Retail Management - Chapter 12 Sample Test Questions

Chapter 12

Which is not a typical time frame for a profit-and-loss statement?

Correct Answer: Weekly

Which is not a major component of a profit-and-loss statement?

Your Answer: Depreciation

Property, buildings, fixtures, and equipment are examples of

Your Answer: fixed assets.

Payroll expenses payable and accounts payable are examples of

Your Answer: current liabilities.

Assets minus liabilities equals a retailer's

Correct Answer: net worth.

The value of a retail business, after deducting all financial obligations, is known as

Your Answer: net worth.

Which of the following will increase asset turnover?

Correct Answer: Outsourcing delivery operations

The three components of return on assets are

Correct Answer: net sales, net profit after tax, and total assets.

Total assets divided by net worth equals

Correct Answer: financial leverage.

A firm with a financial leverage equal to one has

Your Answer: no debt.

The strategic profit model results in a performance measure known as

Your Answer: return on net worth.

The key business ratio found by computing cash plus accounts receivable, and then dividing by total current liabilities is the

Correct Answer: quick ratio.

The key business ratio found by calculating net sales minus cost of goods sold, and then dividing by net sales is the

Correct Answer: overall gross profit.

Planned expenditures for a given time period based on expected performance are outlined in a

Correct Answer: budget.

After determining who is responsible for budgeting decisions, the next step in the preliminary budgeting process is to determine

Correct Answer: the budgeting time frame.

With zero-based budgeting, a retailer

Correct Answer: starts each new budget from scratch.

When planning and implementing a budget, a retailer must carefully consider

Correct Answer: cash flow.

Capital expenditures are

Correct Answer: the long-term investments in fixed assets.

Which measure is not used to describe a retailer's productivity?

Correct Answer: Quick ratio

Which is a way for a retailer to increase its productivity?

Correct Answer: Automating operations

A profit-and-loss statement summarizes a retailer's assets, liabilities, and net worth at a particular point in time.

Correct Answer: False

Accounts receivable is a component of a retailer's current assets.

Correct Answer: True

Fixed assets are recorded on the basis of cost less accumulated depreciation.

Your Answer: True

Depreciated assets that are reflected on a retailer's balance sheet at low values relative to their actual worth are referred to as hidden assets.

Correct Answer: True

Net worth represents the value of a retail business after deducting all financial obligations.

Your Answer: True

Net profit margin is also known as owner's equity.

Your Answer: False

Asset turnover is based on net profit and net sales.

Correct Answer: False

A firm with high financial leverage has a low level of debt.

Your Answer: False

The strategic profit model has three components: asset turnover, profit margin, and financial leverage.

Your Answer: True

A current ratio above 1 to 1 means a firm is liquid and can cover short-term debt.

Your Answer: True

Overall gross profit does not take markdowns, discounts, or shortages into account.

Your Answer: False

In top-down budgeting, lower-level executives develop departmental budget requests; these requests are assembled and an overall company wide budget is designed.

Correct Answer: False

Operating expenditures are the short-term expenses of running a retail business.

Your Answer: True

Sales commissions are a fixed cost.

Your Answer: False

Indirect costs are shared by multiple departments.

Correct Answer: True

Natural account expenses are classified on the basis of the purpose or activity for which expenditures are made.

Correct Answer: False

With incremental budgeting, a firm uses current and past budgets as guides and adds or subtracts from these budgets to arrive at the coming period's expenditures.

Your Answer: True

A percentage