Finance
A business has added automation to its assembly line process. This addition is most likely an example of
A. invention.
B. creativity.
C. innovation.
D. problem-solving.
C
Innovation. Innovation is the development of something new, such as a new product, method, strategy, or process. Innovation can also involve an improvement of something that already exists. Adding automation to an assembly line is an example of innovation because the automation is likely to improve the efficiency of the assembly line process. An invention involves creating something entirely new that did not exist prior to the invention. Creativity, which can be a part of developing innovative ideas, is the ability to generate unique ideas, approaches, and solutions. People with problem-solving skills are often able to innovate and find solutions to obstacles in their path.
The first task in creating a risk-management plan is
A. identifying as many known risks as possible.
B. figuring out how team members will communicate.
C. determining how to avoid risks.
D. strategizing for limiting the impact of risks.
A
Identifying as many known risks as possible. The first task in creating a risk-management plan is identifying as many known risks as possible. After that, project managers can determine how to avoid those risks or limit their potential impact. Figuring out how team members will communicate is a task for the communications plan.
Which of the following is a piece of information that is often added to a customer relationship management (CRM) system:
A. Job applications
B. Product inventory
C. Sales opportunities
D. Budget spreadsheets
C
Sales opportunities. A customer relationship management system is software that provides businesses with information about their customers and potential customers. CRM systems are used to store information such as sales opportunities so that employees can turn these opportunities into buying customers. CRM systems do not typically include job applications, product inventory, or budget spreadsheets because these aspects of the business are not related to customers.
Which finance career area most commonly deals with an individual's or a household's tax planning, estate planning, and retirement planning?
A. Personal finance
B. Corporate finance
C. Government finance
D. Public finance
A
Personal finance. Personal finance is centered around meeting personal financial goals and involves managing money, saving, and investing. As an industry, it provides financial services to individuals or households and offers suggestions for financial and investment opportunities. Financial position, adequate position, tax planning, investment and accumulation goals, retirement planning, and estate planning all fall under personal finance. The other two main finance career areas are corporate finance and public finance. Corporate finance refers to providing funds for a business's activities, as corporate finance managers typically balance risk and profitability, study and forecast economic trends, manage funds, and work to maximize stock value, among other things. Public finance (or government finance) centers around the financial dealings of states and public entities and focuses on the role of the government in the economy.
What question should finance professionals ask to provide the appropriate types and levels of service to their clients?
A. Should I follow up with the clients?
B. How can I maximize my returns?
C. Are my goals realistic and attainable?
D. What are the client's expectations?
D
What are the client's expectations? To provide the level of service that their clients desire, finance professionals need to understand and know the level of service and communication that their clients expect. To build longterm client relationships, finance professionals should participate in ongoing communication with clients, which includes following up with clients to answer questions and resolve problems. Answering questions about personal career goals and personal financial returns are not directly related to providing the appropriate levels of service to clients.
The reason why a business prepares a balance sheet is to determine its
A. average cash flow.
B. estimated annual income.
C. current financial situation.
D. future sales goal.
C
Current financial situation. A balance sheet is a financial statement that captures the financial condition of the business at that particular moment. It indicates what the business owns, what it owes, and its worth as of a certain date. By preparing a balance sheet, a business can determine if it has sufficient assets to cover its liabilities and still have money remaining, or if its liabilities are more than its assets. A business does not prepare a balance sheet to determine its average cash flow, estimated annual income, or future sales goal.
Cash register tape is an example of a(n)
A. supply.
B. equipment.
C. service.
D. material.
A
Supply. Supplies are industrial goods that are constantly being purchased and used up in the operation of a business. Materials are industrial goods that become part of the finished product after they have been processed. Equipment is industrial goods used in the operation of a business, but not used in the actual production of a good or service. Cash register tape is a tangible good rather than an intangible service.
Spreadsheets, database applications, and other software are often used by businesses for
A. employee recognition.
B. financial analysis.
C. staff communication.
D. public relations.
B
Financial analysis. Technology such as spreadsheets, databases, and other software applications have made it easier for companies to perform financial analysis. Companies use these technologies to analyze their financial performance, create budgets, predict future incomes and expenses, and review their overall financial health. Companies do not generally use these technologies for employee recognition, staff communication, or public relations
To calculate the future value of money, you need the present value, the length of time, and the
A. bottom line.
B. wage.
C. interest rate.
D. utility.
C
Interest rate. The future value of money is calculated by the equation FV = PV × (1 + i) ⁿ where “FV” is future value, “PV” is present value, “i” is the interest rate, and “n” is the period of time. The bottom line is the net income of a business or the net result of a project or event. Utility and wage are business terms that are not relevant to the calculation of the time value of money
95.
