BUS 202 Principles of Managerial Accounting UPDATED Questions and CORRECT Answers
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Course
BUS 202 Principles of Managerial Accounting
Institution
BUS 202 Principles Of Managerial Accounting
BUS 202 Principles of Managerial
Accounting UPDATED Questions and
CORRECT Answers
What is Net Present Value (NPV)? - CORRECT ANSWER- Compares the present value
of a project's future cash flows to the initial investment.
Assuming there are equal projected cash flows each year, what is the pa...
BUS 202 Principles of Managerial
Accounting UPDATED Questions and
CORRECT Answers
What is Net Present Value (NPV)? - CORRECT ANSWER✔✔- Compares the present value
of a project's future cash flows to the initial investment.
Assuming there are equal projected cash flows each year, what is the payback period? -
CORRECT ANSWER✔✔- Payback period is the initial investment divided by the annual net
cash flow.
Is the internal rate of return calculated using cash flows or net income? - CORRECT
ANSWER✔✔- Cash Flows
What is the formula for the profitability index? - CORRECT ANSWER✔✔- Present value of
future cash flows divided by the initial investment.
When deciding between mutually exclusive investments, a manager should make what
decision? - CORRECT ANSWER✔✔- They should choose the option that has the lowest
cost on a net present value basis (not necessarily depreciation).
What is the purpose of a balanced scorecard? - CORRECT ANSWER✔✔- It attempts to
focus managers' attention on more than just financial measures.
How is the decision-making authority in a decentralization organization? - CORRECT
ANSWER✔✔- Authority is spread throughout the organization.
What are investment center managers responsible for? - CORRECT ANSWER✔✔-
Responsible for profit and investment of assets.
How is profit margin defined? - CORRECT ANSWER✔✔- Defined as the ratio of operating
income to sales revenue, not the other way around.
, What is a hurdle rate? - CORRECT ANSWER✔✔- Called the required rate of return (not the
economic value added), and represents the company's cost of capital.
What is horizontal analysis? - CORRECT ANSWER✔✔- Involves comparing results across
time, often expressing changes in account balances as a percentage of prior year balances.
What are liquidity ratios? - CORRECT ANSWER✔✔- They relate to the company's short-
term survival , in particular, the company's ability to use current assets to repay liabilities as
they become due.
What is vertical analysis? - CORRECT ANSWER✔✔- (Common size) involves expressing
each financial statement amount as a percentage of another amount on the same financial
statement.
How is vertical analysis expressed? - CORRECT ANSWER✔✔- Involves expressing each
financial statement amount as a percentage of another amount on the same financial
statement.
What is the fixed asset turnover ratio? - CORRECT ANSWER✔✔- Indicates how much
revenue the company generates for each dollar invested in fixed assets.
What is Receivable turnover? - CORRECT ANSWER✔✔- Receivable turnover = Net Sales
/ Average Net Receivable
The higher the receivables turnover, the faster accounts receivable are being collected.
What is the internal rate? - CORRECT ANSWER✔✔- Measure of the rate actually earned
by the project, considering the time value of money.
What is the transfer price? - CORRECT ANSWER✔✔- The amount that one division
charges when it sells goods to another division within the same company.
What is raw materials inventory? - CORRECT ANSWER✔✔- The account that represents
the cost of materials purchased but not yet issued to production.
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