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