FREE AICPA Business Environment and Concepts Questions and Answers
What does the term “economic order quantity” (EOQ) refer to in inventory management?
Economic Order Quantity (EOQ) is a formula used in inventory management to determine the optimal order quantity that minimizes the total costs of inventory, including ordering costs and holding costs.
In the context of cost accounting, which cost classification is most appropriate for decision-making purposes?
For decision-making purposes, variable costs are most relevant as they change with the level of production or sales volume. These costs directly impact the cost of producing additional units or changing production levels.
Which financial ratio is most useful for assessing a company’s short-term liquidity?
The current ratio is used to assess a company’s ability to meet its short-term liabilities with its short-term assets. It is a key indicator of short-term liquidity.
Which of the following is a primary function of corporate governance?
Corporate governance is concerned with overseeing and ensuring that a company adheres to internal policies, procedures, and regulatory requirements. It involves setting the direction for the company, monitoring performance, and making sure that policies are followed to maintain ethical standards and accountability.
Which of the following best describes the "balanced scorecard" approach to performance management?
The balanced scorecard is a performance management tool that integrates both financial and non-financial measures to provide a more comprehensive view of organizational performance. It helps in balancing short-term financial performance with long-term strategic goals and non-financial factors such as customer satisfaction and internal processes.