Which of the following best describes how you manage your money?
Have a budget and keep track of all spending for things like housing, food, gas, and entertainment
Have a budget and keep track of major spending for things like housing and car payments
Do not have a formal budget, but have a very good idea of how much I spend on things like housing, food, gas, and entertainment
I have a general sense of what I am spending but do not really track things
I don’t really keep track of my spending.
Approximately how much interest would be paid in one year on a loan with $10,000 balance and an annual percentage rate of 10%
If the interest rate on your saving account was 2% per year and inflation was 3% per year, after one year how much would you be able to buy with the money from your savings account?
More than today
The same as today
Less than today
Need additional information to determine
Through your 401K at work, you have invested in a mutual fund. During the year, the value of the mutual fund declined from $50 to $45. What has happened to the value of your 401K?
Nothing, 401K investments cannot lose value
Nothing, the employer is responsible for any losses
If you deposit $100 into a bank account with an annual interest rate of 10%, how much money will you have in two years?
If a product regularly sells for $60, and the store is having a sale and offering 25% off the regular price, how much money will you save if you buy the product at the sale price instead of the regular price?
If investment A is expected to earn a 5% return and investment B is expected to earn a 20% return, which of the following is most likely to be true?
Investment A is riskier than investment B
Investment B is riskier than investment A
I will always earn more money with investment A
Investment B is a great opportunity
Which of the following best explains the concept of the time value of money:
Money that is not spent today can be spent at a later date.
Money received today can be invested to earn more money by a future date.
Over time, the value of a country’s currency fluctuates in the world market.
The money the government borrows must be repaid from taxes at a future date
If you have a monthly budget, and you have had some unexpected repair bills for your car for which you paid cash in June, which of the following is likely to be true about your budget?
There is no effect on the budget since this expense was unexpected
You will need to reduce some other expenses in June to stay within your budget.
The extra money spent in June can be spread over the budget for the next three months.
Unexpected spending does not effect a budget
If the sales of a business increased from $50,000 to $60,000 during a month while profits increased from $10,000 to $15,000 during the same month, which of the following is true?
On a percentage basis, sales have increased more than profits
On a percentage basis, profits have increased more than sales
Sales and profits have increased by the same percentage
The business lost $5,000 of profits
If you borrowed $20,000 to purchase a car using a 6 year car loan. Your monthly payment includes both principal and interest. After 3 years, how much money do you still owe on this loan?
More than $10,000
Less than $10,000
You have decided to purchase a new home appliance at a cost of $1,200. The store is offering some special deals, and you are offered three options to pay for the appliance. You can pay $1,200 now, pay $100 a month for 12 months, or pay $1,200 one year from now. From a financial perspective, which is the more advantageous offer?
Pay $1,200 now
Pay $100 per month for 12 months
Pay $1,200 one year from now
They are all the same
In corporations, budgets are primarily used to:
Complete profit and loss statements
Evaluate new hires
Post credits and debits
Businesses often look at gross margin, the percentage of profit made on each unit sold, when they evaluate new products. If product A costs $2 per unit and sells for $5 per unit, and product B costs $70 per unit, and sells for $100 per unit, which of following is true?
Product A has a higher gross margin percentage than product B
Product B has a higher gross margin percentage than product A
Their gross margin percentages are the same
There is not sufficient information provided to calculate gross margin percentage
Assume that last year you used a $200,000, 6% annual adjustable rate mortgage to purchase a home. Your current monthly mortgage principal and interest payment is $1,200 per month. Which of the following will be true should interest rates go up 2% by your first reset date?
The monthly mortgage payment will rise to approximately $1,224
The monthly mortgage payment will remain at $1,200
The monthly mortgage payment will rise to approximately $1,479
The monthly mortgage payment will rise to approximately $1,895
You have agreed to sell your business partner your half of the business for $10,000. He has offered you two options for payment. The first option is to pay you $10,000 today. The second option is a guaranteed payment of $11,000 one year from now. From a financial perspective, which of the following is most important to consider in making your decision?
The dollar difference between $10,000 and $11,000
The percentage difference between $10,000 and $11,000
How much I could earn by investing the $10,000 for one year.
How much the business will be worth in one year.
The rules that accountants generally use to prepare financial statements are:
Very explicit and cover all possible events
Generally well-defined, but at times require subjective decisions on allocation and categorization of certain events
Allow the accountants to be creative when booking accounting entries
Which of these is a synonym for profit?
Which of the following statements is true?
If a business is profitable, cash flow and profits will be equal
If a business is not profitable, cash flow will always be less than profits
Cash flow and profits will always be equal
Cash flow and profits can be different
On which of the following statements would you most likely look to determine how much money the business made last month?
