36) Which of the following is one of the positive benefits of an effective ethics program?
A) reduce potential litigation and judgment costs
B) maintain and build competitor confidence
C) gain the loyalty, commitment, and respect of the firm’s competitors
D) making sure violations are penalized, while at the same time not subjecting the employee to
publicity
37) The implementation of a pro-active ethics program is expected to result in ________.
A) a positive corporate image and increased respect, but is not expected to affect cash flows
B) an increased share price resulting from a decrease in risk, but is not expected to affect cash
flows
C) a positive corporate image and increased respect, but is not expected to affect share price
D) a positive corporate image and increased respect, a reduction in risk, and enhanced cash flow
resulting in an increase in share price
38) An effective ethics program ________.
A) can weaken corporate value
B) has no effect on a corporation’s value
C) can enhance a corporation’s value
D) will result in high employee attrition rate
39) Corporate ethics policies typically apply to ________ in dealing with ________.
A) employee actions; customers and creditors
B) employee actions; customers, vendors, and regulators
C) management actions; all corporate constituents
D) employee actions; all corporate constituents
1) 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.
2) The treasurer typically manages a firm’s cash, investing surplus funds when available and
securing outside financing when needed.
3) A corporate treasurer’s focus tends to be more external, while the controller’s focus is more
internal.
4) The accrual method recognizes revenue at the point of sale and recognizes expenses when
incurred.
5) 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.
6) A corporate treasurer typically handles both the cost accounting and financial accounting.
7) 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.
8) The financial manager of a firm prepares financial statements that recognize revenue at the
point of sale and expenses when incurred.
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.
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.
11) An accountant’s primary function is ________.
A) the evaluation of the financial statements
B) making decisions based on financial data
C) the collection and presentation of financial data
D) the planning of cash flows
12) A treasurer is commonly responsible for handling ________.
A) tax management
B) corporate accounting
C) investing surplus funds
D) cost accounting
13) A controller is commonly responsible for ________.
A) managing cash
B) financial accounting
C) managing credit activities
D) financial planning
14) A ________ is 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.
A) treasurer
B) controller
C) foreign exchange manager
D) pension fund manager
15) A ________ is responsible for the firm’s accounting activities, such as corporate accounting,
tax management, financial accounting, and cost accounting.
A) treasurer
B) controller
C) foreign exchange manager
D) pension fund manager
16) Which of the following is true of accrual basis accounting?
A) Expenses are recognized either when they are incurred or cash is paid.
B) Revenue is recognized when a customer pays cash.
C) Expenses are recognized when they are incurred.
D) Revenue is recognized when a customer pays cash or shows interest to purchase the product
or service.
17) Which of the following is true of cash basis accounting?
A) All credit sales will be recorded as revenue.
B) Revenue is recognized when a customer pays cash.
C) Expenses are recognized when they are incurred.
D) Accounts receivable and accounts payable can never be zero.
18) A financial manager is interested in the cash inflows and outflows of a firm, rather than the
accounting data, in order to ________.
A) ensure profitability
B) maintain healthy public relations
C) ensure timely payment of taxes
D) maintain an optimum solvency level
19) Which of the following is the responsibility of a finance manager?
A) processing purchase orders and invoices
B) ensuring accounts payable are paid on time
C) preparing the monthly income statement
D) analyzing the capital needs of the firm
20) Economic theories that a financial manager must ensure for efficient business operations,
include ________.
A) supply-and-demand analysis
B) asset pricing theory
C) Porter’s theory of five forces
D) Monte-Carlo simulation
21) The primary economic principle used in managerial finance is ________.
A) purchase power parity
B) asset pricing theory
C) Porter’s theory of five forces
D) marginal cost-benefit analysis
22) Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of
merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full
for the merchandise during the year, it is yet to collect at year end from the customer. The net
profit and cash flow from this sale for the year are ________.
A) $3,000 and $10,000, respectively
B) $3,000 and -$7,000, respectively
C) $7,000 and -$3,000, respectively
D) $3,000 and $7,000, respectively
23) A firm has just ended its calendar year making a sale in the amount of $150,000 of
merchandise purchased during the year at a total cost of $112,500. Although the firm paid in full
for the merchandise during the year, it is yet to collect at year end from the customer. The net
profit and cash flow from this sale for the year are ________.
A) $0 and $150,000, respectively
B) $37,500 and -$150,000, respectively
C) $37,500 and -$112,500, respectively
D) $150,000 and $112,500, respectively
24) ________ is one of the primary responsibilities of a financial manager.
A) Monitoring quarterly tax payments
B) Analyzing budget and performance reports
C) Determining the audit policy
D) Preparing income statements
25) By concentrating on cash flows within a firm, the financial manager should be able to
________.
A) prepare tax returns
B) control the share price
C) avoid insolvency
D) maintain public relations
26) Marginal analysis states that financial decisions should be made and actions should be taken
only when ________.
A) marginal revenue equals marginal cost
B) benefits equal costs
C) added benefits exceed added costs
D) added benefits are greater than zero
27) A firm has just ended its calendar year making a sale in the amount of $200,000 of
merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full
for the merchandise during the year, it is yet to collect at year end from the customer. The
possible problem this firm may face is ________.
A) high taxes
B) lack of cash flow
C) inability to receive credit
D) high leverage
1.5 Identify the primary activities of the financial manager.
1) A financial manager’s primary activities include making investment and financing decisions.
2) Financing decisions deal with the left-hand side of the firm’s balance sheet.
3) Which of the following line items in a balance sheet is considered the most for making a
financing decision?
A) current assets
B) long-term liabilities
C) revenue
D) cost of goods sold
4) Investment decisions generally refer to the items that appear on the ________.
A) left-hand side of the balance sheet, and financing decisions relate to the items on the right-
hand side
B) right-hand side of the balance sheet, and financing decisions relate to the items on the left–
hand side
C) right-hand side of the balance sheet, and financing decisions relate to the items on the income
statement
D) left-hand side of the balance sheet, and financing decisions relate to the items on the income
statement
5) Which of the following is one of the key activities of a financial manager?
A) making financing decisions
B) managing cost accounting
C) managing financial accounting
D) making legal policy decisions