ETS MFT BUSINESS EXAM | Answered Correctly! Summer 2022-23.

Abraham Maslow, noted psychologist, theorized that people were motivated by:

a) money, more money, and even more money
b) time pressures
c) unmet needs
d) greed
c) unmet needs

According to Trompenaar and Hampden-Turners classification, a culture with private life kept separate from work is called:

a) Diffuse
b) Specific
c) Neutral
d) Emotional
b) Specific

All of the financial statements are for a period of time except the

a) Income statement
b) Owner’s equity statement
c) Balance sheet
d) Statement of cash flows
c) Balance sheet

All of the following are true regarding a seller’s rights to reduce legal liability in the sale of non-consumer goods EXCEPT:

a) The seller can disclaim consequential
damages if it is done clearly and conspicuously.

b) The seller can limit the remedy available to the buyer if he or she does so clearly and
fairly.

c) The seller can place reasonable conditions on the warranty coverage and a shorter time limit of warranty coverage.

d) The seller can disclaim all implied warranties by simply stating that there are no implied warranties.
d) The seller can disclaim all implied warranties by simply stating that there are no implied warranties.

Assume that $1 is equal to ¥102.32 and also equal to C$1.0958. Based on this, you could say that C$1 is equal to: C$1(¥102.32 / C$1.0958) = ¥93.37. The exchange rate of C$1 = ¥93.37 is referred to as the:

A) Cross-rate
B) Interest rate
C) Forward rate
D) Open exchange rate
E) Backward rate
A) Cross-rate

As the size of the sample increases, what happens to the shape of the sampling means?

a) Cannot be predicted in advance
b) Approaches a normal distribution
c) Positively skewed
d) Negatively skewed
b) Approaches a normal distribution

Based on his scientific management theory, Frederick Taylor developed what pay principle?

a) Hourly pay
b) Incentive pay
c) Profit sharing
d) Monthly salary with bonus
b) Incentive pay

Based on the central limit theorem, the size of the sampling error is:

a) Directly related to the sample size, i.e., the larger the sample size the larger the sampling error

b) Directly related to the population mean, i.e., the larger the mean, the larger the sampling error

c) Inversely related to the sample size, i.e., the larger the sample size the smaller the sampling error

d) Inversely related to the population standard deviation, i.e., the smaller the standard deviation, the larger the sampling error
c) Inversely related to the sample size, i.e., the larger the sample size the smaller the sampling error

The Bill of Rights refers to:

a) the inalienable rights found at the beginning of the Constitution

b) the first ten amendments to the Constitution

c) a specific listing of individual rights found in the original text of the Constitution.

d) a grouping of individual rights set forth by the United States Supreme Court shortly after the Constitution was ratified by the states
b) the first ten amendments to the Constitution

Business torts consist of:

a) interference with contractual relations.
b) disparagement.
c) fraudulent misrepresentation
d) All of the above
d) All of the above

By assembling computers only after customers have paid them for, resulting in a lower finished goods inventory, Dell Computer Co. achieved:

a) Increased quality
b) A competitive advantage
c) Increased responsiveness
d) Increased innovation
e) None of the above
b) A competitive advantage

Carefully dismantling and inspecting a competitor’s product to look for design features that can be incorporated into your own product is known as:

a) concurrent design
b) design for manufacturability
c) benchmarking
d) reverse engineering
d) reverse engineering

The central processing unit (CPU) in a personal computer contains the

a) control unit and primary memory
b) control unit and arithmetic/logic unit
c) arithmetic/logic unit and bus
d) arithmetic/logic unit only
b) control unit and arithmetic/logic unit

The CEO reviews the performance of her company in the past month’s Profit & Loss Statement to determine if the company is “on track” in terms of its sales and profitability goals. This CEO is engaged in which function?

a) Planning
b) Organizing
c) Demonstrating
d) Controlling
e) Leading
d) Controlling

The channels of distribution create all of the following utilities EXCEPT:

a) time
b) place
c) form
d) possession
c) form

The common characteristic possessed by all assets is

a) Long life
b) Great monetary value
c) Tangible nature
d) Future economic benefit
d) Future economic benefit

A company had sales of $920,000 and fixed costs were $160,000. What was the income from operations if the contribution margin ratio was 30 percent?

