Question 1

Which of the following is true of stakeholders?

Accepted Answer

Stakeholders are groups or individuals that have a direct or indirect interest in a firm, often having a direct economic link, such as employees, customers, suppliers, and the community, not just financial obligations or ownership.

Question 2

Which of the following is an example of a firm's stakeholder?

Accepted Answer

Suppliers are considered as one of the important stakeholders of a firm since they contribute to the production process and the overall success of the business. The Federal reserve, media, and competitors are not typically considered stakeholders of a firm.

Question 3

A corporate treasurer typically handles both the cost accounting and financial accounting.

Accepted Answer

A corporate treasurer is primarily responsible for managing a company's financial risks and overseeing its financial strategy, including cash management, investments, and funding. While they may work closely with cost accountants and financial accountants, the treasurer's role is distinct and typically focused on high-level financial decision making rather than day-to-day accounting tasks.

Question 4

Marginal cost-benefit analysis states that financial decisions should be made and actions should be taken only when the added benefits exceed the added costs.

Accepted Answer

Marginal cost-benefit analysis follows the principle that decisions should be made and actions should be taken only if the added benefits are greater than the added costs. So, the statement is true.

Question 5

Which of the following is one of the positive benefits of an effective ethics program?

Accepted Answer

An effective ethics program can help reduce potential litigation and judgment costs by preventing unethical behavior before it leads to legal action.

Question 6

A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would ________.

Accepted Answer

The answer of A financial manager must choose between three...

Question 7

The implementation of a pro-active ethics program is expected to result in ________.

Accepted Answer

Implementation of a pro-active ethics program is expected to result in a positive corporate image and increased respect, a reduction in risk, and enhanced cash flow resulting in an increase in share price. A positive corporate image and increased respect can lead to increased customer loyalty, investor confidence, and employee morale. Reduction in risk can save costs, and enhanced cash flow can increase profitability, leading to higher share prices. Therefore, all these factors contribute to an overall positive impact on the company's financial performance.

Question 8

A corporate treasurer's focus tends to be more external, while the controller's focus is more internal.

Accepted Answer

A corporate treasurer is responsible for managing a company's financial assets and investments, and ensuring adequate funding for the organization's operations. Their focus is typically more external, as they work with banks, investors, and other financial institutions to raise capital and manage risk. On the other hand, a controller is focused on the internal financial operations of a company, such as accounting, financial reporting, and internal controls. They are responsible for ensuring accurate and timely financial information and compliance with regulatory requirements.

Question 9

Using certain standardized and generally accepted principles, an accountant prepares financial statements that recognize revenue at the point of sale and expenses when incurred.

Accepted Answer

This statement is true. The generally accepted accounting principles (GAAP) require revenue to be recognized when it is earned, and expenses to be recognized when they are incurred. This helps ensure that financial statements accurately reflect a company's financial performance and position.

Question 10

The financial manager must look beyond financial statements to obtain insight into developing or existing problems since the accrual accounting data do not fully describe the circumstances of a firm.

Accepted Answer

Accrual accounting data only provide a snapshot of a firm's financial position and performance at a specific point in time. It is essential for financial managers to look beyond the financial statements to gain a deeper understanding of the company's financial health, market conditions, and other factors that may impact its performance. This requires a comprehensive analysis of various sources of financial data, as well as qualitative information such as customer feedback and industry trends.

Question 11

An effective ethics program ________.

Accepted Answer

An effective ethics program can enhance a corporation's value by promoting ethical behavior among employees, reducing legal and reputational risks, and building trust with stakeholders. A weak ethics program or a lack of ethics can lead to negative consequences, such as legal violations, damaged reputation, and decreased shareholder value. Therefore, a strong ethics program is beneficial for a corporation's long-term success.

Question 12

Which of the following is considered as a violation of business ethics?

Accepted Answer

Earnings management involves manipulating financial statements to meet financial targets or expectations. This is considered unethical as it misleads investors and can result in financial fraud. Repurchasing shares, using call options on callable bonds, and paying dividends are all common business practices that do not necessarily violate business ethics.

Question 13

A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below.  Based on the wealth maximization goal, the financial manager would choose ________.

Accepted Answer

The answer of A financial manager must choose between four...

Question 14

The accountant of a firm evaluates financial statements, develops additional data, and makes decisions based on his or her assessment of the associated returns and risks.

Accepted Answer

An accountant typically evaluates financial statements and develops additional data, but making decisions based on returns and risks is usually the role of a financial analyst or manager, not an accountant.

Question 15

Which of the following is true of a cash flow?

Accepted Answer

Profits on the income statement do not necessarily mean cash flows are also increasing. Cash flows can be affected by non-cash transactions such as depreciation, changes in accounts payable and accounts receivable, and capital expenditures. Therefore, it is possible for a company to have positive profits on their income statement but negative cash flows.

Question 16

A corporate controller is an officer responsible for a firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange.

Accepted Answer

A corporate controller is typically responsible for accounting-related functions such as financial reporting, budgeting, and internal controls, while a treasurer handles financial activities like fund raising, capital expenditures, and cash management.

Question 17

Corporate ethics policies typically apply to ________ in dealing with ________.

Accepted Answer

Corporate ethics policies are designed to guide the behavior of employees in their interactions with all corporate constituents, including customers, vendors, regulators, and others.

Question 18

The financial manager of a firm prepares financial statements that recognize revenue at the point of sale and expenses when incurred.

Accepted Answer

The answer of The financial manager of a firm prepares...

Question 19

The accrual method recognizes revenue at the point of sale and recognizes expenses when incurred.

Accepted Answer

The accrual method of accounting recognizes revenue when it is earned (at the point of sale) and recognizes expenses when they are incurred, regardless of when the cash is received or paid out. This is different from the cash method which recognizes revenue and expenses only when cash is received or paid out.

Question 20

The treasurer typically manages a firm's cash, investing surplus funds when available and securing outside financing when needed.

Accepted Answer

The treasurer is responsible for managing a firm's cash, which includes investing any excess funds and securing outside financing when necessary.

Quiz 1: The Role of Managerial Finance