AICPA CPA-Business Quiz 1 Topic 2 Questions 1-5

Question: 1

A company uses the following formula in determining its optimal level of cash.

q1_CPA-Business

Where:

b = Fixed cost per transaction

i = Interest rate on marketable securities

T = Total demand for cash over a period of time

This formula is a modification of the Economic Order Quantity (EOQ) formula used for inventory management. Assume that the fixed cost of selling marketable securities is $10 per transaction, and the interest rate on marketable securities is 6 percent per year. The company estimates that it will make cash payments of $12,000 over a one-month perioD. What is the average cash balance (rounded to the nearest dollar)?

A$1,000

B$2,000

C$3,464

D$6,928

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Question: 2

Having identified their mission, overall strategy, and critical success factors, organizations often review the internal and external factors that will contribute to their success. This analysis is often referred to as:

ATOC evaluation.

BBrainstorming.

CBalanced scorecard review.

DSWOT analysis.

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Question: 3

Limitations of the information provided by total asset turnover include:

AA good measure for trend analysis of a particular company, but variable ways of calculating cost of goods sold limit its usefulness for comparative analysis.

BThe calculation can be affected by varying accounting assumptions, which affect the calculation of net income.

CBecause of differing costs of capital, the measure cannot be effectively used for comparative analysis.

DWhen making the calculation, total assets may need to be refined by the elimination of assets that do not relate to sales as the inclusion of these items could distort the measure.

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Question: 4

When purchasing temporary investments, which one of the following best describes the risk associated with the ability to sell the investment in a short period of time without significant price concessions?

AInterest rate risk.

BPurchasing power risk.

CFinancial risk.

DLiquidity risk.

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Question: 5

When does competition not become an even stronger force impacting the profitability of a firm?

AVarious firms use various types of strategic plans.

BCustomers do not have strong brand preferences.

CThe market is not growing fast.

DThe costs of exiting the market are less than the costs of continuing to operate.

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AICPA CPA-Business Quiz:1 Topic:2 Questions:1-5