Chapter 11Multiple ChoiceChoose the letter of the best answer to the questions listed below.I.Which of the following is not an advantage of preparing and using a budget?a It allows managers to anticipate and prepare for future business conditionsb.It provides managers defined standards used to develop and enforce appropriate costcontrol systemsc.It ensures that the first department to request additional funding will receive itd.It helps managers periodically carry out a self-evaluation of the organization and itsprogress toward its financial objectives2.A budget’s horizon refers to_a.The amount of profit projected for the businessb.The amount of revenue projected for the businessC.The level of management consulted in preparing the budgetd.The time period included in the budget3.A long-range budget typically covers_a.One monthb.One weekc.Five yearsd.One year4.A weekly plan for the number of servers needed in a restaurant and their estimated wages isan example of a(n)a.Achievement budgetb.Cash budgetC.Long-range budgetd.Capital budget5.What type of budget is management’s estimate of all(or any portion of)the income statement?a.Cash budgetb.Operations budgetC.Standards budgetd.Capital budget6.What type of budget is developed by management to estimate the actual impact on cashbalances that will result from operating,investing,and financing activities?a.Cash budgetb.Operations budgetc.Standards budgetd.Capital budgetWhich of the following is not essential information to have when preparing an operationsbudget?a.Knowledge of the organization’s financial objectivesb.Assumptions about the next period’s operationsC.Information from prior periodsd.Knowledge of industry standards for similar operations8.Forecasting revenues for an operations budget is critical becausea.If revenues are high,the business will be profitableb.Expected revenues will determine how much the owner will pay in taxesc.All forecasted expenses and profits will be based on revenue forecastsd.It is impossible to forecast profits9.Which of the following types of costs are not included in an operations budget?a.Mixed costsb.Fixed costsC.Variable costsd.Capitalization costs10.Bonuses,sick leave,and employee meals are examples of_a.Payroll allocationsb.Payroll taxesC.Salary deductionsd.Tax-free income11.Which of the following is not part of the operations budget monitoring process?a.Compare actual results to the operations budgetb.Use a bidding process to ensure the best pricec.Identify significant variancesd.Take corrective action or modify the budget12.Which of the following is not a characteristic of an effective management control system?a.Emphasis on protecting company assetsb.Placing a trusted employee in charge of all financial transactionsC.Cost effectivenessd.Separation of responsibilitiesTrue/FalseChoose the letter of the best answer to the questions listed below.13.An annual budget always includes 12 one-month periods.Bonuda.Trueb.FalseChapter 12Multiple Choicehoose the letter of the best answer to the questions listed below.I.Capital budgets are used toa.Plan and evaluate purchases of fixed assetsb.Plan and evaluate hiring of new employeesc.Plan and evaluate revenues and expenses associated with the everyday running of abusinessd.Both a and c2.The concept that money has different values at different points in time is calleda.Income deferralb.Time value of moneyC.Return on investmentd.Capital investment3.What is the best definition of compounding?a.The process of determining the discounted value of moneyb.The process of evaluating the risk of an investmentc.The process of money earning interest and growing to a future valued.Taking inflation into account when evaluating an investment4.Maximum returns on money invested(ROI)are achieved by utilizing which of the followinginvestment strategies?a.Increasing the length of time money is investedb.Defer(delay)any cash flow into the futurec.Increasing the annual rate of return on the investmentd.Both a and c5.An owner’s ROI can be calculated as follows:a.Funds invested/Money earned on funds investedb.Funds invested/Net operating incomeC.Net operating income/Funds investedd.Money earned on funds invested/Funds invested6.The relationship between the annual savings achieved by an investment and the initial capitalinvested is called thea.Savings rate of returnb.Book value of the investmentc.Money earned on funds investedd.Payback periodThe length of time it will take to recover 100% of an amount invested is called the_a.Payout periodb.Return thresholdc.Payback periodd.Savings rate of return8.In the hospitality industry,are utilized to compare the price of enteringa business(the investment)with the anticipated,but not guaranteed,returns from thatinvestment(net operating income).a.Profit ratiosb.Capitalization ratesC.Book valuesd.Property values9.When investors raise money by selling a portion of ownership in the company,they areutilizing_a.Capitalization ratesb.Debt financingC.Property valuesd.Equity financing10.What is the debt coverage ratio?a.A measure of how much of the investor’s funding comes from debtb.A measure of how likely the business is to actually have the funds necessary for loanrepaymentc.The ratio of the outstanding debt on a property to the market value of that propertyd.The ratio of the debt financing on a property to the equity financing11.Which of the following is not an advantage of leasing capital equipment?a.Low cost tax advantagesb.100%financingC.Property can be used as collateral for loansd.Improved return on investment12.is generally defined as gross income adjusted for variousdeductions allowable by law.a.Taxable incomeb.Accumulated depreciationc.Realized capital gainsd.Total taxable assessment
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