Financial Accounting & Commercial Banking

Financial Accounting & Commercial Banking – Introduction To Business

This quiz is about financial accounting and commercial banking.


_____ accounting involves analyzing financial documents in search of fraudulent entries or financial misconduct. 

Management

Forensic – correct

Tax

Financial


Money is a medium of exchange.

True – correct

False


A credit union is owned and controlled by the government.

True

False – correct


An account that represents all unpaid financial obligations incurred by an organization is called 

accounts payable.

long-term liabilities.

accrued expenses. – correct

current assets.


_____ bonds are best described as a sequence of small bond issues of progressively longer maturity. 

Serial – correct

Debenture

Secured

Junk


A nonbanking financial institution that buys and sells stocks, bonds, and other securities for its customers is called a 

thrift bank.

credit union.

brokerage firm. – correct

finance company.


_____ analysis refers to calculations that measure an organization’s financial health. 

Ratio – correct

Specific

General

Cash-flow


The balance sheet presents a “snapshot” of an organization’s financial position at a given moment. 

True – correct

False


Which of the following equations is used to calculate return on equity? 

return on equity = net income/total assets

return on equity = net income/sales

return on equity = net income/owners’ equity – correct

return on equity = assets + liabilities


Which of the following types of accountants has titles such as controller, tax accountant, and internal auditor? 

noncertified accountants

private accountants – correct

forensic accountants

certified public accountants


A company’s financial obligations to short-term creditors, which must be repaid within one year, are called its 

net profit.

current assets.

accounts payable.

current liabilities. – correct


A(n) _____ underwrites new issues of securities for corporations, states, and municipalities needed to raise money in the capital markets. 

certified public accountant

certified management accountant

private accountant

investment banker – correct


Which of the following is an arrangement by which a bank agrees to lend a specified amount of money to an organization upon request? 

a floating-rate bond

a lockbox

a trade credit

a line of credit – correct


_____ allow consumers to perform an ever-widening array of financial transactions from their personal or work computers. 

Automated teller machines

Credit card terminals

Online banking services – correct

Magnetic stripe readers


_____ includes the owners’ contributions to a company along with income earned by the company and retained to finance continued growth and product development. 

Owner’s liability

Revenue

Owner’s equity – correct

Owner’s assets


_____ is a written promise from one company to another to pay a certain amount of money. .

Secured bond

Certificate of deposit

Trade credit

Commercial paper – correct


Which of the following statements is true of bonds? 

They denote a firm’s current liabilities.

They are the same as preferred stock.

They can be defaulted without penalty.

They must be repaid according to the terms set in the indenture. – correct


Profitability ratios measure 

the performance of the firm relative to others on a per-share basis.

the speed with which a company can turn its short-term assets into cash to pay off its short-term debts.

how efficiently a firm uses its assets to generate sales.

how much operating income or net income a firm is able to generate relative to its assets, equity, and sales. – correct


Serial bonds are a sequence of small bond issues of progressively longer maturity.

True – correct

False


The Federal Reserve Board controls the amount of money available in the economy 

by printing new currency notes.

through monetary policy. – correct

by issuing credit cards.

by levying heavy taxes.


The _____, an asset utilization ratio, indicates how many times a firm collects its accounts receivable in one year. 

inventory turnover

accounts payable

asset turnover

receivable turnover – correct


Open market operations refer to decisions to 

regulate income tax rates for the open market.

buy or sell U.S. Treasury bills and other investments in the open market. – correct

issue savings accounts and certificates of deposit in the open market.

set a credit limit for the credit cards.


Cash, investments, accounts receivable, and inventory are 

long-term assets.

long-term liabilities.

current assets. – correct

retained earnings.


_____ are savings accounts that guarantee a depositor a set interest rate over a specified interval of time as long as the funds are not withdrawn prematurely. 

Checking accounts

Certificates of deposits – correct

Demand deposits

Money market accounts


The Federal Reserve Board was established by Congress in 1913 to 

regulate corporate money laundering.

facilitate global monetary cooperation.

regulate the banking industry. – correct

provide benefits to retirees and the unemployed.


Which of the following statements is true of junk bonds? 

They have low inherent risks.

They offer relatively high rates of interest. – correct

They are short-term liabilities.

