Southern New Hampshire University
OL-110 Intro to Business
EXAM 4 questions and answers
1
Riley had a checking account and a savings account with a bank. She used online access to her account to move
$50 each month from her checking account to her savings account.
Which of the following does this scenario illustrate?
A point of sale terminal
An automated clearing house
An automatic teller machine
An electronic funds transfer
CONCEPT
Financial Institutions and Their Services
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2
Which of the following correctly describes the market value of a stock?
A balance sheet provides which of the following?
A record of the company's operating expenses
The amount of cash going in and out of a business
A snapshot of a company's financial situation
The money earned or lost by a business for a set time period
CONCEPT
Financial Planning
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4
Colin was a manager for EST Corporation, and the company wanted to expand into a new region. Colin
analyzed data to determine how much money the company could make from the expansion within two years.
Which responsibility of financial management below did Colin demonstrate?
Evaluated trends in the market the company would enter
Prepared the income statement for external users to review
Evaluated short term financing options for the expansion
Evaluated immediate cash flow issues from different departments
CONCEPT
Financial Accounting as Compared to Managerial Accounting
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5
A budget is used to manage the finances for a business for which of the following reasons?
To accurately assess the investments of a business
To value the assets a business maintains
To make sure spending is planned and controlled
To identify the losses a business could incur
CONCEPT
Role of Financial Management
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6
Which of the following companies is more likely to use a loan secured by inventory for its short term financing?
An accounting firm that provides tax preparation and
financial planning services
A struggling web development company with no options
for collateral
A home repair company that needs a long repayment period to
pay back a loan
A grocery store chain that keeps large quantities of products on
hand
CONCEPT
Secured Short Term Financing
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7
Which of the following is true, regarding the risk return relationship?
A conservative investment is more likely to have the highest return.
A conservative investment is the riskiest type of investment.
An aggressive investment is likely to have the highest return.
An aggressive investment is less likely to involve a lot of risk.
CONCEPT
Investors and Private Placement
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8
Which of the following does a high debt to owner's equity ratio signal?
The company assumes too much risk.
The company is able to pay offcurrent debts.
The company relies too much on debt.
The company is not credit worthy.
CONCEPT
Budgeting
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9
A well-known corporation planned to expand one of their product lines and needed financing. The
corporation wanted financing that could be quickly arranged. All information about the financing needed to
be kept confidential so their competitors would not find out about the expansion.
Which of the following types of financing is the company likely to use?
Venture capitalist
Long term loan
Corporate bond
Stock offering
CONCEPT
Debt Financing
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10
Which of the following best describes a promissory note?
It is an agreement that allows a business to take possession
of goods it needs from a supplier.
It is an agreement where a financial institution keeps a
monetary deposit for a defined period of time.
It is a document that describes the rights a borrowing member has
with regard to a financial institution.
It is a legal instrument signed by a borrower that defines a
specific payback date and amount for a loan.
CONCEPT
Trade Credit and Promissory Notes
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11
Which statement describes a savings and loan association?
Focuses primarily on commercial business loans
Focuses primarily on earning a profit through taking deposits
and offering loans.
Focuses primarily on serving the needs of its cooperative
membership
Focuses primarily on loans rather than deposits
CONCEPT
Financial Institutions and Their Services
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12
Which of the following is a characteristic of an angel investor?
Provides initial funding to a business from personal finances
Typically loans a business money for no longer than 10 years
Provides growth funding for a startup company to expand
Assesses and evaluates risk more thoroughly before loaning money
CONCEPT
Investors and Private Placement
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13
Which of the following is true about short term financing?
A lending institution usually requires a business to repay a short
term loan within a year.
Short term financing often requires a business to provide
collateral to obtain the loan.
The need for short term financing by a business signals that the
business is in distress.
Short term financing tends to be a risky option for
financial institutions.
CONCEPT
Trade Credit and Promissory Notes
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14
Which of the following can investors use to evaluate a company's potential earning power?
Debt to owner's equity ratio
Earnings per share
Current ratio
Asset to liabilities ratio
CONCEPT
Equity Financing
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15
Which of the following best describes the Federal Reserve?
It provides loans to different organizations.
It backs insurance policies that protect businesses.
It takes deposits from consumers.
It serves as a bank for the government.
CONCEPT
Federal Reserve
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16
Which of the following is true regarding risk management?
Large and small companies need to manage issues with
speculative risks.
Pure risk typically results in potential gains for an organization.
Speculative risks are usually associated with natural disasters.
Large companies are more likely to require risk management plans.
CONCEPT
Risk Management
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17
Which of the following is true regarding discount rate controls?
The higher the discount rate a bank has to pay, the less willing
a bank will be to lend money.
The lower the discount rate a bank has to pay, the more likely
the health of the economy has declined.
The lower the discount rate a bank has to pay, the more difficult
it becomes for consumers to borrow money.
The higher the discount rate a bank has to pay, the more
money there is in supply.
CONCEPT
Federal Reserve
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18
Select the item below that would NOT be included in the M2 money supply.
Certificate of deposit
Cash
Savings account
Common stock
CONCEPT
How Money has Developed over Time
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19
A company created a set of policies and procedures for a manufacturing facility to reduce the likelihood of
workplace accidents.
Which of the types of risk management below does this scenario describe?
Risk control
Risk avoidance
Risk transfer
Risk retention
CONCEPT
Risk Management
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people to use within an organization.
Financial accounting provides financial information to people
outside of an organization.
Financial accounting is used by an organization to make
financial plans for the future.