To reduce the risk of future legal problems, a company might require its business partners to sign a formal
A. contract.
B. premium.
C. warrant.
D. invoice.
A
Contract. A contract is an agreement between two or more parties stating that one party is to do something in return for something provided by the other party. By putting the terms of an agreement or business arrangement in a written contract that both parties sign, the business reduces the risk of misunderstanding about what is expected and what will be provided. When agreements are not documented and a problem occurs, legal action may be required, which can be costly to the business. An invoice is a bill. A premium is a fee for an insurance policy. A warrant is a legal document issued by authorities that requires an individual or business to take a certain action
The Six Sigma model involves continuously implementing activities that
A. stimulate revenue and lessen decision-making.
B. influence regulation and decrease outputs.
C. improve quality and reduce inefficiencies.
D. promote consistency and eliminate resources.
C
Improve quality and reduce inefficiencies. Six Sigma is a quality-management framework that involves continuously setting higher goals of perfection. Six Sigma builds upon previous goals to set higher goals in order to continuously improve the quality of the business's goods, services, or processes. The ultimate goal is to maximize outputs, reduce inefficiencies and waste, have no process or product defects, and minimize production costs. If these actions are successful, the business's profits may increase. As a quality-control framework, the primary purpose of Six Sigma is not to eliminate resources, lessen decision-making, influence regulation, or decrease outputs.
When people desire to fit in with the crowd and just do what everyone else is doing, they are displaying
A. herd mentality.
B. status quo bias.
C. groupthink.
D. risk-taking behavior.
A
Herd mentality. When people just follow others without thinking, they are demonstrating herd mentality. Status quo bias refers to a preference to maintain the status quo and the view that a change from it is a loss. Risktaking behavior refers to risky activities one might participate in. Groupthink refers to a process that occurs when bad decisions are made by a group because the group’s members fear expressing opinions or suggesting ideas that others may disagree with.
Which of the following primarily serves as an organization's conscience during decision-making:
A. The public
B. Employees
C. Board of directors
D. The “C-Suite” (CEO, CFO, etc.)
C
Board of directors. The board of directors guides the organization during the decision-making process so that the organization continues to accomplish its mission in an efficient and ethical way. It would not be appropriate for the C-Suite, an organization's employees, or the public to act as an organization's conscience during decision-making.
Ryder has learned that his company will announce a round of layoffs in two weeks. Ryder decides to sell some of the stock options he had in the company before the news of the layoffs goes public. He tells his friends to do the same. This is an example of
A. insider trading.
B. corporate fraud.
C. corporate espionage.
D. extortion.
A
Insider trading. Insider trading occurs when a company's owners, directors, or key management trade its stock. Insider trading is illegal when those individuals make trades based on information that has not been disclosed to the public. Corporate fraud involves deception purposely carried out so that a company can secure an unfair or unlawful gain. Corporate espionage involves spying on a competitor or theft of a competitor's proprietary information. Extortion involves using force to obtain another person's or company's property or money.
Last week, a man who frequents Alice's health club and goes to the same church approached her and struck up a conversation. After a bit of small talk, the man said that he would love to help Alice earn some money in the stock market. "You can trust me," the man said. "We go to the same church and the same gym. In fact, our minister and the manager of the gym just gave me a ton of money to invest for them!" The man is attempting to commit __________ fraud.
A. private placement offering
B. life settlement
C. natural resource investing
D. group affinity
D
Group affinity. Group affinity fraud typically involves a scammer who either claims or actually is a member of the investor's group. In this case, the man is a member of the same health club and attends the same church as Alice. Because the scammer is a member of the same group, investors may falsely believe they can trust the scammer, especially if the scammer has lured in a few well-respected group members (like the minister or the gym manager) to buy into the scam early on. Natural resource investing fraud occurs when a scammer convinces investors to put money in fraudulent energy investments. Investors are tempted by the scammer's promise of a fast, easy return. Private placement offering fraud involves convincing investors to buy nonexistent stock from businesses. Life settlement fraud occurs when a scammer purchases a large life insurance policy from the insured for an unreasonably small amount of money. This usually occurs when the insured person needs money to pay necessities such as medicine and medical care before death.
Which of the following is a political factor that might be identified as part of an environmental scan:
A. Increasing tax rates
B. Changing family roles
C. Changing laws and regulations
D. Decreasing interest rates
C
Changing laws and regulations. Environmental scanning is the process of collecting information about the environment surrounding your business. Changing laws and regulations is a political factor that might be identified as part of an environmental scan. Decreasing interest rates and increasing tax rates are both economic trends that may be identified as part of an environmental scan. Changing family roles is a society and culture trend.
Which of the following scenarios is an example of selling an idea:
A. Leonard University provides all incoming students with a brand new computer.
B. Your teacher tells the class to read pages 30-45 in your textbook for homework.
C. The local fire department holds a popular holiday toy drive every year.
D. You convince your parents to give you and your siblings a weekly allowance
D
You convince your parents to give you and your siblings a weekly allowance. This is an example of idea selling because it involves convincing another party to go along with an idea or proposal. A teacher assigning homework, a fire department hosting a toy drive, and a university providing students with computers are not examples of idea selling because they do not involve convincing other people to buy into an idea.
