PTC Flashcards
iffy Grill has an ERP system. It has assigned responsibility for determining who has what access rights within the ERP system. This assignment mostly likely was to: Internal auditors. Other personnel. Management Support functions
Support functions
This Answer is Correct
(Correct!) This answer is correct because support functions are mostly likely to have responsibility for determining system access.
A strategy initiative in the balanced scorecard framework is
A statement of what the strategy must achieve and what is critical to its success.
A key action program required to achieve strategic objectives.
A diagram of the cause-and-effect relationships between strategic objectives.
The level of performance or rate of improvement needed in the performance measure.
A key action program required to achieve strategic objectives.
Asher Company eased its credit policy by lengthening its discount period from 10 days to 15 days. Which of the following is/are likely reasons for Asher lengthening its discount period?
I. To show a higher average age of accounts on its accounts receivable aging schedule.
II. To meet terms offered by competitors.
III. To seek to stimulate sales.
I only.
II only.
III only.
II and III, only.
II and III, only.
This Answer is Correct
Asher likely lengthened its discount period to meet terms offered by competitors (Statement II), and to seek to stimulate sales (Statement III). It would not have lengthened its discount period to increase the average age of its account receivable (Statement I), but that was an undesirable, but necessary, outcome.
A company invested in a new machine that will generate revenues of $35,000 annually for seven years. The company will have annual operating expenses of $7,000 on the new machine. Depreciation expense, included in the operating expenses, is $4,000 per year. The expected payback period for the new machine is 5.2 years. What amount did the company pay for the new machine? $145,600 $161,200 $166,400 $182,000
166,400
The expected payback period is computed as the length of time needed for net cash flows to recover the initial cash investment in a project. Since the payback period is given, that period multiplied by the annual net cash inflow will result the cost of the new machine. The annual revenue is $35,000 and the annual cash expenses are $3,000, which is determined as the total operating expenses less the amount of depreciation expense included (since it is a non-cash expense). Thus, the annual net cash flow is $35,000 - $3,000 = $32,000 x 5.2 = $166,400, the correct answer.
Which of the following capital budgeting techniques, if any, implicitly assumes that all cash inflows are immediately reinvested to earn a return for the company? Net Present Value Internal Rate of Return Yes Yes Yes No No Yes No No
YES YES
Both the net present value method and the internal rate of return method of evaluating capital projects assume that all cash inflows (or savings) that result from the project are immediately reinvested to earn a return for the company.
The earnings from these investments constitute part of the benefit derived by the company from its investment in a project. There is, however, a difference in the rate of return of the reinvestment implicitly assumed under the two methods:
1) The net present value method implicitly assumes that reinvestment of cash inflows earns the hurdle rate of return, the same rate used to discount future cash flows to get present value.
2) The internal rate of return method implicitly assumes that reinvestment of cash inflows earns a rate of return equal to the internal rate of return.
The credit instrument known as a banker’s acceptance
Calls for immediate payment upon delivery of the shipping documents to the bank’s customer and acceptance of goods by the bank.
Involves an invoice being signed by the banker upon receipt of goods, after which both the banker and the seller record the transaction on their respective books.
Is a time draft payable on a specified date and guaranteed by the bank.
Is a method of sales financing in which the bank retains title to the goods until the buyer has completed the payment.
This answer is correct. A banker’s acceptance is a time draft, payable on a specified future date, with the bank guaranteeing the payment.
Which of the following instruments of monetary policy is the most important means by which the money supply is controlled? Changing the reserve ratio. Open market operations. Manipulation of government spending. Changing the discount rate.
This answer is correct. Open market operations through bond sales and purchases are flexible (government securities can be purchased or sold in large or small amounts), cause prompt changes in bank reserves, and are more subtle than reserve ratio changes.
When calculating the cost of capital, the cost assigned to retained earnings should be
(This question is CIA adapted)
Zero.
Lower than the cost of external common equity.
Equal to the cost of external common equity.
Higher than the cost of external common equity.
Lower than the cost of external common equity.
Newly issued or “external” common equity is more costly than retained earnings because the company incurs issuance costs when raising new funds.
Which of the following inventory management approaches orders at the point where carrying costs equate nearest to restocking costs in order to minimize total inventory cost? Economic order quantity. Just-in-time. Materials requirements planning. Activity-based costing (ABC).
The economic order quantity model minimizes the sum of ordering and carrying costs.
In general, does the use of short-term financing require collateral and/or impose restrictive terms on the borrower? Collateral Required Restrictive Terms Imposed Yes Yes Yes No No Yes No No
NO NO
In general, items of short-term financing do not require collateral from or impose restrictive terms on the borrower. Accounts payable and accrued payables, for example, do not require either collateral or have restrictive terms. Similarly, most short-term notes do not require collateral or have restrictive terms.
An organization relied heavily on e-commerce for its transactions. Evidence of the organization’s security awareness manual would be an example of which of the following types of controls? Preventive. Detective. Corrective. Compliance.
PREVENTIVE
This answer is correct because the use of such a manual is designed to prevent breaches of security.
The degree of operating leverage (DOL) is
Constant at all levels of sales.
A measure of the change in earnings available to common stockholders associated with a given change in operating earnings.
A measure of the change in operating income resulting from a given change in sales.
Lower if the degree of total leverage is higher, other things held constant.
This answer is correct. The degree of operating leverage (DOL) is a measure of the change in earnings available to common stockholders associated with a given change in sales volume. It is calculated, for a particular level of sales, as
Percent change in operating income
Percentage change in sales volume
There can be official full employment when there is which of the following kinds of unemployment?
I. Structural unemployment.
II. Frictional unemployment.
III. Seasonal unemployment.
Only I.
Only II.
Only III.
I, II, and/or III.
I, II, and/or III.
This Answer is Correct
There could be official full employment when there is structural, frictional, and/or seasonal unemployment. Only cyclical unemployment is considered in the official measure of full employment.
The following information was taken from the income statement of Hadley Co.:
Beginning inventory 17,000
Purchases 56,000
Ending inventory 13,000
What is Hadley Co.’s inventory turnover?
3.
4.
5.
6.
4
Inventory turnover is computed as: Cost of Goods Sold/Average Inventory. Cost of goods sold (COGS) is the sum of beginning inventory (BI) plus purchases (P), which equals cost of goods available for sale (COGAS), less ending inventory (EI); that difference is cost of goods sold. It would be computed as: BI $17,000 + P $56,000 = COGAS $73,000 - (EI) $13,000 = (COGS) $60,000. Average inventory (AI) is computed as (BI) $17,000 + (EI) $13,000/2, or (AI) $30,000/2 = $15,000. Thus, inventory turnover is (COGS) $60,000/(AI) $15,000 = 4.
