Question 1

The choices that individuals and organizations make regarding financial management are influenced by which of the following?
A) Demand
B) Scarcity
C) Price
D) Only a and c are correct
E) All three-a, b, and c-are correct

Accepted Answer

Financial management decisions are influenced by demand, as it affects the revenue and expense of an organization. Scarcity plays a role in decision-making as resources are limited, and organizations need to make the best use of their resources to achieve their financial goals. Price affects the profitability of an organization and impacts revenue. Therefore, all three factors - demand, scarcity, and price - are significant in financial management decision-making.

Question 2

When sport leagues do not expand into a market that can support a franchise, or when they create rules to limit the movement of existing franchises, which of the following economic concepts is being applied?
A) Demand
B) Scarcity
C) Price
D) Equilibrium
E) None of the above

Accepted Answer

The economic concept being applied is scarcity, as the league is artificially limiting the number of franchises or restricting their movement in order to maintain a level of scarcity and thereby increase the perceived value of the existing franchises.

Question 3

When the citizens of Hamilton County, Ohio, decided to raise their taxes to fund two new sports stadiums rather than to raise taxes for something like improving the educational system in the county, they missed a chance to improve the educational system. What is this known as?
A) A marginal cost
B) A fixed cost
C) A variable cost
D) An opportunity cost
E) None of the above

Accepted Answer

This is an example of an opportunity cost, where the opportunity to improve education was missed due to the choice of allocating funds towards sports stadiums.

Question 4

The vast majority of for-profit businesses in the United States operate as which of the following?
A) Sole proprietorships
B) General partnerships
C) Subchapter S corporations
D) Limited liability corporations
E) C corporations

Accepted Answer

Sole proprietorships are the most common form of business structure in the United States due to their simplicity, ease of setup, and minimal regulatory requirements. This makes them highly attractive for individual entrepreneurs starting businesses.

Question 5

The major disadvantages of forming a business under a _____ structure is that there is double taxation of profits, and the cost of forming the business and operating the business is higher than other structures.
A) Sole proprietorships
B) General partnerships
C) Subchapter S corporations
D) Limited liability corporations
E) C corporations

Accepted Answer

C corporations are subject to double taxation because the corporation itself pays taxes on its income, and then shareholders also pay taxes on any dividends they receive. Additionally, the cost of forming and operating a C corporation is generally higher than other business structures due to regulatory requirements, legal fees, and administrative costs.

Question 6

Which of the following is the depreciation method that is most aggressive at allocating loss of useful life to the early years of the asset's use?
A) Straight-line
B) Sum-of-years digits, decelerating deprecation
C) Sum-of-years digits, accelerating depreciation
D) Double-declining balance
E) Units of production

Accepted Answer

The double-declining balance method is the most aggressive at allocating loss of useful life to the early years of an asset's use. This method results in higher depreciation expenses in the early years and lower expenses towards the end of the asset's useful life.

Question 7

Which of the following methods of depreciation attempts to take the non-linear loss of a fixed asset's value into account, with depreciation occurring quickly after purchase? Using this method, the denominator for a fixed asset with a useful life of five years is 15.
A) Straight-line
B) Sum-of-years digits, decelerating deprecation
C) Sum-of-years digits, accelerating depreciation
D) Double-declining balance
E) Units of production

Accepted Answer

The answer of Which of the following methods of depreciation...

Question 8

Which of the following methods of depreciation attempts to take the non-linear loss of a fixed asset's value into account with depreciation occurring late after purchase? Using this method, the denominator for a fixed asset with a useful life of five years is 15.
A) Straight-line
B) Sum-of-years digits, decelerating deprecation
C) Sum-of-years digits, accelerating depreciation
D) Double-declining balance
E) Units of production

Accepted Answer

Sum-of-years digits, accelerating depreciation attempts to take non-linear loss of a fixed asset's value into account by accelerating depreciation in the early years after purchase and decreasing it in the later years. The denominator is the sum of the digits of the useful life, which for a five-year useful life, would be (5+4+3+2+1) = 15. Choice A, Straight-line, evenly spreads depreciation over the useful life of the asset. Choice B, Sum-of-years digits, decelerating depreciation attempts to take non-linear loss of a fixed asset's value into account by decreasing depreciation in the early years and accelerating it in the later years. Choice D, Double-declining balance, applies a constant rate of depreciation based on twice the straight-line rate. Choice E, Units of production, bases depreciation on the actual usage of the asset, rather than a predetermined useful life.

