49. A(n) _____ compares different elements of a balance sheet or an income statement to one another.
a.
expense budget
b.
profit budget
c.
internal audit
d.
operations budget
e.
financial ratio
p. 440
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Financial Control
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50. Which of the following summarizes the financial performance of an organization over a period of time?
a.
Balance sheet
b.
Liquidity ratio
c.
Cash flow statement
d.
Income statement
e.
Debt statement
p. 440
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p. 440
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51. Which of the following is the most common means of financial control within organizations?
a.
Financial statements
b.
Ratio analysis
c.
Budgets
d.
Financial audits
e.
Benchmarking
52. John began his company making herb vinegars from a recipe his grandmother had given him. As demand grew, he had
to buy a large commercial kitchen. Which of the following ratios would a banker be most interested in before allowing
John to borrow $500,000?
a.
Liquidity ratio
b.
Balance sheet
c.
Return on investment
d.
Operating ratio
e.
Debt ratio
53. Which of the following reflects a firm’s ability to meet its long-term financial obligations?
a.
Debt ratio
b.
Balance sheet
c.
Return on investment
d.
Profit budget
e.
Liquidity ratio
a
groups, departments, divisions, and the whole organization.
Easy
p. 440
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54. Which of the following ratios assesses the ease with which an organization’s assets can be converted into cash?
a.
Liquidity ratio
b.
Profitability ratio
c.
Debt ratio
d.
Operating ratio
e.
Coverage ratio
a
Easy
p. 440
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55. Financial analysts look at a company’s _____ ratio to determine if it can make interest payments on borrowed capital.
a.
coverage
b.
operating
c.
debt
d.
return
e.
liquidity
a
Moderate
p. 440
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Debt ratios reflect ability to meet long-term financial obligations.
Easy
p. 440
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56. Which of the following statements about financial audits is true?
a.
Audits can only be conducted by experts who are not employees of the organization.
b.
Financial audits are always internal to an organization.
c.
Audits are used to monitor accounting and financial systems within an organization.
d.
Organizational operating systems are not audited.
e.
Publicly held corporations are required by law to have internal audits regularly.
c
operational systems.
Moderate
p. 440
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57. The financial ratio that reflects the ability to meet long-term financial obligations is the _____ ratio.
a.
return
b.
operating
c.
liquidity
d.
debt
e.
coverage
Debt ratios reflect the ability to meet long-term financial obligations.
Easy
p. 440
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58. Which of the following is true of the liquidity ratio?
a.
It indicates how easily an organization’s assets are converted into cash.
b.
It reflects an organization’s ability to meet long-term financial obligations.
c.
It shows managers and investors how much return an organization is generating relative to its assets.
d.
It helps estimate an organization’s ability to cover interest expenses on borrowed capital.
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e.
It indicates the effectiveness of specific functional areas in an organization.
59. Which of the following statements is true of auditing?
a.
External audits tend to be more expensive than internal audits.
b.
External audits are handled by employees of the organization.
c.
Publicly held corporations are required by law to have internal audits regularly.
d.
All organizations are required to have a permanent internal auditing staff.
e.
Organizations contract with certified public accountants for external audits.
p. 440
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60. Which of the following is true of the debt ratio?
a.
It reflects ability to meet long-term financial obligations.
b.
It shows managers and investors how much return the organization is generating relative to its assets.
c.
It indicates how liquid an organization’s assets are.
d.
It indicates the effectiveness of specific functional areas.
e.
It helps estimate the organization’s ability to cover interest expenses on borrowed capital.
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Financial Control
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61. Which of the following is true of the operating ratio?
a.
It reflects ability to meet long-term financial obligations.
b.
It shows managers and investors how much return the organization is generating relative to its assets.
c.
It indicates how liquid an organization’s assets are.
d.
It indicates the effectiveness of specific functional areas rather than that of the total organization.
e.
It helps estimate the organization’s ability to cover interest expenses on borrowed capital.
p. 440
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62. A manager at a supermarket needs to know how easily the store’s assets can be converted into cash. Which of the
following ratios will he use?
a.
