ALC EXAM 3 QUESTIONS & ANSWERS LATEST UPDATE

ALC EXAM 3 QUESTIONS & ANSWERS LATEST UPDATE 1. Declaring and paying cash dividends affects . a. Cash only b. Stockholders’ equity only c. Both cash and stockholders’ equity d. Both cash and capital stock 2. The primary advantages of the average rate of return method are its ease of computation and the fact that . a. It is especially useful to managers whose primary concern is liquidity b. There is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term c. It emphasizes the amount of income earned over the life of the proposal d. Rankings of proposals are necessary 3. An important control over cash received from sales in a retail environment is a . a. Cash register b. Voucher c. Debit memorandum d. Credit memorandum 4. is NOT used in assessing a company’s ability to pay current liabilities. a. The quick ratio b. Current position analysis c. Return on equity d. Working capital 5. Capital investment proposals involving different amounts of investment can be placed on a comparable basis for purposes of net present value analysis by using . a. A price-level index b. A present value factor c. An annuity d. A present value index 6. A credit memorandum from the bank . a. Always decreases a bank customer’s account b. Is used to show a bank service charge c. Can be used when a company has deposited a customer’s NSF check d. Can be used when the bank has collected a note receivable for the customer 7. When analysis of an investment proposal by the net present value method indicates that the present value exceeds the amount to be invested, . a. The proposal is desirable and the rate of return expects from the proposal exceeds the minimum rate used for the analysis b. The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis c. The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis d. The proposal is undesirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis 8. The Management Discussion and Analysis . a. Is a report assessing the probability that the company will remain in business b. Discusses the company’s exposure to significant risks. c. Is a report assessing the market value of the company’s stock d. Provides an opinion on the competency of the company’s board of directives 9. When RST borrows $25,000 from the bank, the effects on RST’s financial statement include . a. A $25,000 increase in cash and $25,000 decrease in notes payable b. A $25,000 increase in cash and $25,000 increase in notes payable c. A $25,000 decrease in cash and $25,000 decrease in notes payable d. A $ 25,000 decrease in cash and $25,000 increase in notes payable 10. Periodic comparisons between planned objectives and actual performance are reported in . a. Zero-base reports b. Budget performance reports c. Master budgets d. Static budgets 11. The basic financial statements do not include the . a. Income statement b. Tax return c. Balance sheet d. Statement of cash flows 12. The reports results of operations of a period of time. a. COSO framework b. Cash balance c. Balance sheet d. Income statement 13. In the first month of operations, a company’s net cash flows from operating activities is $3,760, net cash flows from investing activities is ($5,415), and the ending cash balance to be $2,425. The bet cash from financing activities must be . a. 770 b. 4080 c. -11600 d. 11600 14. The percentage analysis of increase and decreases in individual items in a single company’s comparative financial statements is called . a. Vertical analysis b. Solvency analysis c. Profitability analysis d. Horizontal analysis 15. In the context of cash, “EFT” . a. Mean “Efficient Funds Transfer” b. Can process certain cash transactions at less cost than by using the mail c. Makes it easier to document purchase and sale transactions