Question

Chapter Quiz: BA118ch08

Started: Apr 22 at 6:52pm

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Question 12 pts

1. One of the major objectives of financial plans is to build traffic.

True

False

2. Which of the following is a type of financial statement fraud?

All of these answers are correct

Taking advantage of the accounting cutoff period to boost sales

Concealing paperwork related to expenses

Overstating inventory value

Not disclosing all changes in accounting procedures

3. The income statement includes which of the following?

Gross Profit

Net Income before taxes

Income taxes

Operating Expenses

All of these answers are correct.

4. Which is a category of assets?

Long-term assets

Current Assets

Concurrent

Long-term assets and current assets

None of these answers is correct

5. Blockbuster Video and the Borders Group, Inc. are companies that have successfully reorganized after declaring bankruptcy.

False

True

6. If current assets are $50,000 and current liabilities are $68,000 then the current ratio is .27 to 1.

True

False

7. Gross profit is the difference between the retailer’s net sales and the cost of goods sold.

False

True

8. Primary statements or reports found in a retail accounting system include which of the following?

None of these answers is correct.

Site selection criteria

A report on growth management

a balance sheet

Inventory projections

9. A retail accounting system

is a storage center for laws related to running the business

helps a retailer account for each employee

houses information related to site location

can only be accessed by upper management

None of these answers is correct.

10. Liquidity ratios reflect management’s control of

long-term liabilities

current assets and current liabilities

cash

All of these answers are correct

long-term assets

Answer 1

ANSWER TO QUESTION 1 :

The key objectives of Financial Planning are :

1. Determining capital requirements- This will depend upon factors like cost of current and fixed assets, promotional expenses and long- range planning. Capital requirements have to be looked with both aspects: short- term and long- term requirements.
2. Determining capital structure- The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt- equity ratio- both short-term and long- term.
3. Framing financial policies with regards to cash control, lending, borrowings, etc.
4. A finance manager ensures that the scarce financial resources are maximally utilized in the best possible mannerat least cost in order to get maximum returns on investment.

Therefore , it is FALSE that One of the major plans of financial plans is to buildtraffic

ANSWER : FALSE

ANSWER TO QUESTION 3 :

Income statement is also known as Profit & Loss Statement of a company .

Income statement usually calculates following :

Gross profit = Total revenue – cost of goods sold

Operating profit = Gross profit _- Operating expenses

Net income = Operating profit – Interest – Depreciation /amortisation – Income tax

Therefore , correct answer would be “ all of the answers are correct “

ANSWER : ALL OF THE ANSWERS ARE CORRECT

ANSWER TO QUESTION 4 :

The two main types of assets are current assets and non-current assets. These classifications are used to aggregate assets into different blocks on the balance sheet, so that one can discern the relative liquidity of the assets of an organization.

Current assets are expected to be consumed within one year, and commonly include the following line items:

• Cash and cash equivalents
• Marketable securities
• Prepaid expenses
• Accounts receivable
• Inventory

Non-current assets are also known as long-term assets, and are expected to continue to be productive for a business for more than one year. The line items usually included in this classification are:

• Tangible fixed assets
• Intangible fixed assets
• Goodwill

Therefore, correct answer would be “long term assets and current assets”

ANSWER : LONG TERM ASSETS AND CURRENT ASSETS

ANSWER TO QUESTION 5 :

On January 12, 2012, Borders Group, Inc. went out of business as per its Chapter 11 liquidation filing under bankruptcy. Borders Group, Inc., through its subsidiaries, engages in the operation of book, music, and movie superstores, as well as mall-based bookstores

Blockbuster LLC, formerly Blockbuster Entertainment, Inc.,^[4] and also known as Blockbuster Video^[5] or simply Blockbuster, was an American-based provider of home movie and video game rental services through video rental shops, DVD-by-mail, streaming, video on demand, and cinema theater. It went into bankruptcy and became defunct in 2013

Therefore , answer to given question is “ FALSE “

ANSWER : FALSE

ANSWER TO QUESTION 6 :

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the current total assets of a company (both liquid and illiquid) relative to that company’s current total liabilities. The formula for calculating a company’s current ratio is:

Current Ratio = Current Assets / Current Liabilities

Therefore , current ratio in this case = 50,000/68,000 = 0.735

Therefore, current ratio is within range 0.27 and 1

Therefore , correct answer is “ TRUE”

ANSWER : TRUE

ANSWER TO QUESTION 7 :

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Gross profit will appear on a company's income statement, and can be calculated with this formula:

Gross profit = Revenue - Cost of Goods Sold

Therefore , correct answer will be “TRUE “

ANSWER : TRUE