a) $116,000
b) $276,000
c) $484,000
d) $644,000
a) $116,000

A company is considering producing a product for a new market. The fixed costs required for manufacturing and delivering the product is $50,000. Labor and material costs are estimated to be approximately $25.00 per product. If the product is sold for $35.00 each, the firm’s break-even volume would be:

a) 50,000 units
b) 5,000 units
c) 2,500 units
d) 500 units
b) 5,000 units

A company issued a $600,000, 12 percent, 90-day note payable to acquire an office building. What is
the maturity value of the note?

a) $72,000
b) $600,000
c) $618,000
d) $672,000
c) $618,000

A company’s buying center encompasses:

a) a representative from each department within an organization

b) only a gatekeeper and a buyer

c) everyone who is involved in any aspect of the buying process

d) an exclusive top-notch buying department
c) everyone who is involved in any aspect of the buying process

The control of the money supply by the Federal Reserve System is known as:

a) fiscal policy
b) supply-side policy
c) congressional policy
d) monetary policy
d) monetary policy

The degree to which a product meets pre-established standards is known as

a) conformance
b) performance
c) reliability
d) none of the above
a) conformance

A department manager telephoned two managers in other departments to discuss a cost savings idea that would benefit their departments as well as her own. Which of the following most accurately defines the communication channel that the manager was using?

a) Upward
b) Lateral
c) Downward
d) Hierarchical
b) Lateral

A differentiation strategy enables a business to address the five competitive forces by

a) lessening competitive rivalry by distinguishing itself

b) having brand-loyal customers become more sensitive to prices

c) increasing economies of scale

d) serving a broader market segment
a) lessening competitive rivalry by distinguishing itself

The document that provides a common understanding, justification, and expected result for a project is referred to as

a) the statement of work (SOW)
b) the work breakdown structure (WBS)
c) the scope statement
d) the responsibility assignment matrix (RAM)
c) the scope statement

Douglass Interiors is considering two mutually exclusive projects and have determined that the crossover rate for these projects is 11.7 percent. Project A has an internal rate of return (IRR) of 15.3 percent and Project B has an IRR of 16.5 percent. Given this information, which one of the following statements is correct?

a) Project A should be accepted as its IRR is closer to the crossover point than is Project B’s IRR.

b) Project B should be accepted as it has the higher IRR.

c) Both projects should be accepted as both of the project’s IRRs exceed the crossover rate.

d) Neither project should be accepted since both of the project’s IRRs exceed the crossover rate.

e) You cannot determine which project should be accepted given the information provided.
e) You cannot determine which project should be accepted given the information provided.

Dreamland Pillow Company sells the “Old Softy” model for $20 each. One pillow requires two pounds of raw material and one hour of direct labor to manufacture. Raw material costs $3 per pound and direct production labor is paid $4 per hour. Fixed supervisory costs are $2,000 per month and Dreamland rents its factory on a five-year lease for $4,000 per month. All costs are considered costs of production.

Another firm has offered to produce “Old Softy” and sell them to Dreamland for $12 each. Dreamland cannot avoid the factory lease payments, but can avoid all labor costs if it does not produce these pillows. Under these conditions, how many “Old Softy” pillows must Dreamland sell to earn monthly gross profits of $1,000?

a) 417
b) 500
c) 625
d) 875
c) 625

How many pillows must Dreamland produce and sell each month to earn a monthly gross profit of $1,000?

a) 300
b) 350
c) 600
d) 700
d) 700

The economic entity assumption requires that the activities

a) of different entities can be combined if all the entities are corporations

b) must be reported to the Securities and Exchange Commission

c) of a sole proprietorship cannot be distinguished from the personal economic events of its owners

d) of an entity be kept separate from the activities of its owner
d) of an entity be kept separate from the activities of its owner

Economists assume a firm’s goal is to:

a) Minimize total costs
b) Maximize total revenue
c) Maximize profits
d) All of the Above
c) Maximize profits

The effect whereby slight demand variability is magnified as it moves back upstream in the supply chain is known as

a) the bullwhip effect
b) postponement
c) collaborative replenishment
d) direct-response delivery
a) the bullwhip effect

The essence of common law is:

a) its prospective nature.
b) the concept of stare decisis
c) its flexibility
d) the plain meaning doctrine
b) the concept of stare decisis

An example of an unfair trade practice is:

a) EU Government policy prohibiting imports of U.S. Beef

b) EU prohibitions of Latin American bananas

c) US tariffs on European steel

d) All of the above
d) All of the above

Family branding refers to a group of:

a) similar brands of products from different makers

b) different brands of products from different makers within the same industry

c) different products marketed under a single brand name

d) similar products sold by small, family-owned firms
c) different products marketed under a single brand name

