or more alternatives that aren't equally acceptable to different groups.
    -Often characterized as a "right-versus-right" decision

          

  19. 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.

          

  20. Gantt chartAn easy-to-use graphical tool that helps operations managers determine the status of projects.

          

  21. Process layoutCredit given by your suppliers; you'll buy supplies with this while you generate accounts payable

          

  22. Breakeven Analysis-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

          

  23. Materials management-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.

          

  24. How to maintain honesty and integrityDetails changes in owner's equity for the reporting period

          

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

          

  26. Inventory turnoverShows anticipated expenditures for major equipment

          

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

          

  28. Current Liabilities-Compares current assets to current liabilities
    -Provides a measure of a company's ability to meet current liabilities.

          

  29. Many companies have discovered the benefits of valuing diversity:-Shows income figures for year 2 and year 1
    -Accountants generally put numbers for the most recent year in the inside column

          

  30. Investment banking firmAn employee shouldn't use private information about an employer for personal financial benefit.

          

  31. Balance sheet reports-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)

          

  32. International Financing Report Standards (IFRS)-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?)

          

  33. Drawbacks of angels and venture capitalists-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

          

  34. Rate of interest on a loan varies with several factors-Define the problem and collect the relevant facts.
    -Identify feasible options.
    -Assess the effect of each option on stakeholders (owners, employees, customers, communities).
    -Establish criteria for determining the most appropriate option.
    -Select the best option, based on the established criteria.

          

  35. Unsecured loansIssued for five or more years

          

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

          

  37. 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.

          

  38. Businesspeople face two types of ethical challenges:-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)

          

  39. Venture capitalistsThe cost of using someone else's money

          

  40. Statement of cash flows-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

          

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

          

  42. Accounts receivableRecords of cash that you owe to the suppliers of products that you use (pay bills on time, but not ahead of time)

          

  43. 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.

          

  44. 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

          

  45. Intermediate loanIssued for one to five years

          

  46. Sustainability-The principle of providing products today that don't compromise the ability of future generations to meet their needs.
    -Companies that undertake sustainability initiatives believe that meeting business needs and protecting the environment are not mutually exclusive. They must do both.

          

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

          

  48. Classified balance sheetClassifies assets and liabilities into separate categories

          

  49. Income statementShows revenues/sales and expenses (the cost of doing business; divided into cost of goods sold and operating expenses)

          

  50. Ratio Analysis-Produce tangible, generally standardized products
    -In manufacturing, operations managers focus on scheduling the activities needed to produce goods

          

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

          

  52. Statement of owner's equity-How efficiently your assets are being managed
    -Ex. inventory turnover

          

  53. Corporate social responsibilityManagers' responsibility to safeguard the company's assets and handle its funds in a trustworthy manner.

          

  54. AmortizationThe schedule by which you'll reduce the balance of your debt

          

  55. Interest coverage ratio-Compares current assets to current liabilities
    -Provides a measure of a company's ability to meet current liabilities.

          

  56. Long term loanIssued for five or more years

          

  57. Fiduciary responsibility-The principle of providing products today that don't compromise the ability of future generations to meet their needs.
    -Companies that undertake sustainability initiatives believe that meeting business needs and protecting the environment are not mutually exclusive. They must do both.

          

  58. How to distinguish a bribe from an acceptable giftMaterials arrive just in time to enter the manufacturing process

          

  59. 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

          

  60. Outsourcing-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. Computer-aided design software (CAD)-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.

          

  62. Insider TradingYou don't have to put up collateral, but banks don't usually give these to new business ventures

          

  63. Cellular layoutSmall teams of workers handle all aspects of building a component, a "family of components," or even a finished product.

          

  64. Comparative Income Statement-Shows income figures for year 2 and year 1
    -Accountants generally put numbers for the most recent year in the inside column

          

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

          

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

          

  67. Electronic data interchange (EDI)-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.

          

  68. Financial condition ratios-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

          

  69. 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.

          

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

          

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

          

  72. Mass customization-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

          

  73. Companies have a responsibility to guard workers' safety and health and to provide them with a work environment that's free from sexual harassment, which occurs whenPeople with diverse backgrounds bring new talents and fresh perspectives, and improve a company's ability to serve an ethically diverse population.