Debt ratio
b.
Return ratio
c.
Liquidity ratio
d.
Coverage ratio
e.
Operating ratio
p. 440
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63. An appraisal of an organization’s accounting and financial procedures conducted by employees of that organization is
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known as a(n):
a.
internal audit.
b.
debt audit.
c.
ratio audit.
d.
external audit.
e.
liquidity audit.
64. The purpose of bureaucratic control is to:
a.
support employee participation in the control function.
b.
produce performance above minimum acceptable standards.
c.
get employee compliance.
d.
increase group performance.
e.
increase employee self-control.
The goal of bureaucratic control is employee compliance.
p. 442
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65. Which of the following is characteristic of the bureaucratic approach to organizational control?
a.
Rewards are directed at group performance.
b.
Organizational structure is flat.
c.
Employee participation is extended and informal.
d.
Reliance is on strict rules and a rigid hierarchy.
e.
Performance expectations extend above and beyond the minimum.
Organizations that use bureaucratic control rely on strict rules and a rigid hierarchy.
p. 441
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66. Organizations that use the bureaucratic control are characterized by:
a.
flat structures.
b.
rewards focused on group performance.
c.
limited employee participation.
d.
heavy reliance on group norms.
e.
organic structural arrangements.
c
Moderate
p. 442
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Structural Control
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67. An organization that relies on strict rules and a rigid hierarchy and insists that employees meet minimally acceptable
levels of performance most likely uses _____ structural control.
a.
strategic
b.
decentralized
c.
bureaucratic
d.
organic
e.
screening
c
Moderate
p. 442
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Structural Control
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p. 442
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68. _____ control is an approach to organization design characterized by formal and mechanistic structural arrangements.
a.
Decentralized
b.
Screening
c.
Bureaucratic
d.
Financial
e.
Preliminary
c
Easy
p. 442
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69. An organization that switches to a different type of functional design is changing its method of _____ control.
a.
postaction
b.
bureaucratic
c.
screening
d.
strategic
e.
preliminary
Moderate
p. 443
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70.
Decentralized control is characterized by:
a.
formal rules
b.
an organic structural arrangement.
c.
focus on employee compliance.
d.
a tall structure.
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e.
limited employee participation.
71. Which of the following is an important element of decentralized control?
a.
Group norms
b.
Rigid hierarchy
c.
Tall organization structure
d.
Individual performance
e.
Employee compliance
a
employees the responsibility for controlling themselves.
p. 443
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72. An organization whose goal is employee commitment to the organization most likely uses _____ structural control.
a.
bureaucratic
b.
decentralized
c.
financial
d.
mechanistic
e.
strategic
The goal of decentralized structural control is employee commitment to the organization.
p. 443
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Moderate
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73. At Circlet, a mid-size technology firm, employees are encouraged to participate in various organizational roles and
decision-making functions. Top management relies on a strong corporate culture to foster employee commitment to the
organization. Circlet uses _____ structural control.
a.
bureaucratic
b.
strategic
c.
decentralized
d.
mechanistic
e.
operational
c
Challenging
p. 443
74. Which of the following types of control focuses on leadership and technology control systems?
a.
Bureaucratic
b.
Structural
c.
Operations
d.
Strategic
e.
Screening
Moderate
p. 443
75. Organizations that use _____ strategic control believe it is effective because it allows the home office to keep better
informed of the performance of foreign units.
a.
organic
b.
centralized
c.
mechanistic
d.
bureaucratic
e.
environmental
76. Organizations make the decision of whether to have a centralized or decentralized international control system when
they are addressing issues of ____ control.
a.
screening
b.
strategic
c.
financial
d.
bureaucratic
e.
preliminary
Moderate
p. 444
77. A multinational construction firm does not require its various divisions to report frequently to the head office. The
organization believes in letting each manager have the authority to respond quickly to environmental changes. These
managerial actions do not have to be approved by the head office before they are implemented. This firm uses _____
strategic control.
a.
bureaucratic
b.
mechanistic
c.
decentralized
Moderate
p. 444