A business can protect its digital financial data from losses associated with fire, flood, and electrical outages by
A. installing intrusion detection systems.
B. implementing a manual filing system.
C. performing backup procedures on a regular basis.
D. changing passwords and encryption techniques periodically.
C
Performing backup procedures on a regular basis. Backing up the computer system and storing the backup information off-site can reduce financial losses due to uncontrollable circumstances such as electrical outages or fire. Businesses that do not perform backup procedures on a regular basis may lose the data for good or take a lot of time and money to replace if a disaster harms its computer systems. Computer systems help make businesses operate more efficiently than manual systems do. Different types of intrusion detection systems (e.g., firewalls) are designed to protect the business's computer systems from unauthorized access. Passwords and encryption are additional techniques used to secure access to computer information.
If the dividend per share on a securities table is blank, it indicates that the company's stock
A. has a net change value of zero.
B. does not currently pay dividends.
C. has a negative dividend yield.
D. had zero trades in the last 24 hours.
B
Does not currently pay dividends. The dividend per share indicates the annual dividend payment per share, and a blank indicates the company does not currently pay out dividends. A negative dividend would suggest that shareholders pay dividends to the company, which typically does not occur. The number of trades that have occurred in the last 24 hours is the trading volume listed on a securities table. Net change refers to the dollar value change in a stock price from previous day's closing price and is represented as a positive or negative value in the net change column on a securities table.
97. Which of the following is an uninsurable external risk to businesses:
A. Personal injury
B. Natural disasters
C. Inventory
D. Tax increases
D
Tax increases. Businesses cannot control when and by how much a government may increase taxes, which are uninsurable. A business's inventory is insurable. Liability insurance can be purchased to transfer the business's risks related to the potential injuries of its employees and customers. Natural disasters such as fire, tornados, and earthquakes are insurable risks.
High levels of investment in new plants and equipment indicate producers expect a(n)
A. increase in consumer spending.
B. decrease in consumer spending.
C. decrease in sales-stock ratio.
D. shortage of consumer goods.
A
Increase in consumer spending. Producers are not willing to build new plants or buy new equipment unless they feel the economy is growing and expanding. The expansion phase of a business cycle is a time of economic prosperity. When there is a shortage of consumer goods, demand has exceeded supply, and the business cycle has peaked. A decrease in consumer spending and a decrease in sales-to-stock ratio occur in a period of economic contraction.
Consumers can borrow against future income to make current purchases by making use of
A. credit.
B. money orders.
C. interest.
D. certificates of deposit.
A
Credit. Credit is the arrangement by which businesses or individuals can purchase now and pay later. Money orders are purchased at banks, post offices, or stores to be used as checks. Certificates of deposit are savings certificates. Interest is the fee lenders charge borrowers for the use of credit.
Which of the following is a common cause of disparate data structures within many large corporations' financial information management systems?
A. Capital structure
B. Channels of distribution
C. Mergers and acquisitions
D. Accounting method
C Mergers and acquisitions. Mergers and acquisitions commonly handicap large corporations' financialinformation management systems because of disparate data structures. Even though two companies may become one as a result of a merger or acquisition, the two companies' historical financial data may be incompatible or housed in different data structures, making a merge of the data difficult. Channels of distribution, the company's capital structure, and the accounting method that the company uses do not commonly cause disparate data structures within financial-information management systems.
Which of the following is an effective way to initiate a professional relationship with a vendor:
A. Having salespeople talk to the vendor
B. Giving the vendor an expensive gift
C. Treating the person to a round of golf
D. Offering jobs to people on the vendor's staff
C
Treating the person to a round of golf. Something as simple as four hours of golf gives you the opportunity to get to know a vendor better. It gives you an opportunity to learn the person's interests and to talk business in a casual environment. Giving the vendor an expensive gift might be construed as a bribe. Although having salespeople talk to the vendor is helpful, it doesn't foster a professional relationship with you. Offering jobs to people on the vendor's staff would create conflict rather than helping to build a positive, professional relationship.
98. Which of the following is a disadvantage of enterprise risk management practices:
A. They increase redundant processes and employee satisfaction.
B. They rely heavily on management estimates and inputs.
C. They lead to more unexpected risks.
D. They only identify risks a company is not aware of.
B
They rely heavily on management estimates and inputs. Enterprise risk management (ERM) is an organization-wide strategy to identify, assess, and prepare for potential dangers and hazards that may harm or interfere with an organization's finances, operations, and objectives. A disadvantage of ERM is that it relies heavily on management estimates and inputs, which sometimes can be very difficult to accurately predict. ERM identifies risk that a company has been exposed to in the past, and is thus limited in identifying future risk that a company is not yet aware of. ERM benefits a business because it leads to less unexpected risks and greater employee satisfaction, while reducing or even eliminating redundant processes.