Test your basic knowledge |

Capital Budgeting

Subject : business-skills
Instructions:
  • Answer 25 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The book value of old equipment is not relevant because you cannot change what has already been spent - current disposal price of old equipment is relevant since future cash flows will differ among alternatives - the gain or loss on sale of equipme






2. The projection of both volume and dollar value of sales for a future period.






3. Projected financial statements based on a given set of assumptions.






4. Costs of a single process or a series of processes that simultaneously produce two or more products of significant value.






5. The dollar value of assets that is required to create a dollar of sales






6. Limits within which the volume of activity can vary and cost relationships still remain valid.






7. The point in the manufacturing process where the joint products produced become individually identifiable.






8. The cash flow actually available for distribution to investors after the firm has made all necessary investments in fixed assets and permanent working capital necessary to support on-going operations.






9. The plans used to implement the corporate strategy involving the identification of the responsibility for implementation - specific tasks to be accomplished - and revenue and costs targets - among other things.






10. A cost that has already occurred and is not affected by a capital budgeting decision.






11. A cost that is incurred to support a number of activities and cannot be directly traced to any of them






12. The strategic use of outside resources by organizations to perform tasks to produce products traditionally handled by or produced using internal staff and resources.






13. A net cash inflow that will be lost if a particular course of action under consideration is taken as compared to another possibility.






14. Define the problem - determine possible alternatives - prepare estimates - identify possible constraints - select the best alternative.






15. A cost that is expected to differ among alternative future courses of action - also known as differential and relevant cost






16. A cost that could be eliminated in whole or in part if a different course of action is taken that would either end the need for the activity or increase efficiency






17. A limited resource that limits an organization's ability to produce enough to satisfy demand






18. The acquisition cost o assets - also known as acquisition or original cost.






19. Percentage of debt - preferred stock - and common stock used for financing the firm's assets.






20. A relevant cost in decision making but one for which information might not be available.






21. The profit a firm would make id there were no debt and no non-operating assets.






22. Broad - long-range plans such as developing new technologies in a particular field.






23. A statement defining the general purpose o the company.






24. Involves taking the operating plans and developing proforma financial statements - forecasting financing needs - and measurement (control) criteria.






25. A cost that differs between alternatives - also known as incremental cost or relevant cost.