Q&A Hero

Q: Which of the following statements is CORRECT? a. The cash budget and the capital budget are developed separately, and although they are both important to the firm, one does not affect the other. b. Since depreciation is a non-cash charge, it neither appears on nor has any effect on the cash budget. c. The target cash balance should be set such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts, although it should be changed to reflect long-term changes in the firm's operations. d. The typical cash budget reflects interest paid on loans as well as income from the investment of surplus cash. These numbers, as well as other items on the cash budget, are expected values; hence, actual results might vary from the budgeted amounts. e. Shorter-term cash budgets, in general, are used primarily for planning purposes, while longer-term budgets are used for actual cash control.

Q: What is a virus?

Q: Which of the following items should a company report directly in its monthly cash budget? a. Cash proceeds from selling one of its divisions. b. Accrued interest on zero coupon bonds that it issued. c. New shares issued in a stock split. d. New shares issued in a stock dividend. e. Its monthly depreciation expense.

Q: Which of the following statements is correct? a. Packet switching combines the messages of multiple users into a "packet" for transmission. At the receiving end, the packet is disassembled into the individual messages and distributed to the intended users. b. The decision to partition a database assumes that no identifiable primary user exists in the organization. c. Packet switching is used to establish temporary connections between network devices for the duration of a communication session. d. A deadlock is a temporary phenomenon that disrupts transaction processing. It will resolve itself when the primary computer completes processing its transaction and releases the data needed by other users.

Q: Which of the following statements concerning the cash budget is CORRECT? a. Cash budgets do not include financial items such as interest and dividend payments. b. Cash budgets do not include cash inflows from long-term sources such as the issuance of bonds. c. Changes that affect the DSO do not affect the cash budget. d. Capital budgeting decisions have no effect on the cash budget until projects go into operation and start producing revenues. e. Depreciation expense is not explicitly included, but depreciation's effects are reflected in the estimated tax payments.

Q: HTTP a. is the document format used to produce Web pages. b. controls Web browsers that access the Web. c. is used to connect to Usenet groups on the Internet d. is used to transfer text files, programs, spreadsheets, and databases across the Internet. e. is a low-level encryption scheme used to secure transmissions in higher-level () format.

Q: A digital signature is a. the encrypted mathematical value of the message sender's name b. derived from the digest of a document that has been encrypted with the sender's private key c. the computed digest of the sender's digital certificate d. allows digital messages to be sent over analog telephone lines

Q: Which of the following is NOT directly reflected in the cash budget of a firm that is in the zero tax bracket? a. Depreciation. b. Cumulative cash. c. Repurchases of common stock. d. Payment for plant construction. e. Payments lags.

Q: An IP Address: a. defines the path to a facility or file on the web. b. is the unique address that every computer node and host attached to the Internet must have. c. is represented by a 64-bit data packet. d. is the address of the protocol rules and standards that governing the design of internet hardware and software.

Q: Since depreciation is a non-cash charge, it neither appears on nor has any effect on the cash budget. Thus, if the depreciation charge for the coming year doubled or halved, this would have no effect on the cash budget. a. True b. False

Q: The cash budget and the capital budget are handled separately, and although they are both important, they are developed completely independently of one another. a. True b. False

Q: A message that is made to look as though it is coming from a trusted source but is not is called a. a denial of service attack b. digital signature forging c. Internet protocol spoofing d. URL masquerading

Q: HTML a. is the document format used to produce Web pages. b. controls Web browsers that access the Web. c. is used to connect to Usenet groups on the Internet. d. is used to transfer text files, programs, spreadsheets, and databases across the Internet. e. is a low-level encryption scheme used to secure transmissions in higher-level () format.