          

  74. A company is likely to progress through five different stages:-Defensive: When first criticized over some problem, companies take a defensive stance. They reject allegations of wrongdoing and refuse to take responsibility.
    -Compliant: During this stage, companies do only what they have to do to satisfy their critics, protect brands or reputations, and reduce the risk of litigation.
    -Managerial: When it's clear that the problem won't go away, companies take responsibility and look for long-term solutions.
    -Strategic: At this point, they may start to reap the benefits of acting responsibly. Responding to public needs gives them a competitive edge and enhances long-term success.
    -Civil: Ultimately, companies recognize the importance of getting other companies to follow their lead. They enlist the cooperation of other companies in supporting the issue of concern to the public.

          

  75. Gantt and PERT chartsIssued for five or more years

          

  76. 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)

          

  77. Why is accounting often called "the language of business?"-Treat employees, customers, investors, and the public fairly
    -Make fairness a top priority, communicate core values to those in the organization
    -Demand and reward integrity from all members while holding them accountable for their actions.

          

  78. If you're presented with what appears to be an ethical decision, asking yourself the following questions will improve your odds of making an ethical choice:-Is the action illegal?
    -Is it unfair to some parties?
    -If I take it, will I feel bad about it?
    -Will I be ashamed to tell my family, friends, coworkers, or boss about my action?
    -Would I want my decision written up in the local newspaper?

    If you answer yes to any one of these five questions, you're probably about to do something that you shouldn't

          

  79. Who uses managerial accounting info?-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.

          

  80. Material requirements planning (MRP)Encompasses materials purchasing, inventory control, and work scheduling.

          

  81. Trade creditIssued by banks; allow you to borrow up to a specified amount as the need arises (like a limit on a credit card)

          

  82. Acting ethically in business-Obeying laws and regulations, being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your employer and coworkers.
    -You need a good idea of what's right and wrong
    -You also need the personal conviction to do what's right even if it means doing something that's difficult or personally disadvantageous.

          

  83. Managers estimate the quantity of products to be produced by...-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

          

  84. 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.

          

  85. Financial Plan-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

          

  86. 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.

          

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

          

  88. ManufacturersWealthy individuals willing to invest in startup ventures they believe will succeed

          

  89. Financial Manager-Calculates the amount of funds that a company needs for a specified period
    -Details a strategy for obtaining those funds

          

  90. Initial public offering (IPO)Offering an initial sale of stock

          

  91. CollateralBusiness or personal assets that you pledge in order to guarantee repayment

          

  92. Business Ethics-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.

          

  93. Master production schedule (MPS).Encompasses materials purchasing, inventory control, and work scheduling.

          

  94. Short term loanIssued for less than a year

          

  95. 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.

          

  96. Ethical dilemma-A morally problematic situation in which you must choose between two or more alternatives that aren't equally acceptable to different groups.
    -Often characterized as a "right-versus-right" decision

          

  97. Fiscal yearThe cost of using someone else's money

          

  98. Production layout choicesProcess, product, cellular, and fixed-position.

          

  99. Make-to-order strategyGoods are made to customer specifications

          

  100. Code of conductDescribes the principles and guidelines that all members must follow in the course of job-related activities.

          

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

          

  102. Ethical decisionA "right-versus-wrong" decision—one in which there's a right (ethical) choice and a wrong (unethical or downright illegal) choice.

          

  103. Conflict of interestThe cost of using someone else's money

          

  104. Mass production/make-to-stock strategyGoods are made to customer specifications

          

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

          

  106. 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).

          

  107. 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)

          

  108. Current ratio-Compares current assets to current liabilities
    -Provides a measure of a company's ability to meet current liabilities.

          

  109. Accounting equation-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

          

  110. Operating activitiesliabilities that don't become due for more than one year

          

  111. Long Term Assets-Assets that you intend to convert into cash within a year (ex. cash and inventory)

          

  112. 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)

          

  113. Management efficiency ratios-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.

          

  114. Generally Accepted Accounting Principles (GAAP)-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.

          

  115. Commonly used inventory control methods-Shows income figures for year 2 and year 1
    -Accountants generally put numbers for the most recent year in the inside column

          

  116. Gross profit/gross margin-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)

          

  117. 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

          

  118. Accounts payable-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.

          

  119. 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).

          

  120. Lines of creditAn easy-to-use graphical tool that helps operations managers determine the status of projects.