Question 1

What measures the profitability of products that are sold?

Accepted Answer

A)  Accounts receivable 
B)  Asset turnover 
C)  Gross margin 
D)  Owner's equity 
E)  Shrinkage

Question 2

Harriet's Wimsey is a bookstore for people who love mysteries. How would a complete set of P. D. James mystery novels, a first edition copy of The Maltese Falcon, the money in the cash register, and an IOU from a loyal customer who forgot her wallet one day when she came to purchase the newest Dorothy Cannell book be listed on the store's balance sheet?

Accepted Answer

A)  As owners' equity 
B)  As current liabilities 
C)  As fixed assets 
D)  As long-term liabilities 
E)  As current assets

Question 3

Which of the following would be the best example of an input measure?

Accepted Answer

A)  Inventory 
B)  Gross margin 
C)  Net profits 
D)  Return on assets 
E)  Sales revenue

Question 4

What are the critical assets controlled by a store manager?

Accepted Answer

The answer of What are the critical assets controlled by...

Question 5

Which of the following would be a fixed asset?

Accepted Answer

A)  Merchandise inventory 
B)  A hand calculator 
C)  The store building 
D)  Accounts receivable 
E)  Accounts payable

Question 6

In response to a growing trend of workers eating at their work stations, OfficeEase, an Internet retailer, offers a line of products that can be used to protect office equipment and furniture, including a plastic sheath for a computer keyboard and a spill-proof cup. Last year, its net sales were $1,450,000 with cost of goods sold for $353,000. The company's expenses last year totaled $960,000. Calculate the company's net profit percentage.

Accepted Answer

A)  9.4 percent 
B)  24.3 percent 
C)  66.2 percent 
D)  75.6 percent 
E)  8.0 percent

Question 7

Which of the following is an example of a fixed asset for a music store?

Accepted Answer

A)  Sheet music that is played in the store 
B)  An assortment of music displayed in the store 
C)  A selection of jazz CDs owned by the store employees 
D)  A wide range of classical and electric guitars 
E)  A computer that is used to manage the store's inventory

Question 8

Why is it important for department stores to achieve a high gross margin?

Accepted Answer

A)  Their operating expenses are higher than other retail formats. 
B)  It is stated in the store's financial objectives. 
C)  Without a high gross margin, department stores will be unable to achieve a high asset turnover. 
D)  The strategic profit model will otherwise change the strategy of the retailer. 
E)  A low gross margin will turn it into a discounter.

Question 9

Michael's sets goals at the top of the organization. Then, it breaks down these objectives for merchandise categories and regions. When these objectives reach the buyers, each objective is personalized. What does this process demonstrate?

Accepted Answer

A)  Accountable design planning 
B)  Decentralized planning 
C)  Functional development 
D)  Indirect planning 
E)  Top-down planning

Question 10

________ are the total revenues received by a retailer that are related to selling merchandise during a given time period.

Accepted Answer

A)  Gross assets 
B)  Net profits 
C)  Gross sales 
D)  Total profits 
E)  Net sales

Question 11

Using the information above, calculate each retailer's gross margin percent and net operating profit percent. Compare the two and discuss which retailer is performing better. What could the poorer performing retailer do to increase their financial performance?

Accepted Answer

The answer of  
Using the information above, calculate each...

Question 12

Calculate the return on assets for a gun shop that has total assets of $410,000, current assets of $74,000, total liabilities of $280,000, accounts receivable of $12,000, net sales of $64,000, and operating profit margin of $30,000.

Accepted Answer

A)  18.3 percent 
B)  8.2 percent 
C)  7.3 percent 
D)  25.0 percent 
E)  26.5 percent

Question 13

Which of the following is an example of a productivity measure?

Accepted Answer

A)  Cost of merchandise 
B)  Inventory turnover 
C)  Gross margin 
D)  Net sales 
E)  Advertising expenses

Question 14

When Erica calculates the current assets for her picture framing business, she should not include which of the following?

Accepted Answer

A)  Her accounts payable 
B)  The money in her cash register 
C)  Office supplies 
D)  Her accounts receivable 
E)  The store's inventory of matting

Question 15

The Bookstore Café is a small restaurant located in a downtown business district. It is opened for breakfast and lunch and serves simple yet nutritious meals and also sells books from the New York Times bestseller list. How would you categorize the book inventory, cooking equipment, tables, chairs, and the register?

Accepted Answer

A)  As retained earnings 
B)  As assets 
C)  As current liabilities 
D)  As investor capital 
E)  As owners' equity

Question 16

Which of the following is expressed as a percentage of net sales?

Accepted Answer

A)  Accounts receivable 
B)  Net profit margin 
C)  Gross sales 
D)  Operating expenses 
E)  Total assets

Question 17

Using the information above, calculate each retailer's asset turnover and compare the results. Discuss what the results indicate about each retailer.
Net Sales/Total Assets = Asset Turnover

Accepted Answer

The answer of  
Using the information above, calculate each...

Question 18

________ gives the retailer a measure of how much profit it is making on merchandise sales without considering the expense associated with operating the store.

Accepted Answer

A)  Gross margin 
B)  Financial leverage 
C)  General expenses 
D)  Expenses 
E)  Net profit

Question 19

Country Homes is a store for people who collect country arts and crafts and use them to decorate their homes. Last year, its net sales totaled $120,500. The cost value of the items it sold was $72,300. Taxes for the year were $7,680. The only expenses that the operation had were (1) rent for $3000, (2) salaries to the owner and one part-time assistant for $27,000, (3) utilities at $1,200, and (4) advertising of $500. Calculate the gross margin percentage for Country Homes.

Accepted Answer

A)  40 percent 
B)  26.3 percent 
C)  9.6 percent 
D)  60.2 percent 
E)  7.3 percent

Question 20

The formula for calculating operating expenses percentage is

Accepted Answer

A)  total sales/operating expenses. 
B)  gross sales/operating expenses. 
C)  operating expenses/net sales. 
D)  average sales/gross sales. 
E)  total sales/average sales.

Exam 6: Financial Strategy