12.4 financial decision making

Question 1

assets, liabilites and owner’s equity are reported on _____

Answer 1

the balance sheet

Question 2

the _____ ratio is the company’s liabilities divided by the owner’s equity

Answer 2

debt to equity ratio

Question 3

differences between actual and budgeted performance

Answer 3

discrepancies

Question 4

financial performance ratios

Answer 4

comparisons of a company’s financial elements that indicate how well the business is performing

Question 5

true or false

sales and profits for a specific period are reported in a company’s income statement

Answer 5

false

sales, expenses and profits are in income statement

Question 6

if income and expenses are similar to the budget, the manager will not need to take action. if there are financial _____, managers will take corrective action to try to bring performance back in line with the budget.

Answer 6

if income and expenses are similar to the budget, the manager will not need to take action. if there are financial problems, managers will take corrective action to try to bring performance back in line with the budget.

Question 7

sales, expense and profits for a specific period are reprorted on _____

Answer 7

income statement

Question 8

the ____ ratio tells yo if the business can pay its debts as they become due

Answer 8

current ratio

Question 9

____ are responsible for the financial health of their company and for the specific areas of the company under their control

Answer 9

managers

Question 10

the return on equity ratio shows the rate of return the ____ are getting on the money they invested in the company

Answer 10

owners

Question 11

the debt to equity ratio tells you how much the business is relying on money _____ from others that will have to be paid back rather than money provided by the owners

Answer 11

borrowed

Question 12

what does a current ratio of 1:1 mean?

Answer 12

means that there are at least as many current assets as current liabilities

Question 13

current assets compared to the current liabilities

Answer 13

current ratio

Question 14

the _____ ratio is the net profit of the business compared to the amount of owner’s equity

Answer 14

return on equity ratio

Question 15

if more money than is needed is used for certain operations, there may not be ____ for other parts of the company

Answer 15

if more money than is needed is used for certain operations, there may not be enough for other parts of the company

Question 16

true or false

employees rather than managers are responsible for the financial health of a company

Answer 16

false

managers are responsible for the financial health

Question 17

in adequate (enough) finances are not available, the _____ that is required will not be done as well or as quickly as needed

Answer 17

in adequate (enough) finances are not available, the work that is required will not be done as well or as quickly as needed

Question 18

managers use ____ as a guide to operate the business

Answer 18

budgets

Question 19

at the end of the period covered by the budget, the business will prepare new financial _____

Answer 19

statements

Question 20

The 3 most important elements of a company’s financial strength are its assets, liabilities and owner’s equity. 3 other key financial elements for a business are the amount of ____, _____ & _____

Answer 20

sales, expenses and profits

Question 21

the _____ ratio is the total sales compared to the net income for a period such as six months or a year

Answer 21

net income ratio

Question 22

____ let managers identify problems before they become serious enough to harm the business

Answer 22

discrepancies

Question 23

the net income ratio shows how much profit is being made by each dollar of ____ for the period being analyzed

Answer 23

sales

Question 24

comparisons of a company’s financial elements that indicate how well the business is performing

Answer 24

financial performance ratios

Question 25

a ____ identifies the amount of money needed for all parts of the business to complete planned activities. it also projects what types and amounts of income will be earned from the sale of the company’s products, services and other investments

Answer 25

budget

Question 26

differences between actual and expected performance are

• ratios
• budgets
• profit or loss
• discrepancies

Answer 26

budgets

Question 27

the first step in financial decision making is preparing a ____

Answer 27

budget

Question 28

what are some important financial performance ratios used by businesses?

Answer 28

1. current ratio
2. debt to equity ratio
3. return on equity ratio
4. net income ratio

Question 29

which of the following is not one of the three most important elements of a company’s financial strength?

• assets
• owner’s equity
• payroll
• liabilities

Answer 29

payroll

Question 30

expenses should ____ exceed the budgeted amount

Answer 30

expenses should NOT exceed the budgeted amount

Question 31

financial statements are important management ____ owners and managers

Answer 31

business