Which of the following explains why a business calculates its current ratio?
• To determine whether it is credit worthy
• To evaluate its profitability
• To evaluate its liquidity
• To determine the initial s
...
Which of the following explains why a business calculates its current ratio?
• To determine whether it is credit worthy
• To evaluate its profitability
• To evaluate its liquidity
• To determine the initial stock price
2
Which of the following illustrates a pure risk?
• A company experiences a data breach after upgrading technology.
• A company loses all customer data after a tornado destroys the corporate office.
• A company loses money after introducing a new product.
• A company loses customers after changing ingredients in a recipe.
3
Which of the following institutions only provides its services to members who meet a set of defined qualifications?
• Commercial bank
• Credit union
• Finance company
• Pension fund
4
A small business owner purchases an insurance policy to protect his building in the event a fire occurs.
Which type of risk management choice does this demonstrate?
• Risk retention
• Risk transfer
• Risk avoidance
• Risk control
5
When a corporation earns income, which of the following portions does it keep instead of paying money out to investors?
• Capital gains
• Retained earnings
• Owner’s equity
• Dividends
6
Select the two items below that would be considered part of the M1 money supply.
• Bonds
• Money market account
• Checking accounts
• Paper currency
• Preferred stock
7
Which of the following correctly describes why it is easier for a business to get short term financing?
• Lending institutions prefer to make short term rather than long term loans.
• The amount borrowed for short term loans is usually small.
• Businesses can resell short term loans to other banks.
• The business does not have to prove it is credit worthy.
8
Which of the following is true regarding preferred stock?
• Owners have voting rights.
• Owners may have to sell the stock back to the company.
• Owners are not taxed on capital gains.
• Owners are paid last.
9
Which of the following best describes a budget?
• Plan for projected revenue
• Plan for expected expenses
• Analysis of employee turnover
• Analysis of market changes
10
Which of the following is the purpose of the Federal Reserve?
• To increase inflation rates
• To enforce securities rules and regulations
• To reduce unemployment rates
• To control the money supply
11
Which of the following involves a deposit that provides a specific return based on a fixed interest rate?
• Promissory note
• Common stock
• Certificate of deposit
• Mortgage bond
12
Match each term below to its related description.
Angel investor
Venture capitalist
A.Group that becomes a limited partner in the business it funds
B.Individual that obtains voting rights for purchasing stock
C.Individual that expects a share of ownership for investing funds into a company
13
Which financial planning document below provides details about the owner's equity in a business?
• Balance sheet
• Income statement
• Cash flow
• Capital budget
14
What of the following does an investor do in order to earn a high return on an investment?
• Buy many shares of preferred stock
• Assume a high level of risk
• Invest in companies with low retained earnings
• Purchase a certificate of deposit
15
Which of the following correctly describes why a business might consider using a corporate bond instead of a long term loan?
• The repayment period is longer.
• The bond creation process requires fewer people.
• The bond creation process is quicker.
• The administration fees are lower.
16
Which of the following best describes financial accounting?
• Details past performance of a company over a set period of time
• Determines what products and services a business should provide
• Estimates what may happen to the business in the future
• Analyzes business markets and trends
17
Which of the following is a responsibility of a financial manager?
• Prepare internal reports for sales
• Secure funding for investments
• Set performance goals for individual departments
• Research trends in product development
A business normally uses trade credit in which of the following ways?
• To pay wages and salaries
• To purchase inventory
• To fund equipment purchases
• To fund business expansions
19
Which of the following must a business provide to obtain secured short term financing?
• Documents that show a positive cash flow
• Assets that serve as collateral
• Revenue for the last three years
• Spending priorities for the funds it is borrowing
20
Which of the following correctly describes a reserve requirement?
• The amount of money paid to secure a loan through the Federal Reserve
• The amount of money charged to take out a short term loan
• The amount of collateral needed by a business to secure a loan
• The amount of money a bank must keep in cash or deposit
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