SOPHIA UNIT 4 PRACTICE MILESTONE 4,100% CORRECT

Which of the following explains why a business calculates its current ratio? • To determine whether it is credit worthy • To evaluate its profitability • To evaluate its liquidity • To determine the initial stock price 2 Which of the following illustrates a pure risk? • A company experiences a data breach after upgrading technology. • A company loses all customer data after a tornado destroys the corporate office. • A company loses money after introducing a new product. • A company loses customers after changing ingredients in a recipe. 3 Which of the following institutions only provides its services to members who meet a set of defined qualifications? • Commercial bank • Credit union • Finance company • Pension fund 4 A small business owner purchases an insurance policy to protect his building in the event a fire occurs. Which type of risk management choice does this demonstrate? • Risk retention • Risk transfer • Risk avoidance • Risk control 5 When a corporation earns income, which of the following portions does it keep instead of paying money out to investors? • Capital gains • Retained earnings • Owner’s equity • Dividends 6 Select the two items below that would be considered part of the M1 money supply. • Bonds • Money market account • Checking accounts • Paper currency • Preferred stock 7 Which of the following correctly describes why it is easier for a business to get short term financing? • Lending institutions prefer to make short term rather than long term loans. • The amount borrowed for short term loans is usually small. • Businesses can resell short term loans to other banks. • The business does not have to prove it is credit worthy. 8 Which of the following is true regarding preferred stock? • Owners have voting rights. • Owners may have to sell the stock back to the company. • Owners are not taxed on capital gains. • Owners are paid last. 9 Which of the following best describes a budget? • Plan for projected revenue • Plan for expected expenses • Analysis of employee turnover • Analysis of market changes 10 Which of the following is the purpose of the Federal Reserve? • To increase inflation rates • To enforce securities rules and regulations • To reduce unemployment rates • To control the money supply 11 Which of the following involves a deposit that provides a specific return based on a fixed interest rate? • Promissory note • Common stock • Certificate of deposit • Mortgage bond 12 Match each term below to its related description. Angel investor Venture capitalist A.Group that becomes a limited partner in the business it funds B.Individual that obtains voting rights for purchasing stock C.Individual that expects a share of ownership for investing funds into a company 13 Which financial planning document below provides details about the owner's equity in a business? • Balance sheet • Income statement • Cash flow • Capital budget 14 What of the following does an investor do in order to earn a high return on an investment? • Buy many shares of preferred stock • Assume a high level of risk • Invest in companies with low retained earnings • Purchase a certificate of deposit 15 Which of the following correctly describes why a business might consider using a corporate bond instead of a long term loan? • The repayment period is longer. • The bond creation process requires fewer people. • The bond creation process is quicker. • The administration fees are lower. 16 Which of the following best describes financial accounting? • Details past performance of a company over a set period of time • Determines what products and services a business should provide • Estimates what may happen to the business in the future • Analyzes business markets and trends 17 Which of the following is a responsibility of a financial manager? • Prepare internal reports for sales • Secure funding for investments • Set performance goals for individual departments • Research trends in product development A business normally uses trade credit in which of the following ways? • To pay wages and salaries • To purchase inventory • To fund equipment purchases • To fund business expansions 19 Which of the following must a business provide to obtain secured short term financing? • Documents that show a positive cash flow • Assets that serve as collateral • Revenue for the last three years • Spending priorities for the funds it is borrowing 20 Which of the following correctly describes a reserve requirement? • The amount of money paid to secure a loan through the Federal Reserve • The amount of money charged to take out a short term loan • The amount of collateral needed by a business to secure a loan • The amount of money a bank must keep in cash or deposit