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Accounting Test Bank




Question;1. A bonus usually differs from a salary in;terms of;A.;Amount;and timing.;B.;Base, timing, and financial statement;effect.;C.;Tax implications.;D.;Motivation effects.;E.;Base, pool, and payment terms.;2. Of the three basic forms of management;compensation (salary, bonus, benefits), the fastest growing part of total;compensation is;A.;Salary.;B.;Bonus.;C.;Benefits.;D.;Salary and bonus.;3. As a firm's strategy changes to respond to;different stages of a product's life cycle, compensation;A.;Can;be affected.;B.;Is affected, but only to a very limited;extent.;C.;Should change in response to the new;strategy.;D.;Should increase.;E.;Should decrease.;4. Risk aversion by managers should be;recognized when revising compensation plans because;A.;Compensation;mix (salary, bonus) can influence a manager's risk aversion.;B.;Most companies want risk averse;managers.;C.;Most companies want risk taking;managers.;D.;It costs less to pay risk averse;managers.;5. Due in part to the failure of many banks in;2008, executive compensation is getting increased oversight by;A.;Audit;committees of corporate boards;B.;Top management;C.;Compensation committees of corporate;boards;D.;Banking regulators and corporate;compensation committees;E.;Banking regulators such as the SEC;6. Any system of compensation;A.;May;encourage unethical behavior.;B.;Must be approved by the appropriate;regulatory authority.;C.;Should be designed by top management.;D.;Must be approved by the auditor.;7. The objectives of management compensation;when compared to the objectives used to develop performance measurement;systems, are;A.;More;numerous.;B.;Less specific.;C.;Consistent in content.;D.;Significantly broader in scope.;E.;More specific.;8. In developing compensation plans, the;management accountant works to achieve fairness by making the plan;A.;Precise;comprehensive and directive.;B.;Simple, clear and consistent.;C.;Attractive.;D.;Rewarding.;E.;Selective.;9. Bases for management bonus compensation often;include;A.;Stock;price performance.;B.;Percentage of salary.;C.;Achievement of break-even sales.;D.;Percentage of firm-wide net income.;10.;When strategic performance measures or;critical success factors are used to determine bonus compensation, the bonus;will usually depend either on the amount of improvement in the measure or on;A.;Maintaining;the current level.;B.;Achieving a predetermined goal.;C.;Quality of work completed.;D.;Intensity of effort expended.;11. Bonus plans;should be tied to variable cost income which is not affected by inventory level;changes, rather than the conventional;A.;Tax-based;net income.;B.;Marginal cost income.;C.;Full cost income.;D.;Operating income.;12. The;balanced scorecard critical success factors (CSFs) provide strong motivation in;bonus compensation plans if the non-controllable factors are;A.;Emphasized.;B.;Separated.;C.;Recognized.;D.;Excluded.;E.;Controlled.;13. If fairness;only is considered, unit managers prefer;A.;Not;to be evaluated.;B.;A subjective measure.;C.;A single, objective measure.;D.;A firm-wide pool over a unit-based pool.;E.;A unit-based pool over a firm-wide pool.;14.;Generally, the current and deferred;types of bonus payment options currently in use tend to focus the manager's;attention on short-term performance measures, most commonly;A.;Division;profit.;B.;After tax corporate profit.;C.;Cash flow.;D.;Growth in firm value.;E.;Stock price.;15. The stock;option form of bonus payments to managers usually;A.;Motivates;well even in extended market downturns.;B.;Can lose some motivation because of the;delay in reward.;C.;Focuses on the short-term.;D.;Is not consistent with shareholder;interests.;E.;Has less risk than other types of bonus;payment plans.;16.;The ideal compensation plan would make;all company contributions to the plan immediately tax-deductible and all tax;consequences for managers;A.;Insignificant.;B.;Deferred or avoidable.;C.;Limited, but current.;D.;Limited, but pre-paid.;17. In;management compensation, the use of the balanced scorecard achieves;A.;Fairness.;B.;Alignment of manager's incentives and;the organization's strategy.;C.;The desired ethical environment.;D.;Revenue generation and cost control.;E.;A specific non-financial measurement.;18. The balanced;scorecard evaluation of the firm is an especially strong financial tool because;of its;A.;Use;of qualitative measures.;B.;Use of quantitative measures.;C.;Simplicity in use.;D.;Ability to predict change.;E.;Use of