Fiedler proposes that all of the following determine whether a task- or relationship-oriented style is more effective except:

a) Situational favorableness
b) Leader-member relations
c) Task structure
d) Position power
a) Situational favorableness

Firms engage in international operations because they can benefit from:

a) Cheap labor, cheap resources, and fair market opportunities

b) Competitive labor prices, cheap resources, and enormous market opportunities

c) Lax government regulation, low taxes, and few laws

d) Unsophisticated employees and customers, eager learners, and a few consumer goods
b) Competitive labor prices, cheap resources, and enormous market opportunities

A firm that would like to know whether it has enough cash to meet its bills would be most likely to use which category of financial ratio?

a) Liquidity
b) Leverage
c) Efficiency
d) Profitability
a) Liquidity

The General Agreement on Tariffs and Trade (GATT) created the World Trade Organization (WTO). The WTO activities include:

a) stimulating international commerce and resolving trade disputes.

b) enforcement of the Foreign Corrupt Practices Act (FCPA).

c) elimination of almost all trade barriers between Canada, Mexico, and the United States.

d) All the above are correct
a) stimulating international commerce and resolving trade disputes.

General Bikes is debating which marketing research options to employ. The traditional person-to-person methods have been effective; however, the new director of market research is campaigning for online-based research. What argument for this method might he/she use?

a) Consumers are more relaxed at home in front of their computers, therefore it is more likely the responses will be truthful

b) Online research has been standardized for each industry, making it easier to understand them

c) A well-designed, Internet-based marketing research project can cost less and yield information faster than offline research

d) Person-to-person methods most often incorporate researcher bias into the surveys and observations
c) A well-designed, Internet-based marketing research project can cost less and yield information faster than offline research

Generally, as the number of servers in a waiting line system increases

a) service cost increases and waiting cost decreases
b) service cost decreases and waiting cost increases
c) both service cost and waiting cost increase
d) both service cost and waiting cost decrease
a) service cost increases and waiting cost decreases

Green desires to form a new company to manufacture lawn mowers. Green is concerned about having his personal assets exposed to liability for the new company’s contracts and torts. Furthermore, he wants to retain control over the company’s operations and growth for the next few years. He will need an infusion of equity capital to begin operations. He hopes to take the company public in about five years if it is advantageous to do so at the time. Which of the following types of associations would be best for Green’s new company?

a) Corporation
b) General partnership
c) Limited partnership
d) Member-managed limited-liability company
a) Corporation

A group that develops naturally as a result of employees’ interaction within an organization is referred to as

a) an informal group
b) a formal group
c) a work-team group
d) a formation group
a) an informal group

High product differentiation is generally accompanied by

a) higher market share
b) decreased emphasis on competition based on price
c) higher profit margins and lower costs
d) significant economies of scale
b) decreased emphasis on competition based on price

If the Federal Reserve decides to decrease the money supply, which of the following most likely will occur?

a) An increase in private investment and consumer expenditure

b) A decrease in private investment and consumer expenditure

c) An increase in private investment and a decrease in consumer expenditure

d) A decrease in private investment and an increase in consumer expenditure
b) A decrease in private investment and consumer expenditure

If the spread between the spot and forward exchange rates of two currencies equals the interest rate difference between the two countries, this phenomenon is referred to as

a) purchasing-power equality
b) commodity arbitrage
c) currency hedging
d) interest-rate parity
d) interest-rate parity

In a large firm, the pool of applicants for the positions of sales manager and sales associate consists of three men and three women. If each candidate has an equal chance of being selected, what is the probability that both positions will be filled by men?

a) 0.20
b) 0.25
c) 0.33
d) 0.50
a) 0.20

In an economy the unemployment rate is 10 percent and the inflation rate is 1 percent. An
appropriate fiscal policy in this phase of the business cycle would be to

a) increase government spending
b) increase income taxes
c) decrease transfer payments
d) decrease the money supply
a) increase government spending

In a negligence case, the plaintiff must establish:

a) duty, strict liability, causation, and injury

b) mens rea, breach, foreseeable harm, and injury.

c) duty, actus reus, foreseeable harm, and causation.

d) duty of due care, breach, causation, foreseeable harm, and injury
a) duty, strict liability, causation, and injury

In a period of rising prices, which inventory valuation method would generally yield both the
lowest ending inventory value and the lowest net income figure?

