Question 1

EBIT is the same as net income.

Accepted Answer

EBIT (Earnings Before Interest and Taxes) is a measure of a company's profitability that excludes interest and income tax expenses, whereas net income is the total profit after all expenses, including interest and taxes, have been deducted.

Question 2

Shares authorized are normally less than the number of shares outstanding.

Accepted Answer

Shares authorized refer to the maximum number of shares a company can issue as approved by its corporate charter, while shares outstanding are the shares that have been issued and are currently held by shareholders. Typically, the number of shares authorized is greater than the number of shares outstanding.

Question 3

Circumstances dictate which fixed debt obligations need to be met.

Accepted Answer

The answer of Circumstances dictate which fixed debt obligations need...

Question 4

To be a price leader or a price follower is a decision that may require finance/accounting policies.

Accepted Answer

The answer of To be a price leader or a...

Question 5

The Starbucks Corporation does not have any treasury stock.

Accepted Answer

Starbucks Corporation does not have any treasury stock, meaning it has not bought back any of its own shares.

Question 6

Shares outstanding is the same as treasury stock.

Accepted Answer

Shares outstanding refers to the total number of shares currently held by all shareholders, while treasury stock refers to shares that were once part of the outstanding shares but were repurchased by the company and are held in the company's treasury.

Question 7

Two primary sources of capital are debt and equity.

Accepted Answer

Debt and equity are the two main ways companies can raise capital. Debt involves borrowing money to be paid back with interest, while equity involves selling ownership stakes in the company.

Question 8

Determining an appropriate mix of debt and equity in a firm's capital structure is an important strategy-formulation decision.

Accepted Answer

The answer of Determining an appropriate mix of debt and...

Question 9

Although acquiring needed capital can be an important task, it is not seen as central to strategy implementation.

Accepted Answer

Acquiring needed capital is central to strategy implementation as it ensures that the necessary resources are available to execute strategic plans effectively.

Question 10

One of the issues that may require finance and accounting policies, decisions, analyses, and actions in implementing strategies is the selection of the CEO.

Accepted Answer

The selection of the CEO is typically a governance issue, not directly related to finance and accounting policies, which focus more on financial management, reporting, and compliance.

Question 11

Return on Assets is the most widely used technique for determining whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strategies.

Accepted Answer

Return on Assets (ROA) measures a company's profitability relative to its total assets, not its capital structure. The decision on whether to use debt, equity, or a combination is typically assessed using other metrics like the cost of capital, debt-to-equity ratio, or weighted average cost of capital (WACC).

Question 12

Theoretically, an enterprise should carry enough debt in its capital structure to boost its return on investment in projects earning more than the cost of the debt.

Accepted Answer

Using debt can increase a company's return on investment if the projects funded by the debt generate returns greater than the cost of the debt, leveraging the benefits of financial leverage.

Question 13

Another term for earnings is gross margin.

Accepted Answer

Earnings refer to the net profit of a company after all expenses, taxes, and costs have been deducted from total revenue, while gross margin is the difference between revenue and the cost of goods sold, before other expenses.

Question 14

Another term for earnings is profits.

Accepted Answer

Earnings and profits are often used interchangeably to refer to the financial gain a company makes after deducting expenses.

Question 15

If the net income is the same, an increase in treasury stock lowers the EPS.

Accepted Answer

An increase in treasury stock reduces the number of outstanding shares, which can increase the EPS if net income remains the same.

Question 16

In low-earning periods, excessive debt in the capital structure of an organization can endanger stockholders' returns and jeopardize company survival.

Accepted Answer

Excessive debt increases financial risk, especially during low-earning periods, as the company may struggle to meet debt obligations, affecting returns and survival.

Question 17

EPS/EBIT analysis is a widely used technique for determining a firm's competitive threats.

Accepted Answer

EPS/EBIT analysis is primarily used to assess a firm's financial performance and capital structure, not to evaluate competitive threats.

Question 18

When employees understand the thinking that went into strategy formulation, and understand their roles, they will be more inclined to accept the work required for strategy implementation.

Accepted Answer

Understanding the rationale behind a strategy and their specific roles can increase employees' buy-in and commitment to executing the strategy effectively.

Question 19

All firms have treasury stock.

Accepted Answer

Not all firms have treasury stock; it depends on whether they have repurchased their own shares and held them in the treasury.

Question 20

A way to raise capital for new projects is to acquire existing businesses.

Accepted Answer

Acquiring existing businesses is a strategy for growth or diversification, not a method to raise capital. Raising capital typically involves obtaining funds through means such as issuing stocks, bonds, or securing loans.

Quiz 8: Implementing Strategies: Finance and Accounting Issues