They are a sequence of small bond issues of progressively longer maturity.


Which of the following types of marketable securities are the safest?

certificate of deposit

U.S Treasury bills – correct

commericial paper

cash deposits


New issues of stocks and bonds are sold directly to the public and to institutions in what is known as the primary market. 

True – correct

False


The _____ Act limits the types of assets commercial banks can buy; the amount of capital they must maintain; and the use of derivative instruments such as options, futures, and structured investment products. 

Celler-Kefauver

Glass-Steagall

Sarbanes-Oxley

Dodd-Frank – correct


The oldest and largest of all financial institutions are 

savings and loans associations.

insurance companies.

credit unions.

commercial banks. – correct


_____ ratios provide information about how much debt an organization is using relative to other sources of capital, such as owners’ equity. 

Debt utilization – correct

Asset utilization

Receivables turnover

Quick


_____ accounts are similar to interest-bearing checking accounts, but with more restrictions. 

Money market – correct

Savings

Current

Certificates of deposit


A debit card 

provides a hard “paper trail.”

allows cardholders to pay for transactions at a later date.

offers a purchase “grace period.”

looks like a credit card but works like a check. – correct


_____ are businesses that protect their clients against financial losses from certain specified risks in exchange for a fee, called a premium. 

Insurance companies – correct

Mutual savings banks

Investment banks

Finance companies


_____ ratios compare current assets to current liabilities to indicate the speed with which a company can turn its assets into cash to meet debts as they fall due. 

Profitability

Current

Debt

Liquidity – correct


Corporations usually employ _____ to help sell their securities in the primary market. 

investment banking firms – correct

stock brokers

commercial banks

capital budgeters.


Asset utilization ratios measure 

how much income a firm generates relative to its assets, equity, and sales.

how well a firm uses its assets to generate each $1 of sales. – correct

the speed with which a company can turn its short-term assets into cash to pay off its short-term debts.

the performance of the firm relative to others on a per-share basis.


The _____ Act required firms to be more rigorous in their accounting and reporting practices. 

Williams

Glass-Steagall

Sarbanes-Oxley – correct

Celler-Kefauver


The _____ presents a snapshot of an organization’s financial position at a given moment. 

net income

profit margin

statement of cash flows

balance sheet – correct


The principal value of a budget lies in its 

evaluation of the firm’s performance.

purpose of control over expenditures.

breakdown of cash inflows and outflows. – correct

forecast of income and expenses over a period of time.


Employees of a local school conduct their financial transactions through a financial institution, which is also owned by them. This financial institution is most likely to be a(n) 

insurance company.

savings and loan association.

credit union. – correct

federal bank.


_____ are marketable securities that are short-term debt obligations sold by the U.S. government to raise money.

Commercial certificates of deposits

U.S. Treasury bills – correct

Trade credits

Secured loans


Double-entry bookkeeping is a system of recording and classifying business transactions 

in all accounts including those that do not maintain the accounting equation.

by the amount of the transaction.

in the same account.

in separate accounts in order to balance the accounting equation. – correct


The _____ insures individual bank accounts. 

National Credit Union Administration

Federal Savings and Loan Insurance Corporation

Federal Deposit Insurance Corporation – correct

Federal Reserve Board


The over-the-counter securities market 

does not have a central location. – correct

is similar to organized stock exchanges.

accounts for the least total dollar value of all of the secondary markets.

does not trade corporate bonds.


Working capital management refers to  

managing short-term assets and liabilities. – correct

financing internal projects.

managing long-term liabilities.

managing long-term assets.


The _____ rate is the interest rate commercial banks charge their best customers for short-term loans. 

credit

factor

over-the-counter

prime – correct


An income statement shows 

an organization’s profitability over a period of time. – correct

how much income each employee earned.

a company’s assets, liabilities, and equity.

a company’s variable costs at a particular point in time.


_____ is the total amount of money received from the sale of goods or services, as well as from other business activities such as the rental of property and investments. 

Profit

Revenue – correct

Expense

Net income


A finance company that buys other companies’ accounts receivable for less than they are worth and assumes the responsibility for collecting the debt is known as a 

conciliator.

brokerage.

factor. – correct

lockbox.


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