Q: A firm's peak borrowing needs will probably be overstated if it bases its monthly cash budget on the assumption that both cash receipts and cash payments occur uniformly over the month but in reality receipts are concentrated at the beginning of each month. a. True b. False

Q: A firm's peak borrowing needs will probably be overstated if it bases its monthly cash budget on the assumption that both cash receipts and cash payments occur uniformly over the month but in reality payments are concentrated at the beginning of each month. a. True b. False

Q: IP spoofing a. combines the messages of multiple users into a "spoofing packet" where the IP addresses are interchanged and the messages are then distributes randomly among the targeted users. b. is a form of masquerading to gain unauthorized access to a web server. c. is used to establish temporary connections between network devices with different IP addresses for the duration of a communication session. d. is a temporary phenomenon that disrupts transaction processing. It will resolve itself when the primary computer completes processing its transaction and releases the IP address needed by other users.

Q: Shorter-term cash budgets⎯say a daily cash budget for the next month⎯are generally used for actual cash control while longer-term cash budgets⎯say monthly cash budgets for the next year⎯are generally used for planning purposes. a. True b. False

Q: FTP a. is the document format used to produce Web pages. b. controls Web browsers that access the Web. c. is used to connect to Usenet groups on the Internet d. is used to transfer text files, programs, spreadsheets, and databases across the Internet. e. is a low-level encryption scheme used to secure transmissions in higher-level () format.

Q: Which of the following statements is correct? TCP/IP a. is the basic protocol that permits communication between Internet sites. b. controls Web browsers that access the WWW. c. is the file format used to produce Web pages. d. is a low-level encryption scheme used to secure transmissions in HTTP format.

Q: During the coming year, Gold & Gold wants to increase its free cash flow by $180 million, which should result in a higher stock price. The CFO has made these projections for the upcoming year: EBIT is projected to equal $850 million. Gross capital expenditures are expected to total to $360 million versus depreciation of $120 million, so its net capital expenditures should total $240 million. The tax rate is 40%. There will be no changes in cash or marketable securities, nor will there be any changes in notes payable or accruals.What increase in net working capital (in millions of dollars) would enable the firm to meet its target increase in FCF?a. $72b. $90c. $108d. $130e. $156

Q: A distributed denial of service (DDoS) attack a. is more intensive that a Dos attack because it emanates from single source b. may take the form of either a SYN flood or smurf attack c. is so named because it effects many victims simultaneously, which are distributed across the internet d. turns the target victim's computers into zombies that are unable to access the Internet

Q: Blueroot Inc. is considering a change in its financing policy. Currently, it uses maximum trade credit by not taking discounts on its purchases. The standard industry credit terms offered by all its suppliers are 2/10 net 30 days, and the firm pays on time. The new CFO is considering borrowing from its bank, using short-term notes payable, and then taking discounts. The firm wants to determine the effect of this policy change on its net income. Its net purchases are $11,760 per day, using a 365-day year. The interest rate on the notes payable is 10%, and the tax rate is 40%. If the firm implements the plan, what is the expected change in net income?a. $32,964b. $34,699c. $36,526d. $38,448e. $40,370

Q: Arnold Inc. purchases merchandise on terms of 2/10 net 30, and it always pays on the 30th day. The CFO calculates that the average amount of costly trade credit carried is $375,000. What is the firm's average accounts payable balance? (Assume a 365-day year.)a. $458,160b. $482,273c. $507,656d. $534,375e. $562,500

Q: In a ring topology a. the network consists of a central computer which manages all communications between nodes b. has a host computer connected to several levels of subordinate computers c. all nodes are of equal status; responsibility for managing communications is distributed among the nodes d. information processing units rarely communicate with each other

Q: Suppose the suppliers of your firm offered you credit terms of 2/10 net 30 days. Your firm is not taking discounts, but is paying after 25 days instead of waiting until Day 30. You point out that the nominal cost of not taking the discount and paying on Day 30 is approximately 37%. But since your firm is neither taking discounts nor paying on the due date, what is the effective annual percentage cost (not the nominal cost) of its costly trade credit, using a 365-day year?a. 60.3%b. 63.5%c. 66.7%d. 70.0%e. 73.5%

Q: A star topology is appropriate a. for a wide area network with a mainframe for a central computer b. for centralized databases only c. for environments where network nodes routinely communicate with each other d. when the central database does not have to be concurrent with the nodes

Q: Which of the following statements is correct? The client-server model a. is best suited to the token-ring topology because the random-access method used by this model detects data collisions. b. distributes both data and processing tasks to the server's node. c. is most effective used with a bus topology. d. is more efficient than the bus or ring topologies.