a) First in, first out (FIFO)
b) Last in, first out (LIFO)
c) Weighted average
d) Standard cost
b) Last in, first out (LIFO)

The incomes of a group of 50 loan applicants are obtained. Which level of measurement is income?

a) Nominal
b) Ordinal
c) Interval
d) Ratio
e) None of the above
d) Ratio

Information systems are either operations or management systems. Which one of the following would NOT be classified as an operations system?

a) Transaction processing systems
b) Process control systems
c) Functional information systems
d) Executive support systems
d) Executive support systems

An information system that enables all business departments in the same firm to share relevant information and data is called

a) an enterprise resource planning (ERP) system
b) a material requirements planning (MRP) system
c) a decision support system (DSS)
d) a point-of-sale (POS) system
a) an enterprise resource planning (ERP) system

In general, as the order size increases,

a) ordering costs decrease and carrying costs increase

b) ordering costs increase and carrying costs decrease

c) both ordering and carrying costs increase

d) both ordering and carrying costs decrease
a) ordering costs decrease and carrying costs increase

In general, the _ difficult it is for an organization to enter an industry as a new competitor, the _ are the barriers to entry to this industry

a) Less; lower
b) More; lower
c) More; higher
d) Less; higher
c) More; higher

In marketing research, a firm might consider using secondary data over primary data because

a) secondary data usually cost less
b) secondary data are usually more accurate
c) primary data are usually non specific
d) primary data are likely to be outdated.
a) secondary data usually cost less

In monopolistic competition, there are:

a) Many firms selling identical products

b) Many firms selling similar, but not identical products

c) A few firms selling similar, but not identical products

d) A few firms selling unique products with no close substitutes
b) Many firms selling similar, but not identical products

In organizational decision making, managers are able to exercise the greatest degree of discretion in the

a) enforcement of internal policies
b) settlement of legal disputes
c) restructuring of outstanding loans
d) compliance with federal regulations.
a) enforcement of internal policies

In project management the term slack refers to the:

a) amount of time to complete an activity without delaying the project

b) amount of time an activity can be delayed without delaying the project

c) amount of time needed to complete the entire project

d) amount of time required to complete the project’s critical activities
b) amount of time an activity can be delayed without delaying the project

In _, provincial governments play a substantial role in trade and investment regulation

a) China
b) Norway
c) Indonesia
d) Canada
d) Canada

In service blueprinting, which line separates front office activities from back office activities?

a) Line of visibility
b) Line of intervention
c) Line of influence
d) Line of support
a) Line of visibility

In the calculation of the arithmetic mean for grouped data, which value is used to represent all the values in a particular class?

a) The upper limit of the class
b) The lower limit of the class
c) The frequency of the class
d) The cumulative frequency preceding the class
e) The class midpoint
e) The class midpoint

In the late 1970’s and 1980’s, the U.S. car manufactures sought to limit __ import to the U.S.?

a) Cuban
b) Asian
c) Japanese
d) Chinese
c) Japanese

In the statement of cash flows, the section for cash flows from operating activities will include which of the following?

a) Dividends paid
b) Issuance of common stock
c) A decrease in accounts payable
d) Purchase of a building financed entirely by a mortgage
c) A decrease in accounts payable

Keith is working on a computerized search through one of his company’s massive data files. The purpose of the search is to try to detect patterns in product sales. Keith is engaged in:

a) data forecasting
b) marketing decision support systems
c) data mining
d) sales forecasting
c) data mining

Kershaw Bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:

Date Purchases Sales
Jan 14 375 @ $28
Jan 17 250 @ $20
Jan 25 250 @ $22
Jan 29 250 @ $32

Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units were on hand at January 31.

The cost of the inventory at January 31, under the LIFO method is:

a) $1,000
b) $6,750
c) $7,750
d) $8,000
b) $6,750

A legal institution associated with an independent judiciary relying on case precedents is called

a) common law system
b) civil law system
c) theocratic law system
d) None of the above
a) common law system

Littleton, Inc., has fixed costs of $75,000 per month, variable costs of $5 per unit, and a sales price per unit of $30. What is the break-even quantity per month?

a) 2,143
b) 2,500
c) 3,000
d) 15,000
c) 3,000

The longest path through the network, in terms of time, is referred to as the

a) activity-on-node path
b) path of greatest slack
c) critical path
d) scheduling path
c) critical path

Long-term plans focusing on those organizational objectives that will significantly affect the firm for five or more years are usually referred to as _ plans.

