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