Q: Noddings Inc. needs to raise more capital because its business is booming. The company purchases supplies on terms of 1/10 net 20, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.)a. 10.59%b. 11.15%c. 11.74%d. 12.36%e. 13.01%

Q: In a star topology, when the central site fails a. individual workstations can communicate with each other b. individual workstations can function locally but cannot communicate with other workstations c. individual workstations cannot function locally and cannot communicate with other workstations d. the functions of the central site are taken over by a designated workstation

Q: Hinkle Corporation buys on terms of 2/15, net 60 days. It does not take discounts, and it typically pays on time, 60 days after the invoice date. Net purchases amount to $550,000 per year. On average, what is the dollar amount of total trade credit (costly + free) the firm receives during the year, i.e., what are its average accounts payable? (Assume a 365-day year, and note that purchases are net of discounts.)a. $90,411b. $94,932c. $99,678d. $104,662e. $109,895

Q: A ping signal is used to initiate a. URL masquerading b. digital signature forging c. Internet protocol spoofing d. a smurf attack e. none of the above is true

Q: Fairweather Corporation purchases merchandise on terms of 2/15, net 40, and its gross purchases (i.e., purchases before taking off the discount) are $800,000 per year. What is the maximum dollar amount of costly trade credit the firm could get, assuming it abides by the supplier's credit terms? (Assume a 365-day year.)a. $53,699b. $56,384c. $59,203d. $62,163e. $65,271

Q: A virtual private network: a. is a password-controlled network for private users rather than the general public. b. is a private network within a public network. c. is an Internet facility that links user sites locally and around the world. d. defines the path to a facility or file on the web. e. none of the above is true.

Q: Taylor Textbooks Inc. buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $450,000 per year. On average, what is the dollar amount of costly trade credit (total credit − free credit) the firm receives during the year? (Assume a 365-day year, and note that purchases are net of discounts.)a. $43,151b. $45,308c. $47,574d. $49,952e. $52,450

Q: Packet switching a. combines the messages of multiple users into one packet for transmission. At the receiving end, the packet is disassembled into the individual messages and distributed to the intended users. b. is a method for partitioning a database into packets for easy access where no identifiable primary user exists in the organization. c. is used to establish temporary connections between network devices for the duration of a communication session. d. is a denial of service technique that disassembles various incoming messages to targeted users into small packages and then reassembles them in random order to create a useless garbled message.

Q: Safety Window and Door Co. buys on terms of 2/15, net 60 days. It does not take discounts, and it typically pays on time, 60 days after the invoice date. Net purchases amount to $450,000 per year. On average, how much "free" trade credit does the firm receive during the year? (Assume a 365-day year, and note that purchases are net of discounts.)a. $18,493b. $19,418c. $20,389d. $21,408e. $22,479

Q: Andrews Corporation buys on terms of 2/8, net 45 days, it does not take discounts, and it actually pays after 58 days. What is the effective annual percentage cost of its non-free trade credit? (Use a 365-day year.)a. 14.34%b. 15.10%c. 15.89%d. 16.69%e. 17.52%

Q: To physically connect a workstation to a LAN requires a a. file server b. network interface card c. multiplexer d. bridge

Q: Network protocols fulfill all of the following objectives except a. facilitate physical connection between network devices b. provide a basis for error checking and measuring network performance c. promote compatibility among network devices d. result in inflexible standards

Q: Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.)a. 20.11%b. 21.17%c. 22.28%d. 23.45%e. 24.63%

