1. All the following are considered to be benefits of participative budgeting, except for:

a. Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization.

b. The budget estimates are prepared by those in directly involved in activities.

c. When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.

d. Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.

2. Which of the following represents the normal sequence in which the below budgets are prepared?

a. Sales, Balance Sheet, Income Statement

b. Balance Sheet, Sales, Income Statement

c. Sales, Income Statement, Balance Sheet

d. Income Statement, Sales, Balance Sheet

3. A decrease in the supply of security A and an increase in the demand for security B causes the price of security A to ______ and the price of security B to ______.

a. fall; fall

b. fall; rise

c. rise; fall

d. rise; rise

4. The budget method that maintains a constant twelve month planning horizon by adding a new month on the end as the current month is completed is called:

A, a continuous budget.

b. an operating budget.

c. a capital budget.

d. a master budget.

5. If Casita Company Acid-test ratio is computed as 1.5, Which statement interprets the acid-test ratio of Carita Company?

a. For every dollar of Casita Company's current liabilities, the company has $1.50 of very liquid assets to cover its immediate obligations

b. For every dollar of Casita Company's current asset, the company has $1.50 of very liquid assets to cover its immediate obligations

c. For every dollar of Casita Company's total asset, the company has $1.50 of very liquid assets to cover its immediate obligations

d. For every dollar of Casita Company's total liabilities, the company has $1.50 of very liquid assets to cover its immediate obligations

6. The direct labor budget is based on:

a. the required materials purchases for the period.

b. the desired ending inventory of finished goods.

c. the beginning inventory of finished goods.

d. the required production for the period.

7. A contract whereby a borrower who seeks to obtain money from someone, promises to compensate the lender in the future is known as

a. a warrant.

b. an exchange rate.

c. a derivative security.

d. a financial security.

8. A ratio that is commonly used by lenders to ascertain whether a prospective borrower can afford to take on any additional debt

a. Times-Interest-Earned Ratio

b. Debt to Asset Ratio

c. Debt to Equity Ratio

d. Accounts Receivable Turnover

9. Measures the earning ability of a company to earn profits from its sales or operations, balance sheet assets or shareholders' equity

a. Current Ratio

b. Efficiency Ratio

c. Long-term Solvency Ratio

d. Profitability Ratio

10. Which of the following organizations is not likely to use budgets?

a. Manufacturing firms.

b. Merchandising firms.

c. Firms in service industries.

d. Nonprofit organizations.

e. None of the above, as all are likely to use budgets.

11. When preparing a production budget, the required production equals:

a. budgeted sales + beginning inventory + desired ending inventory.

b. budgeted sales - beginning inventory + desired ending inventory.

c. budgeted sales - beginning inventory - desired ending inventory.

d. budgeted sales + beginning inventory - desired ending inventory.

12. This is an analytical method by which comparative statements are presented as a means of determining improvement or deterioration of the financial condition or results of operations of a business enterprise.

a. Financial Statement Analysis

b. Horizontal Analysis

c. Vertical Analysis

d. Ratio Analysis