Question 1

The manager of a profit center is evaluated on the basis of the amount of sales that have been generated from the goods or services produced in his/her division.The divisional manager is being evaluated using the ______________ budget approach.

Accepted Answer

In a revenue budget approach,managers are asked to maximize the revenues from the sales of goods and services produced.Managers are then remunerated on the basis of the net sales generated by the division.

Question 2

Calculate the return on investment from the information given below.
Net Income = $18,000;Advertising Expenses = $220,000;Total Liabilities = $120,000;Total Assets = $160,000;Gross Margin = $80,000;Taxes Paid = $2,000

Accepted Answer

ROI = Net profit before taxes + Taxes paid/Total assets = ($18,000 + $2,000)/$160,000 = .125 = 12.5 percent.

Question 3

The financial ratio that measures how well the managers of the organization are creating value from the organization's assets is the _____________ ratio.

Accepted Answer

Activity ratios provide measures of how well managers are creating value from organizational assets.

Question 4

A mechanism of control utilized in organizational culture is ___________.

Accepted Answer

Mechanisms of control for organizational culture include values,norms,and socialization.

Question 5

The managers of a division are given a fixed budget and are then evaluated on the basis of their ability to produce goods or services.This is an example of a(n)_____________ budget approach.

Accepted Answer

Managers of a division may be given a fixed budget for resources and be evaluated on the amount of goods or services they can produce using those resources.This is a cost or expense budget approach.

Question 6

The performance ratio that measures the efficiency of the organization in terms of how well the resources of the organization have been used to generate profit is a(n)_____________ ratio.

Accepted Answer

Profit ratios measure how efficiently managers are using the organization's resources to generate profits.

Question 7

When a manager is told to maximize the revenues from the sales of goods and services produced,this is an example of a(n)_____________ budget approach.

Accepted Answer

With a revenue budget,managers are asked to maximize the revenues from the sales of goods and services produced.

Question 8

Management by objectives is a mechanism of control with ______________ organizational control systems.

Accepted Answer

Management by objectives is a mechanism of control for behavior control.

Question 9

The ratio that is computed by dividing the difference between current assets and inventory by current liabilities is the _____________ ratio.

Accepted Answer

Quick ratio = (current assets - inventory)/current liabilities.

Question 10

The financial ratio that measures the ability of the organization to pay its short-term debts is the _____________ ratio.

Accepted Answer

Liquidity ratios measure how well managers have protected organizational resources to be able to meet short-term obligations.The current ratio (current assets divided by current liabilities)tells managers whether they have the resources available to meet the claims of short-term creditors.

Question 11

The financial ratio that indicates how efficiently the managers of the organization are collecting the revenue due to the organization from the sale of its products or services is the _____________ ratio.

Accepted Answer

Days sales outstanding provides information on how efficiently managers are collecting revenue from customers to pay expenses.

Question 12

The manager of Inkman,a convenience store,keeps track of the average sale amount for each customer as a way of deciding on the product mix to be carried in the store.This is an example of _____________ control.

Accepted Answer

Inkman is tracking an output (sales per customer)and will alter its product mix accordingly.This is a form of output control.

Question 13

An organization's net income before taxes divided by the total assets of the organization is known as:

Accepted Answer

Return on investment = Net income before taxes/Total assets.

Question 14

The most commonly used financial performance measure that allows managers of one organization to compare performance with that of other organizations is:

Accepted Answer

Return on investment (ROI)is the most commonly used financial performance measure because it allows managers of one organization to compare performance with that of other organizations.ROI lets managers assess an organization's competitive advantage.

Question 15

Calculate the current ratio of the organization from the information given below.
Sales = $200,000;Gross Profit = $40,000;Total Assets = $450,000;Current Assets = $250,000;Current Liabilities = $300,000

Accepted Answer

Current ratio = Current assets/Current liabilities = $250,000/$300,000 = .83.

Question 16

From the information given below,calculate the organization's return on investment.
Total Liabilities = $300,000;Total Assets = $600,000;Gross Margin = $200,000;Net Income Before Taxes = $30,000;Total Expenses = $240,000

Accepted Answer

ROI = Net profit before taxes/Total assets = $30,000/$600,000 = .05 = 5 percent.

Question 17

The financial ratio that indicates whether or not the organization is capable of paying off its short-term debts without having to sell its inventory is the _____________ ratio.

Accepted Answer

The quick ratio tells whether managers have the resources available to meet the claims of short-term creditors without selling inventory.

Question 18

The financial ratio that indicates the degree to which the organization uses debt or equity to finance its ongoing operations is the _____________ ratio.

Accepted Answer

Leverage ratios,such as the debt-to-assets ratio and the times-covered ratio,measure the degree to which managers use debt (borrow money)or equity (issue new shares)to finance ongoing operations.

Question 19

The manager of Triks Burgers keeps track of the number of customers served at different periods of the day in an attempt to plan a schedule for workers that matches the demand for the restaurant's products.By using this tracking system,the manager of Triks Burgers is utilizing _____________ control.

Accepted Answer

Triks Burgers is tracking an output (number of customer served)and will adjust its production process to try to match demand.This is a form of output control.All managers develop a system of output control for their organizations.First they choose the goals that they think will best measure efficiency,quality,innovation,and responsiveness to customers.Then they measure to see whether the performance goals and standards are being achieved at the corporate,divisional,functional,and individual employee levels of the organization.

Question 20

From the information given below,calculate the organization's current ratio.
Total Liabilities = $750,000;Current Liabilities = $220,000;Total Assets = $700,000;Current Assets = $176,000

Accepted Answer

Current ratio = Current assets/Current liabilities = $176,000/$220,000 = .80.

Quiz 8: Control, Change, and Entrepreneurship

The manager of a profit center is evaluated on the basis of the amount of sales that have been generated from the goods or services produced in his/her division.The divisional manager is being evaluated using the ______________ budget approach.

Calculate the return on investment from the information given below. Net Income = $18,000;Advertising Expenses = $220,000;Total Liabilities = $120,000;Total Assets = $160,000;Gross Margin = $80,000;Taxes Paid = $2,000

The financial ratio that measures how well the managers of the organization are creating value from the organization's assets is the _____________ ratio.

A mechanism of control utilized in organizational culture is ___________.

The managers of a division are given a fixed budget and are then evaluated on the basis of their ability to produce goods or services.This is an example of a(n) _____________ budget approach.

The performance ratio that measures the efficiency of the organization in terms of how well the resources of the organization have been used to generate profit is a(n) _____________ ratio.

When a manager is told to maximize the revenues from the sales of goods and services produced,this is an example of a(n) _____________ budget approach.