Q: The company you just started has been offered credit terms of 4/30, net 90 days. What will be the nominal annual percentage cost of its non-free trade credit if it pays 120 days after the purchase? (Assume a 365-day year.)a. 16.05%b. 16.90%c. 17.74%d. 18.63%e. 19.56%

Q: A system of computers that connects the internal users of an organization that is distributed over a wide geographic area is a(n) a. LAN b. decentralized network c. multidrop network d. Intranet

Q: Which of the following is true? a. Deep Packet Inspection uses a variety of analytical and statistical techniques to evaluate the contents of message packets. b. An Intrusion prevention system works in parallel with a firewall at the perimeter of the network to act as a filer that removes malicious packets from the flow before they can affect servers and networks. c. A distributed denial of service attack is so named because it is capable of attacking many victims simultaneously who are distributed across the internet. d. None of the above are true statements.

Q: Freeman Builders, Inc. buys on terms of 2/15, net 30. It does not take discounts, and it typically pays 60 days after the invoice date. Net purchases amount to $720,000 per year. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?a. 10.86%b. 12.07%c. 13.41%d. 14.90%e. 16.55%

Q: Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays after 60 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?a. 25.09%b. 27.59%c. 30.35%d. 33.39%e. 36.73%

Q: Firewalls are a. special materials used to insulate computer facilities b. a system that enforces access control between two networks c. special software used to screen Internet access d. none of the above

Q: Which of the following deal with transaction legitimacy? a. transaction authorization and validation b. access controls c. EDI audit trail d. all of the above

Q: Which of the following statements is CORRECT? a. A conservative financing policy is one where the firm finances part of its fixed assets with short-term capital and all of its net working capital with short-term funds. b. If a company receives trade credit under terms of 2/10 net 30, this implies that the company has 10 days of free trade credit. c. One cannot tell if a firm uses a current asset financing policy that matches maturities, is conservative, or is aggressive without an examination of its cash budget. d. If a firm has a relatively aggressive current asset financing policy vis--vis other firms in its industry, then its current ratio will probably be relatively high. e. Accruals are an expensive but commonly used way to finance working capital.

Q: Many techniques exist to reduce the likelihood and effects of data communication hardware failure. One of these is a. hardware access procedures b. antivirus software c. parity checks d. data encryption

Q: If one of your firm's customers is "stretching" its accounts payable, this may be a nuisance but it does not represent a real financial cost to your firm as long as the customer periodically pays off its entire balance. a. True b. False

Q: All of the following are designed to control exposures from subversive threats except a. firewalls b. one-time passwords c. field interrogation d. data encryption

Q: If a profitable firm finds that it simply must "stretch" its accounts payable, then this suggests that it is undercapitalized, i.e., that it needs more working capital to support its operations. a. True b. False

Q: If a firm switched from taking trade credit discounts to paying on the net due date, this might cost the firm some money, but such a policy would probably have only a negligible effect on the income statement and no effect whatever on the balance sheet. a. True b. False

Q: In an electronic data interchange environment, the audit trail a. is a printout of all incoming and outgoing transactions b. is an electronic log of all transactions received, translated, and processed by the system c. is a computer resource authority table d. consists of pointers and indexes within the database

Q: In an electronic data interchange environment, customers routinely a. access the vendor's accounts receivable file with read/write authority b. access the vendor's price list file with read/write authority c. access the vendor's inventory file with read-only authority d. access the vendor's open purchase order file with read-only authority

Q: The facts (1) that no explicit interest is paid on accruals and (2) that the firm can control the level of these accounts at will makes them an attractive source of funding to meet working capital needs. a. True b. False

Q: In determining whether a system is adequately protected from attacks by computer viruses, all of the following policies are relevant except a. the policy on the purchase of software only from reputable vendors b. the policy that all software upgrades are checked for viruses before they are implemented c. the policy that current versions of antivirus software should be available to all users d. the policy that permits users to take files home to work on them

Q: Accruals are "spontaneous," but unfortunately, due to law and economic forces, firms have little control over the level of these accounts. a. True b. False

