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Flashcards in Business Principles & Practices Deck (63)
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1

What are the three standard financial reports?

Income statement,
Balance sheet,
Statement of cash flows.

2

What does an income statement show?

Revenue,
Expenses,
Net income over a defined period.

3

What is the underlying equation of the balance sheet?

Assets = liabilities + shareholder equity.

4

What does a balance sheet show?

A summary of an organization’s investing and financing.

5

What does a cash flow statement show?

How cash inflows and outflows affect an organization.

6

What three elements are depicted in a cash flow statement?

Net operating cash flow,
Net investing cash flow,
Financing cash flow.

7

Which two ratios show how an organization has done in making money during a reporting period?

Return on assets = net income/total assets,
Return on equity = net income/shareholders equity.

8

What are the three ways to measure profit margins?

Gross profit margin = (revenue - cost of goods sold - general and administrative costs)/revenue,
Operating margin = EBITA(earnings before interest, taxes, and amortization)/revenue,
Net profit margin = net income/revenue.

9

Which two ratios demonstrate how well the firm has done in making money for a reporting period?

Return on assets = net income/total assets,
Return on equity = net income/shareholders equity.

10

Which two earnings related ratios are commonly examined in financial analysis?

Earnings per share = net income/total shares,
Price to earnings = price per share/earnings per share.

11

What is the current ratio?

The current ratio is a measure of a company‘s ability to cover short term obligations.
Current ratio = current assets/current liabilities.

12

What is the quick ratio?

The quick ratio is a measure of an organization’s ability to cover current liabilities with current assets that can be quickly converted to cash.
Quick ratio = (cash + Securities + accounts receivable)/current liabilities.

13

What is the debt to equity ratio?

The debt to equity ratio is a measure of a company‘s long-term financial health.
Debt to equity ratio = total liabilities/shareholders equity.

14

What are the three main limitations of financial statement analysis?

It doesn’t directly consider changes in market conditions,
All organizations operate differently and target different markets,
Financial reports must be accurate for financial ratios to have meaning.

15

What is a primary benefit of zero based budgeting?

Zero based budgeting may force managers to consider alternative ways of getting the job done.

16

What is generally the most practical approach to budget development?

A combination of top down and bottom up processes.

17

What is an effective way of setting the value of line items in a budget

Look at each budget expense as an investment in calculate the expected return on that investment.

18

Why might lower level managers more readily accept a bottom a budget?

Because they had a role in developing it.

19

Who should be involved in developing a standard?

A broad group of stakeholders and interested parties, working collaboratively.

20

What organization is the worlds largest developer of international standards?

ISO, the international organization for standardization.

21

What are the five pillars of ISO standards?

Equal footing of members,
Market need,
Consensus,
Voluntary participation and application,
Worldwide applicability.

22

What organization is the administrator and coordinator of the US private sector voluntary standardization system?

The American national standards institute (ANSI).

23

Which stakeholder group drives the ANSI standards development process?

Standard users

24

What is the operating principle of ISO’s management systems standards?

The plan-do-check-act cycle.

25

Who should be involved in developing a job requirements analysis?

The hiring manager,
Other team members,
Organizational leaders.

26

What’s the best way to recruit a good candidate for a job?

Internal recommendations.

27

What are the companies top two most valuable resources?

Number one is employees,
Number two is corporate knowledge.

28

What are the five basic functions of management?

Planning,
Organizing,
Directing,
Coordinating,
Controlling.

29

According to Peter Drucker, what is the most crucial question in defining business purpose and mission?

Who is the customer?

30

What is the rule of thumb for allocating for spare parts purchases in a budget?

About 5% of the capital cost of equipment for a location should be allocated each year for spare parts.