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Test your basic knowledge |
Capital Budgeting
Start Test
Study First
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. Limits within which the volume of activity can vary and cost relationships still remain valid.
Financial Planning Process
Outsourcing
Relevant Range
Capital Intensity Ratio
2. Broad - long-range plans such as developing new technologies in a particular field.
Sales Forecast
Corporate Strategies
Mission Statement
Capital Intensity Ratio
3. A cost that is expected to differ among alternative future courses of action - also known as differential and relevant cost
Incremental Cost
Sunk Cost
Split-Off Point
Steps to use in the decision-making process
4. The point in the manufacturing process where the joint products produced become individually identifiable.
Steps to use in the decision-making process
Constraint
Split-Off Point
Imputed Cost
5. A limited resource that limits an organization's ability to produce enough to satisfy demand
Steps to use in the decision-making process
Proforma Financial Statements
Relevant Range
Constraint
6. 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
Proforma Financial Statements
Avoidable Cost
Incremental Cost
Historic Cost
7. Involves taking the operating plans and developing proforma financial statements - forecasting financing needs - and measurement (control) criteria.
Differential Cost
Financial Planning Process
Capital Intensity Ratio
Operating Plans
8. A statement defining the general purpose o the company.
Mission Statement
Imputed Cost
Incremental Cost
Relevant Range
9. A cost that differs between alternatives - also known as incremental cost or relevant cost.
Differential Cost
Opportunity Cost
Financial Planning Process
Constraint
10. 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.
Financial Planning Process
Steps to use in the decision-making process
Imputed Cost
Operating Plans
11. Percentage of debt - preferred stock - and common stock used for financing the firm's assets.
NOPAT (net operating profit after taxes)
Steps to use in the decision-making process
Sunk Cost
Capital Structure
12. A cost that has already occurred and is not affected by a capital budgeting decision.
Mission Statement
Common Cost
Capital Intensity Ratio
Sunk Cost
13. Projected financial statements based on a given set of assumptions.
Differential Cost
Corporate Strategies
Proforma Financial Statements
Free Cash Flow
14. A cost that is incurred to support a number of activities and cannot be directly traced to any of them
Steps to use in the decision-making process
Common Cost
Sales Forecast
Differential Cost
15. A relevant cost in decision making but one for which information might not be available.
NOPAT (net operating profit after taxes)
Corporate Strategies
Split-Off Point
Imputed Cost
16. A net cash inflow that will be lost if a particular course of action under consideration is taken as compared to another possibility.
Steps to use in the decision-making process
Avoidable Cost
Incremental Cost
Opportunity Cost
17. The acquisition cost o assets - also known as acquisition or original cost.
Constraint
Split-Off Point
Historic Cost
Differential Cost
18. 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.
Steps to use in the decision-making process
Corporate Strategies
Free Cash Flow
Proforma Financial Statements
19. The dollar value of assets that is required to create a dollar of sales
Joint Product Costs
Steps to use in the decision-making process
Capital Intensity Ratio
Common Cost
20. The projection of both volume and dollar value of sales for a future period.
Relevant cost for decision making
Sales Forecast
Capital Structure
Incremental Cost
21. Costs of a single process or a series of processes that simultaneously produce two or more products of significant value.
Constraint
NOPAT (net operating profit after taxes)
Joint Product Costs
Steps to use in the decision-making process
22. The strategic use of outside resources by organizations to perform tasks to produce products traditionally handled by or produced using internal staff and resources.
Outsourcing
Incremental Cost
Differential Cost
Steps to use in the decision-making process
23. 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
Relevant cost for decision making
Corporate Strategies
NOPAT (net operating profit after taxes)
Free Cash Flow
24. Define the problem - determine possible alternatives - prepare estimates - identify possible constraints - select the best alternative.
Split-Off Point
Steps to use in the decision-making process
Proforma Financial Statements
Constraint
25. The profit a firm would make id there were no debt and no non-operating assets.
Sunk Cost
NOPAT (net operating profit after taxes)
Steps to use in the decision-making process
Sales Forecast