Q: Accruals are "free" capital in the sense that no explicit interest must normally be paid on accrued liabilities. a. True b. False

Q: In an electronic data interchange (EDI) environment, when the auditor compares the terms of the trading partner agreement against the access privileges stated in the database authority table, the auditor is testing which audit objective? a. all EDI transactions are authorized b. unauthorized trading partners cannot gain access to database records c. authorized trading partners have access only to approved data d. a complete audit trail is maintained

Q: When auditors examine and test the call-back feature, they are testing which audit objective? a. incompatible functions have been segregated b. application programs are protected from unauthorized access c. physical security measures are adequate to protect the organization from natural disaster d. illegal access to the system is prevented and detected

Q: "Stretching" accounts payable is a widely accepted, entirely ethical, and costless financing technique. a. True b. False

Q: Audit objectives for communications controls include all of the following except a. detection and correction of message loss due to equipment failure b. prevention and detection of illegal access to communication channels c. procedures that render intercepted messages useless d. all of the above

Q: One of the effects of ceasing to take trade credit discounts is that the firm's accounts payable will rise, other things held constant. a. True b. False

Q: The calculated cost of trade credit for a firm that buys on terms of 2/10 net 30 is lower (other things held constant) if the firm plans to pay in 40 days than in 30 days. a. True b. False

Q: All of the following tests of controls will provide evidence that adequate computer virus control techniques are in place and functioning except a. verifying that only authorized software is used on company computers b. reviewing system maintenance records c. confirming that antivirus software is in use d. examining the password policy including a review of the authority table

Q: All of the following techniques are used to validate electronic data interchange transactions except a. value added networks can compare passwords to a valid customer file before message transmission b. prior to converting the message, the translation software of the receiving company can compare the password against a validation file in the firm's database c. the recipient's application software can validate the password prior to processing d. the recipient's application software can validate the password after the transaction has been processed

Q: The calculated cost of trade credit can be reduced by paying late. a. True b. False

Q: When deciding whether or not to take a cash discount, the cost of borrowing from a bank or other source should be compared to the cost of trade credit to determine if the cash discount should be taken. a. True b. False

Q: Which method is most likely to detect unauthorized access to the system? a. message transaction log b. data encryption standard c. vertical parity check d. request-response technique

Q: If a firm's suppliers stop offering cash discounts, then its use of trade credit is more likely to increase than to decrease, other things held constant. a. True b. False

Q: Which method will render useless data captured by unauthorized receivers? a. echo check b. parity bit c. public key encryption d. message sequencing

Q: Which control will not reduce the likelihood of data loss due to a line error? a. echo check b. encryption c. vertical parity bit d. horizontal parity bit

Q: As a rule, managers should try to always use the free component of trade credit but should use the costly component only if the cost of this credit is lower than the cost of credit from other sources. a. True b. False

Q: Passwords are secret codes that users enter to gain access to systems. Security can be compromised by all of the following except a. failure to change passwords on a regular basis b. using obscure passwords unknown to others c. recording passwords in obvious places d. selecting passwords that can be easily detected by computer criminals

Q: Trade credit can be separated into two components: free trade credit, which is credit received after the discount period ends, and costly trade credit, which is the cost of discounts not taken. a. True b. False

Q: If a firm busy on terms of 2/10 net 30, it should pay as early as possible during the discount period. a. True b. False

Q: Hackers can disguise their message packets to look as if they came from an authorized user and gain access to the host's network using a technique called a. spoofing. b. spooling. c. dual-homed. d. screening.

Q: Famous Farm's payables deferral period (PDP) is 50 days (on a 365-day basis), accounts payable are $100 million, and its balance sheet shows inventory of $125 million. What is the inventory turnover ratio?a. 4.73b. 5.26c. 5.84d. 6.42e. 7.07

Q: All of the following will reduce the exposure to computer viruses except a. install antivirus software b. install factory-sealed application software c. assign and control user passwords d. install public-domain software from reputable bulletin boards