Cash flow statement
Profit and loss statement
The fundamental accounting rule for the balance sheet is:
Revenue – expenses = profits
Assets + profits = cash flow
Assets = liabilities + owner’s equity
Owner’s equity = Cash - liabilities
For any business to be sustainable, it must have ongoing cash flow from:
The operation of the business
The purchase and sale of assets
All of these are necessary
In the business world, it’s very typical for a company to sell a product or service at one point and actually collect the money from the customer at a different point. Which of the following businesses is likely to be able to collect from the customers most quickly.
A manufacturer of light bulbs
A home improvement contractor
An internet retailer
A government contractor
A company is considering opening a new store. The rent and other operating expenses for the store are expected to be $1,200 per month. If the average sale from this store is $50, and the store makes a 40% profit on each unit sold, how many units must be sold each month to breakeven?
If you were looking at two products sold by the same company and asked to identify the most profitable, the best way to determine this would be look at:
Revenue per unit
Profit per unit
Cash flow per unit
Cost of goods sold per unit
The key reason it is important to manage the cash in a business is:
Cash management helps keep track of credits and debits
A business needs cash to pay its bills
A business needs profits and cash to pay its bills
Without cash, there can be no profits
Which of the following must a business have to be sustainable?
Cash flow from the sale of assets such as manufacturing equipment
Cash flow from lenders and investors
Cash flow from the operations of the business
Cash flow to pay dividends to outside investors.
Which product is it most desirable for a store to sell?
Highest price per unit
Highest profit per unit
Lowest margin per unit
Lowest cost per unit
If a business spends $100,000 to purchase a piece of equipment on July 31, what is the immediate effect of this purchase on the profit and loss statement for July?
Profits are reduced by $100,000 during month of purchase
There is no effect on profits
July profits will increase by $100,000
Profits are reduced by $100,000 less this month’s depreciation.
Which of the following is a risk that you might encounter when expanding the sales of retail business?
A shortage of cash to fund ongoing operations
An increase in cost of goods sold per unit
Additional accelerated depreciation
Since sales have increased, there are no risks
You are reviewing the financial reports of a traditional manufacturing company where products are shipped upon completion and customers are billed at the end of the month. You notice the cash balance has increased. What is the most likely reason for this increase?
Customers have paid their bills
Operating expenses have declined
Customers have been granted additional credit
Sales have increased
You are managing a small business for an owner who lives in another city. He has invested his money in the business and has allowed you to run it. One day, the owner calls and says his returns from the business have declined. Which of the following is the most probable cause:
The owner has withdrawn the profits
Profits are down
Earnings have increased
The business has sold some assets
In reviewing the monthly financial reports for your company, you notice that profits have declined even though sales volume is constant. A possible cause of this is:
The company spent money to purchase some assets
Suppliers are discounting the price of their products
Operating expenses are higher than in prior periods
A big payment was made to the bank
You are the manager of a local retail store, and are considering adding additional help to the Saturday afternoon shift. To help you determine if this will be a profitable move, you should:
Compare the profit contribution to the net margin
Compare the additional sales to the cost of paying that employee
Compare the additional profits to the cost of paying that employee
Determine if there are slots in the schedule
You are a department manager for a major manufacturing business that operates on a calendar year. It’s the middle of December and there is still $2,000 in the training budget for the year. One of the employees in your department requests to take a training class later in the month that will use up this remaining training budget. If you approve this training class, what is the likely effect on the profits of the business for the current year?
There will be no effect on profits as the training has already been budgeted
Profits will decrease by $2000
Since the bill for training won't be paid until January, there will be no effect on profits.
Since you spent this year’s training budget, you can expect the same allocation next year
It’s the close of business on December 31, and you are looking at the financial statements of your company and note that the company has $300 of cash, profits of $200, and $600 of retained earnings. How much money is available to pay the bills on January 1?
Which of the following is not found in the assets section of the balance sheet?
If your business made a loan payment of $1,000 during the month consisting of $900 of interest and $100 of principal, which amount would you expect to see on the profit and loss statement for that month?
If your business made a loan payment of $1,000 during the month consisting of $900 of interest and $100 of principal, which amount would you expect to see on the cash flow statement for that month?
If your business made a $1,000 equipment lease payment during the month, how would this payment typically be recorded on your financial statements?
As a change in asset value
As a repayment of debt
As an operating expense
As a reduction in accumulated depreciation
Which of the following best describes your role in your company or business?
Manage other managers
Which of the following best describes your education?
Did not graduate high school
High school graduate
Masters degree or Ph.D.
What is your current age?
18 to 25
26 to 35
36 to 45
46 to 55
How long have you been in the workforce?
Under 3 years
3 to 5 years
5 to 10 years
10 to 20 years
More than 20 years
Not in workforce
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