Deck 12: Controls: How Do You Keep the New Venture on Track

Question 1

The challenges are quite different when establishing a new venture than when the business is operating, so owners need controls to ensure success.

Answer 1

True

Question 2

A firm's annual_______ is an historical summary of production and other costs that have actually been incurred.

A)net profit and loss statement
B)insurance coverage report
C)financial statement
D)quality control report
E)variable budgets

Answer 2

C

Question 3

_______ are the relationships of the firm's financial figures using balance sheet and income statement information that can be compared to industry averages and prior firm performance.

A)Ratios
B)Accounting principles
C)Variances
D)Deviations
E)Scorecards

Answer 3

A

Question 4

The _______ ratio indicates how long the inventory remains on a store shelf.

A)quick
B)inventory turnover
C)operating
D)leveraging
E)profitability

Question 5

The _______ tells an investor the percentage of revenue /sales left after subtracting the cost of goods sold.

A)net worth
B)relative income
C)net profit
D)after-tax revenue
E)gross profit

Question 6

An insurance policy that protects an individual or business from the risk that they may be sued and held legally liable for something such as malpractice, injury, or negligence is called _______.

A)casualty
B)uninsured worker
C)business interruption
D)liability
E)disability

Question 7

The _______ is the monthly or yearly cost for the amount of insurance coverage desired.

A)premium
B)deductible
C)net cost
D)chunk
E)policy

Question 8

Which of the following are steps in the organizational control process?

A)Establish standards, methods, and times for measuring performance.
B)Decide which ratios your company must set.
C)Set objectives.
D)Measure and compare performance to standards.
E)Reinforce or correct.

Question 9

What are the types of controls in the control process?

A)Attitude controls
B)Preliminary/input controls
C)Concurrent/process controls
D)Rework/output controls
E)Damage controls

Question 10

Which of the following are frequent causes of poor quality?

A)Managers blaming poor quality on employees
B)Lack of proper resources
C)Poor management
D)Lack of training
E)Inefficient operations

Question 11

Which of the following are techniques managers can use to control costs?

A)Emphasize costs, not profits.
B)Emphasize profits, not cost.
C)Set vague standards and hope employees define them themselves.
D)Enforce standards.
E)Do not talk about or reward cost efficiency.

Question 12

Explain what Total Quality Management is, and describe the relationship between quality and costs.

Question 13

Identify variances in budgets.

Question 14

Define a ratio, and describe how ratios can be useful in making sound business decisions.

Question 15

Distinguish between liquidity ratios and leveraging ratios.

Question 16

Budget _______ is a deviation from the established budgetary amount.

A)augmentation
B)selection
C)variance
D)deviation
E)balance

Question 17

A _______ is the relationship between any two numbers derived from a firm's financial statements.

A)ratio
B)controller
C)statement of income
D)deviation
E)causality

Question 18

Poor quality has a direct effect on costs and profits.

Question 19

It is unnecessary for owners to communicate the costs of production and expectation of outputs.

Question 20

Good decision makers include employees when devising ways to develop efficient methods and cut costs.

Question 21

Budgets are not necessary for smaller companies.

Question 22

Although it has not been explicitly mentioned previously, the budget is also a planning device.

Question 23

Department budgets must be complex to account for all the expenditures that will be encountered.

Question 24

The concept of the variable budget is important since it transforms the simple budget from a passive tool to one that can respond to changes.

Question 25

Controls are used to ensure the firm does what is planned.

Question 26

Fixed asset ratios show the ability of the firm to pay its debts.

Question 27

The net profit margin is a ratio of profitability calculated as net profits divided by sales.

Question 28

The higher your company's market share, the higher the indication that your customers are happy with your products and services.

Question 29

An insurance company pools clients' risks to make payments more affordable for the insured.

Question 30

Workers' compensation insurance is insurance on homes, cars, and businesses.

Question 31

_______ leads to damage control of lost customers and possible product liability lawsuits.

A)Good quality
B)Poor quality
C)Acceptable quality
D)Poor human relation skills
E)Corrosive employee relation skills

Question 32

Explain how entrepreneurs can use insurance to their advantage.