multiple critical success factors;(CSFs).;19. The;receivables turnover ratio is a measure of;A.;Asset;value.;B.;Leverage.;C.;Sales performance.;D.;Profitability.;E.;Liquidity.;20. Market value;of equity is an objective measure which clearly shows what;A.;The;firm's financial statements show the firm's value to be.;B.;Investors think is the firm value.;C.;Stock analysts calculate as the firm's;value.;D.;Is the sales value of the firm.;E.;Is the liquidation value of the firm.;21. Analysts;prefer the following three valuation methods over all others;A. EVA, cash;flow multiplier and sales multiplier;B.;Enterprise;value, discounted cash flow, and sales multiple;C.;Sales multiple, earnings multiple, and;discounted cash flow;D.;EVA, return on equity and discounted;cash flow;E.;Enterprise value, earnings multiple, and;sales multiple;22. Since;it is based on cash flows, the discounted cash flow (DCF) method of valuation;has the added advantage that it is not subject to the bias of different;A.;Discount;rates.;B.;Internal rates of return.;C.;Monetary systems.;D.;Accounting policies for determining;total assets and net income.;23.;The multiplier used in an earnings-based;method of valuation of a firm is often estimated from the price-to-earnings;ratios of the stocks of comparable;A.;Taxable;entities.;B.;Industries.;C.;Firms.;D.;For-profit firms.;E.;Publicly-held firms.;24. Which one of;the following items is not a measure of a company's liquidity?;A.;Accounts;receivable turnover.;B.;Return on equity.;C.;Quick ratio.;D.;Cash flow ratio.;E.;Day's sales in inventory.;25. Which one of;the following forms of compensation is a based upon the achievement of;performance goals for current the period?;A.;Perk.;B.;Stock option.;C.;Performance shares.;D.;Bonus.;E.;Salary.;26. Which one of;the following forms of compensation includes special services and benefits for;the employee?;A.;Perk.;B.;Stock option.;C.;Performance shares.;D.;Bonus.;E.;Salary.;27. A method for;determining a bonus based upon the performance of the unit is a(n);A.;Segment-based;pool.;B.;Unit-based pool.;C.;Firm-based pool.;D.;Activity-based pool.;E.;Function-based pool.;28. A method for;determining a bonus based upon the performance of the firm is a(n);A.;Segment-based;pool.;B.;Unit-based pool.;C.;Firm-based pool.;D.;Activity-based pool.;E.;Volume-based pool.;29. All of the;following are listed as common payment options for bonus compensation plans except;A.;Performance;shares.;B.;Current bonus.;C.;Deferred bonus.;D.;Preferred bonus.;E.;Stock options.;30. The profit;multiplier is used to measure;A.;Efficiency.;B.;Effectiveness.;C.;Net revenue.;D.;Collectability.;E.;Accountability.;31. Each one of;the following is a method for directly measuring the value of a firm's equity except;A.;The;discounted cash flow method.;B.;Market value.;C.;Sales;multiple.;D.;Earnings-based valuation.;E.;Enterprise value.;32. Which one of;the following refers to the firm's ability to pay its current operating;expenses and maturing debt?;A.;Discounted;cash flow.;B.;Liquidity.;C.;Earnings base.;D.;Profitability.;E.;Purchasing power.;33. Which one of;the following develops the value of the firm as the discounted present value of;the firm's net free cash flows?;A.;Discounted;cash flow method.;B.;Liquidity method.;C.;Multiples-based method.;D.;Profitability method.;E.;Purchasing power method.;34. A deferred;bonus consists of;A.;Cash;only.;B.;Stock only.;C.;Cash and/or stock.;D.;Membership in a fitness club.;35. Which one of;the following computes value based on annual earnings?;A.;Discounted;cash flow method.;B.;Liquidity method.;C.;Multiples-based method.;D.;Profitability method.;E.;Market value method.;36. Jackson;Supply Company has a 2 to 1 current ratio. This ratio would increase to more;than 2 to 1 if the company;A.;Purchased;a marketable security for cash.;B.;Wrote off an uncollectible receivable.;C.;Sold merchandise on account that earned;a normal gross margin.;D.;Purchased inventory on account.;37. Benefits;include all of the following except;A.;Travel.;B.;Life insurance.;C.;Medical benefits.;D.;Membership in a fitness club.;E.;Performance shares.;38. A current;bonus consists of;A.;Cash;only.;B.;Stock only.;C.;Cash and/or stock.;D.;Membership in a fitness club.;39. In service;firms, improvement in long term profitability is best measured by all the;following except;A.;Staff;utilization.;B.;Net revenues.;C.;Collections of customer accounts.;D.;Materials usage.


Paper#45184 | Written in 18-Jul-2015

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