CPS Financial Management & Budgeting Flashcards

Which of the following is an example of a fixed expense for a business?

Answer: Monthly building lease payment

A fixed expense remains constant regardless of business activity level, such as a lease or insurance premium paid each month.

What does the term 'fiscal year' mean in a business context?

Answer: A 12-month accounting period that may or may not align with the calendar year

A fiscal year is any 12-month period used for financial reporting and budgeting purposes; it doesn't have to run January–December.

When processing expense reports, what supporting document is most important for reimbursement?

Answer: An original receipt showing itemized costs

Original itemized receipts are the primary substantiation required for expense reimbursement under most corporate and IRS policies.

Which financial ratio measures a company's ability to pay short-term obligations with its most liquid assets?

Answer: Current ratio

The current ratio (current assets ÷ current liabilities) measures liquidity and a company's ability to cover short-term debts.

A secretary asked to prepare a purchase order (PO) should include all of the following EXCEPT:

Answer: Employee personal bank account

A purchase order includes vendor details, item descriptions, quantities, and pricing — never the employee's personal financial information.

What does 'net 30' mean on a vendor invoice?

Answer: Payment is due within 30 days of the invoice date

Net 30 is a payment term meaning the full invoice amount is due within 30 calendar days of the invoice date.