D775 Introduction to Business Finance
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What is a financial goal?
- A. the value of the next best alternative that must be forgone as a result of a decision
- B. specific objectives (or goals) that are accomplished through financial planning
- C. managing money continuously through life in order to reach financial goals
Explanation
A financial goal is a specific objective that an individual or business aims to achieve through careful planning and management of financial resources. It provides direction for budgeting, investment, and resource allocation, helping guide decisions toward desired outcomes.
Correct answer
specific objectives (or goals) that are accomplished through financial planning
Which of the following best describes the classification of liabilities based on their due dates?
- A. Current and long-term
- B. Short-term and long-term
- C. Immediate and deferred
- D. Fixed and variable
Explanation
Liabilities are classified based on when they are expected to be settled. Current (or short-term) liabilities are due within one year, while long-term liabilities are obligations due after one year. Immediate/deferred and fixed/variable are not standard classifications for liabilities in accounting.
Correct answer
Current and long-term
The New York Stock Exchange is an example of which of the six parts of the financial system?
- A. Central banks
- B. Government regulatory agencies
- C. Financial markets
- D. Financial instruments
Explanation
The New York Stock Exchange (NYSE) is a financial market where buyers and sellers trade financial instruments such as stocks and bonds. Financial markets provide a platform for the exchange of capital and investment, enabling liquidity, price discovery, and efficient allocation of resources within the economy.
Correct Answer Is:
Financial markets
If a company is planning to launch a new product, how might managerial accounting assist in this process?
- A. By conducting market research on competitors.
- B. By preparing tax returns for the new product.
- C. By providing cost analysis and projected financial outcomes for the new product.
- D. By managing the supply chain logistics.
Explanation
Managerial accounting provides internal financial insights that support decision-making. For a new product launch, it can calculate production costs, forecast revenues and profits, and analyze financial risks. This enables management to assess feasibility, allocate resources effectively, and plan for expected financial outcomes, ensuring that strategic decisions are financially informed.
Correct Answer Is:
By providing cost analysis and projected financial outcomes for the new product
Business finance is concerned with:
- A. Financial Planning
- B. Fund raising
- C. Asset Management
- D. None of the above
- E. All of the above
Explanation
Business finance encompasses a broad range of activities that ensure an organization has the resources it needs to operate and grow. This includes financial planning to forecast needs and allocate resources, fund raising to secure capital from investors or lenders, and asset management to efficiently use and invest financial resources. Together, these functions support the company’s strategic and operational goals.
Correct Answer Is:
All of the above
How is finance used in organizations?
- A. To maximize shareholder value.
- B. To choose between different potential investments.
- C. To ensure that money is at the right place at the right time.
- D. All of these answers.
Explanation
Finance is used in organizations for multiple interconnected purposes. It supports decision-making by evaluating investment opportunities, helps ensure adequate liquidity and efficient cash management, and ultimately aims to enhance value for shareholders or owners. Because finance underpins all these functions, each option listed represents a valid use of finance within an organization.
Correct Answer Is:
All of these answers.
Which of the following is a summary of what a company has earned and spent over a given period?
- A. The balance sheet
- B. The cash flow statement
- C. The income statement
- D. The trial balance
Explanation
The income statement, also called a profit and loss statement, summarizes a company’s revenues and expenses over a specific period, showing whether the company made a profit or incurred a loss. The balance sheet shows assets, liabilities, and equity at a single point in time, the cash flow statement tracks cash inflows and outflows, and the trial balance is an internal accounting tool to ensure debits equal credits.
Correct answer
The income statement
Which item is not one of the six parts of the financial system?
- A. Financial Institutions
- B. Credit cards
- C. Financial Markets
- D. Central Banks
Explanation
The six main components of a financial system are: money, financial instruments, financial markets, financial institutions, government regulatory agencies, and central banks. Credit cards are financial tools or instruments, but they are not considered a primary component of the financial system itself. They are a means of accessing or transferring funds within the system.
Correct Answer Is:
Credit cards
Which of the following statements accurately describes the nature of overhead costs?
- A. It encompasses costs such as utilities, rent, and administrative salaries.
- B. It is solely comprised of direct material expenses.
- C. It represents the total revenue generated by a business.
- D. It is exclusively related to variable costs.
Explanation
Overhead costs refer to the indirect expenses necessary to operate a business that are not tied directly to producing a specific product or service. This includes utilities, rent, administrative salaries, insurance, and other general operating expenses. Overhead does not include direct material costs, total revenue, or exclusively variable costs, as it often contains both fixed and some variable components.
Correct answer
It encompasses costs such as utilities, rent, and administrative salaries.
Which category on a balance sheet would you find a long-term receivable listed?
- A. Long-term assets
- B. Current assets
- C. Short-term investments
- D. Long-term liabilities
Explanation
Long-term receivables are amounts owed to a company that are not expected to be collected within one year. These are classified as long-term assets on the balance sheet because they represent future economic benefits to the company beyond the short-term period. Current assets, by contrast, include cash and receivables expected within a year, while liabilities represent obligations, not receivables.
Correct answer
Long-term assets
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