5 Written questions
5 Matching questions
- net realizable value
- current assets
- accounts receivable
- multinational corporation
- a Multinational corporations have their home in one country but operate and have subsidiaries operating within and under the laws of other countries.
- b Current assets are assets on the balance sheet expected to be converted to cash or expired in one year or the operating cycle, whichever is longer.
- c Hedging is a strategy used by management to reduce the risk associated with fluctuations in the values of assets and liabilities.
- d Net realizable value is the net cash amount expected from the sale of an item, usually equal to the selling price of the item less the cost to complete and sell it.
- e Accounts receivable is a balance sheet account indicating the dollar amount due from customers from sales made on open account. It arises when revenues are recognized before receipt of the associated cash payment. Accounts receivable is normally included as a current asset and for some companies can be quite large.
5 Multiple choice questions
- Initially recognize the full sales price (gross) and later discount the gross.
- A small amount of cash kept on hand to cover minor expenses.
- A decrease in value due to changes in the exchange rate.
- A markdown is a reduction in sales price normally due to decreased demand for an item. Markdowns are very common in the retail industry, especially at the close of the seasons. These discounts are designed to accelerate sales of old items (boosting inventory turnover), making room for new inventories market price The market price is the price at which an asset can be exchanged in the open (output) market as of a particular point in time. See fair market value and stock price.
- The process designed to safeguard cash from loss or theft.
5 True/False questions
open account → When a good or service is sold on credit, the selling company wishes to collect the cash as soon as possible. To encourage prompt payment, many companies offer cash discounts on the gross sales price. Cash discounts specify that an amount of cash less than the gross sales price is sufficient to satisfy the obligation.
window dressing → Hedging is a strategy used by management to reduce the risk associated with fluctuations in the values of assets and liabilities.
quick ratio → Current assets/Current liabilities. The current ratio is often used to assess a company's current asset management and its solvency position. It is normally an important part of financial statement analysis.
working capital → Current assets/Current liabilities. The current ratio is often used to assess a company's current asset management and its solvency position. It is normally an important part of financial statement analysis.
compensating balance → Operating cycle is the time it takes, in general, for a company to begin with cash, convert the cash to inventory (or a service), sell the inventory (or service), and receive cash payment.