Question 1

Which of the following was not identified as one of the four main financial objectives of a firm?

Accepted Answer

The four main financial objectives of a firm are profitability, liquidity, efficiency, and stability. Timeliness is not considered as one of the main financial objectives.

Question 2

The strength and vigor of a firm's overall financial posture is referred to as:

Accepted Answer

Stability refers to the overall financial strength and ability of a firm to withstand changes in the economy or industry conditions. This includes factors such as a strong balance sheet, consistent cash flow, and manageable debt levels. While profitability, liquidity, efficiency, and effectiveness are all important components of a firm's financial health, they do not necessarily provide a complete picture of its overall stability.

Question 3

________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

Accepted Answer

Budgets are itemized forecasts of a company's income, expenses, and capital needs. They help in financial planning and control by providing a roadmap for the company's financial resources. The other options, profitability statements, financial statements, owners' equity statements, and statements of cash flows, are important financial statements but do not serve the same purpose as budgets.

Question 4

Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's:

Accepted Answer

Efficiency measures how well a company uses its resources (in this case, its assets) to produce output. Southwest's low turnaround time means it is using its assets (planes) very efficiently, which is a positive sign for the company's financial performance.

Question 5

A financial statement is a(n):

Accepted Answer

A financial statement is a written report that quantitatively describes a firm's financial health. It includes information about a company's income, expenses, assets, liabilities, and equity. Financial statements are important tools for investors, creditors, and other stakeholders to analyze a company's financial performance and make informed decisions. Choices A, B, C, and D do not fully capture the definition of a financial statement.

Question 6

A company's merchandise, raw materials, and products waiting to be sold is called its:

Accepted Answer

Inventory refers to a company's collection of merchandise, raw materials, and products that are still waiting to be sold or processed. It is often considered one of the most important assets for a company, as it represents the current value of goods that can be sold for profit. Choices A, B, C, and E are less suitable because they either do not accurately reflect the definition of inventory or are not commonly used in this context.

Question 7

Money owed to a company by its customers is referred to as:

Accepted Answer

Accounts receivable refers to money owed to a company by its customers, while accounts payable refers to money that a company owes to its vendors or suppliers. Accounts obtainable and accounts collectable are not commonly used accounting terms. Inventory refers to goods that a company has on hand to sell or use in its business operations.

Question 8

In regard to budgets, which of the following statements is not true?

Accepted Answer

Budgets are actually a very important tool for financial control, as they allow a company to compare actual expenses and income to their planned budget and make adjustments as necessary. Therefore, statement B is not true.

Question 9

Klymit, the company profiled in the opening feature in Chapter 8, makes cold weather apparel products and related accessories. According to the feature, one of the prominent challenges Klymit has faced is:

Accepted Answer

The opening feature in Chapter 8 states that one of the prominent challenges faced by Klymit is cash flow management.

Question 10

Match the financial term with its proper definition.

Accepted Answer

Budgets are itemized forecasts of a company's income, expenses, and capital needs.

Question 11

The Partnering for Success feature in Chapter 8 focuses on buying groups, and recommends that small businesses seek out buying groups to participate in. What is a "buying group" in the context of the feature?

Accepted Answer

A buying group is a partnership of small businesses that come together to combine their purchasing power to get volume discounts on common products and services that they buy.

Question 12

Match the financial objective with its correct definition.

Accepted Answer

The answer of Match the financial objective with its correct...

Question 13

________ is a company's ability to meet its short-term financial obligations.

Accepted Answer

Liquidity refers to a company's ability to meet its short-term financial obligations, such as paying suppliers, employees, and other creditors. Profitability refers to the company's ability to generate profits over a longer period of time, while effectiveness, stability, and efficiency refer to other aspects of the company's operations.

Question 14

The four main financial objectives of a firm are:

Accepted Answer

The four main financial objectives of a firm are profitability (to make profit and maximize shareholder's value), liquidity (to maintain sufficient cash to meet the company's short-term obligations), efficiency (to achieve productivity and reduce costs) and stability (to minimize the risk of bankruptcy and maintain a consistent performance over time). These are the most common and relevant financial objectives for any business, and they are closely related to each other. Therefore, option E is the best choice.

Question 15

Amanda Still owns a seafood restaurant in Clearwater, Florida. She is currently owed $19,000 by a corporation that she catered a meeting for and $2,000 on an overdue account. Amanda has $21,000 in:

Accepted Answer

Accounts receivable represent the money owed to Amanda by the corporation and overdue account. Therefore, the $19,000 and $2,000 amounts mentioned in the question are part of Amanda's accounts receivable. The $21,000 mentioned in the question is not relevant to this calculation.

Question 16

Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Peggy is taking account of her store's:

Accepted Answer

Peggy is taking account of her inventory on January 1, which is the merchandise and products waiting to be sold in her store. Therefore, the best choice is E - inventory.

Question 17

Financial management deals with two things-managing a company's finances and:

Accepted Answer

Financial management includes not only managing a company's finances but also raising money through various sources such as issuing stocks, borrowing from banks or other financial institutions, and issuing bonds.

Question 18

________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

Accepted Answer

Forecasts are estimates of a firm's future income and expenses based on past performance, present circumstances, and future plans. Calculation statements refer to the process of calculating specific financial metrics, such as ratios and percentages. Statements of cash flow report a company's cash inflows and outflows over a specified period. Financial statements provide an overview of a company's financial performance during a specified period. Prediction statements are not a commonly used financial term.

Question 19

________ depict relationships between items on a firm's financial statements.

Accepted Answer

Financial ratios are used to depict relationships between items on a firm's financial statements. These ratios can provide insights into a company's financial health, efficiency, and profitability.

Question 20

A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as:

Accepted Answer

Efficiency refers to the ability of a company to make the most of its resources and assets in order to generate revenue and profits. A company that is highly efficient generally has a lower cost structure, which allows it to be more competitive in the marketplace. Both revenue and profitability are important indicators of a company's efficiency, as they reflect the company's ability to generate income and profits from its resources. Stability and liquidity are related to a company's financial health and ability to meet its financial obligations, but they do not directly measure a company's productivity or efficiency. Effectiveness is related to a company's ability to achieve its goals and objectives, but it is not as closely related to efficiency as revenue and profits. Therefore, the best choice for this question is A) efficiency.

Quiz 8: Assessing a New Ventures Financial Strength and Viability