Question 9

An example of a microeconomic decision that a financial manager might make would be deciding whether to pay for training for current employees to learn new job processes.

Accepted Answer

This decision involves weighing the cost of training against the potential benefits of improved job efficiency, which is a microeconomic decision that falls under the purview of a financial manager.

Question 10

Accounting profit is the profit remaining after the opportunity costs associated with a financial decision are included.

Accepted Answer

Accounting profit only takes into account the explicit costs of a financial decision such as expenses and revenues. It does not include opportunity costs, which are the costs of foregone alternatives. Therefore, option B is correct as accounting profit does not include opportunity costs.

Question 11

In the sport industry, high school and collegiate athletic departments at public schools are ultimately operated by the government.

Accepted Answer

High school and collegiate athletic departments at public schools are funded and operated by the government, specifically the school district and state government.

Question 12

The Minnesota Vikings are an example of a community-owned entity in the NFL.

Accepted Answer

The Minnesota Vikings are privately owned, with the Wilf family being the majority owners since 2005. The Green Bay Packers are the only community-owned team in the NFL.

Question 13

In 2015, the National Football League elected to become a non-profit organization.

Accepted Answer

The NFL was previously classified as a non-profit organization, but in 2015 they changed their tax status and became a taxable for-profit entity.

Question 14

In an S corp, profits flow through the business to the shareholders and are taxed only once, as ordinary income to the shareholders.

Accepted Answer

In an S corporation, profits are distributed to shareholders and only taxed once as individual income, rather than being taxed at the corporate level and again when distributed to shareholders as in a standard C corporation.

Question 15

One advantage of a C corp is that there can be an unlimited number of investors.

Accepted Answer

One advantage of a C corp is that there is no limit on the number of shareholders or investors it can have. This allows for a C corp to gather a large amount of capital to support its business operations and growth.

Question 16

The rate at which banks may borrow money from the Federal Reserve is the federal funds rate.

Accepted Answer

The rate at which banks may borrow money from the Federal Reserve is the discount rate. The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight.

Question 17

M1 measures liquid assets like cash, checking and savings accounts, and CDs.

Accepted Answer

M1 includes liquid assets such as cash, checking accounts, and other funds that are accessible for immediate spending, but it does not include savings accounts and CDs (Certificates of Deposit) as these are considered part of M2.

Question 18

The double-declining balance depreciation method aggressively allocates loss of useful life to the early years of an asset's use.

Accepted Answer

The double-declining balance depreciation method results in higher depreciation expenses in the early years of an asset's use, which is an aggressive approach to depreciating assets.

Quiz 5: Introduction to Financial Management

The choices that individuals and organizations make regarding financial management are influenced by which of the following?

When sport leagues do not expand into a market that can support a franchise, or when they create rules to limit the movement of existing franchises, which of the following economic concepts is being applied?

When the citizens of Hamilton County, Ohio, decided to raise their taxes to fund two new sports stadiums rather than to raise taxes for something like improving the educational system in the county, they missed a chance to improve the educational system. What is this known as?

The vast majority of for-profit businesses in the United States operate as which of the following?

The major disadvantages of forming a business under a _____ structure is that there is double taxation of profits, and the cost of forming the business and operating the business is higher than other structures.

Which of the following is the depreciation method that is most aggressive at allocating loss of useful life to the early years of the asset's use?

Which of the following methods of depreciation attempts to take the non-linear loss of a fixed asset's value into account, with depreciation occurring quickly after purchase? Using this method, the denominator for a fixed asset with a useful life of five years is 15.

Which of the following methods of depreciation attempts to take the non-linear loss of a fixed asset's value into account with depreciation occurring late after purchase? Using this method, the denominator for a fixed asset with a useful life of five years is 15.