Ch 1

Question 1

Statement on ethical professional practice

includes the following:

Answer 1

know your stuff
shut up about stuff
be ethical about stuff
present stuff fairly

Question 2

time based competition

new technologies have affected speed of business transactions

Answer 2

JIT management
Lean Production
Just in Time

(saves you a lot of money)

Question 3

competence

Answer 3

maintain high level of expertise by developing knowledge

2. perform duties w/law, regulations and standards
3. decision support/ recommendation: accurate, clear, concise and timely
4. recognize & communicate limitations/ constrains

Question 4

confidentiality

Answer 4

keep info confidential except when authorized/legal

2. inform all parties, appropriate use. monitor subordinates
3. refrain from using confidential info for unethical/illegal use

Question 5

integrity

Answer 5

1. mitigate conflict of interest. communicate to avoid conflict. Advise parties of any potential conflicts
2. refrain from engaging
3. Abstain from engaging/ supporting any activity that might discredit the profession

Question 6

credibility

Answer 6

communicate info fairly and objectively

2. disclose all relevant info that could reasonably be expected to influence an intended user’s understanding of the reposts, analyses or recommendations
3. disclose delays or deficiencies in info, timeliness, processing or internal controls in conformance with organization policy and or applicable law.

Question 7

JIT management

Answer 7

receiving materials just in time to put out, which causes you to be able to eliminate storage cost

//   just in time 
when you receive materials just in time to process an order, eliminate storage costs, throughput time, etc. Strive for zero defects in manufacturing process.

Question 8

lean production

Answer 8

manufacturing without wasting anything

// manufacturing without waste, which lowers a company’s costs and makes them more competitive.

includes eliminating carrying large inventories, reducing throughput time, and maintaining high quality standards while being cost efficient

Question 9

2. ability to sell inventory and collect receivables

Answer 9

INVENTORY TURNOVER: quickly sells inventory?

// measures how quickly a company sells its inventory

A/R TURNOVER : ability to collect cash

// measures the ability to collect cash from credit customer. Need to be able to collect cash from the sale!

DAYS’ SALES IN RECEIVABLE: days takes a sale in A/R?

// measures how many days a sale stays in accounts receivable before its collected!

Question 10

3. ability to pay long term debt

Answer 10

DEBT RATIO: assets financed 
//  measures the amount of assets financed with debt 

TIMES INTEREST EARNED ratio: how effective incomes can cover interest 
//  measures how effectively incomes earned can cover interest expense incurred on long term debt.

Question 11

5. analyzing stock investments

Answer 11

helps evaluate stock investments

PRICE EARNINGS ratio: market price vs. company's earnings
//  ratio of market price of a common share vs. the company's earnings per share 

DIVIDEND YIELD: dividend vs. market price
//  dividends per share vs. the market price per share

Question 12

liquidity ratios

Answer 12

ability to pay debts when due

working capital
current ratio
quick ratio

Question 13

working capital

+

Answer 13

current assets - current liabilities

assets: cash, a/r, inventory, supplies (within 1yr)
liabilities: a/r, utilities payable, unearned revenue (within 1 yr)

Question 14

current ratio

>1

Answer 14

current assets / current liabilities

Question 15

quick ratio

>1

Answer 15

(cash + short term investments + net receivables) / current liabilities

no inventory

Question 16

profitability

Answer 16

commonly quoted financial ratios that measure profitability of a company

return of sales
return of total assets
return of equity
earnings per share

Question 17

return on sales %

Answer 17

net income / net sales

shows the percentage of each sales dollar earned as net income.

Question 18

return on total assets %

Answer 18

net income + interest expense / avg. Total assets

how well a company uses its assets to generate income

Question 19

return on equity %

Answer 19

(net income - preferred dividends declared) / average common stockholder’s equity

common ration used to calculate in relation to $$ invested by common stockholders

Question 20

earnings per share $

Answer 20

(net income -preferred dividends declared) / average # of common shares outstanding

probably most widely used ratio and most quoted. Must appear on the face of the financial statements. Amount of net income earned for each share fo outstanding common stock!

Question 21

The Sarbanes-Oxley Act has significantly impacted the responsibility for financial reporting by publicly traded corporations.

Answer 21

true

Question 22

Businesses are now viewing sustainability and social responsibility as opportunities for innovation and business development.

Answer 22

true

Question 23

Which of the following is a software system that integrates all of a company’s departments?

Answer 23

ERP

Question 24

When management uses feedback to take corrective action on the budgets, which of the following management responsibilities are being fulfilled?

Answer 24

controlling

Question 25

Controlling means overseeing the company’s day-to-day operations.

Answer 25

false

Question 26

Presenting information fairly and objectively is an example of which ethical standard?

Answer 26

credibility