a) strategic
b) marketing
c) economic
d) Tactical
a) strategic

A major competitor of XYZ, Inc. suddenly creates a new type of product that makes XYZ’s products obsolete. This is an example of which type of force in the environment?

a) General environment
b) Task environment
c) Economic environment
d) Legal environment
e) Political environment
b) Task environment

Managers at ABC, Inc. analyze the current situation of their organization and then develop plans to help their organization to accomplish its mission and achieve its goals. This is known as:

a) Synergy planning
b) Strategy formulation
c) Functional planning
d) SWOT analysis
b) Strategy formulation

A manager who chooses the wrong goals for the organization and makes poor use of the organization’s resources in pursuing these goals is said to have:

a) Low effectiveness/low efficiency
b) Low effectiveness/high efficiency
c) High effectiveness/low efficiency
d) High effectiveness/high efficiency
e) None of the above
a) Low effectiveness/low efficiency

A manufacturer estimates its factory overhead costs to be $30,000 and machine hours to be 4,000 for the year. If the actual hours worked on production total 3,800 and the actual factory overhead costs are $28,000, what is the amount of the over- or underapplied factory overhead?

a) $500 overapplied
b) $500 underapplied
c) $2,000 overapplied
d) $2,000 underapplied
a) $500 overapplied

Manufacturing overhead includes:

a) all direct material, direct labor and administrative costs

b) all manufacturing costs except direct labor

c) all manufacturing costs except direct labor and direct materials

d) all selling and administrative costs
c) all manufacturing costs except direct labor and direct materials

Marketers must constantly monitor their competitors’ products, prices, distribution, and promotional efforts because the:

a) competitors may be violating the truth-in-advertising laws

b) actions of competitors may threaten the firm’s monopoly position

c) actions of competitors may create an oligopoly within an industry

d) new product offerings by a competitor may require adjustments to one or more components of the firm’s marketing mix
d) new product offerings by a competitor may require adjustments to one or more components of the firm’s marketing mix

Markets for resources (factors of production) are different from goods markets because…

a) There is always market power

b) Resources are not consumed themselves, but are means to the production of some other good

c) Resources are vague, undefined concepts

d) Resources are supplied by firms not households
b) Resources are not consumed themselves, but are means to the production of some other good

The matching principle matches

a) customers with businesses
b) expenses with revenues
c) assets with liabilities
d) creditors with businesses
b) expenses with revenues

Maxwell has been named to an upper-level management position at QVC. He will be working with transportation media, order processing, and development of marketing channels. Maxwell is involved in developing _ strategies.

a) product
b) distribution
c) promotional
d) marketing
b) distribution

M-commerce:

a) Involves buying, selling, marketing and servicing of products, services and information over variety of networks

b) Uses commercial processes like multimedia advertising, product information and customer support on the Web

c) Involves Internet security and payment mechanisms that ensure completion of delivery and payment processes

d) All of the choices are correct
d) All of the choices are correct

Miller Brothers Hardware paid an annual dividend of $1.15 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 12 percent rate of return, how much are you willing to pay to purchase one share of this stock today?

a) $12.23
b) $12.55
c) $12.67
d) $12.72
b) $12.55

Money is the key motivator in

a) Herzberg’s motivation-hygiene theory
b) Maslow’s hierarchy of needs
c) McGregor’s Theory X and Theory Y
d) Taylor’s scientific management
d) Taylor’s scientific management

The most appropriate level of market coverage for shopping goods is

a) intensive distribution
b) selective distribution
c) uniform distribution
d) exclusive distribution
b) selective distribution

Most Japanese MNE’s, for instance, begin their international expansion with _ investment because they believe that it enables the sharing of experience, resources, and knowledge already developed at home, thus reducing risk.

a) Vertical FDI
b) Horizontal FDI
c) Conglomerate FDI
d) None of the above
b) Horizontal FDI

Natural Monopolies are characterized by…

a) Economies of Scale (Increasing returns to scale)
b) Constant Returns to Scale
c) Diseconomies of Scale (Decreasing returns to scale)
d) Non-existent returns to Scale
a) Economies of Scale (Increasing returns to scale)

Net income $100,000

Depreciation expense $10,000

Net increase in accounts receivable $5,000

Net increase in accounts payable $3,000

On the basis of the information provided in the table above for a corporation, the corporation’s net cash flow from operating activities for the current year is

a) $98,000
b) $102,000
c) $108,000
d) $118,000
c) $108,000

A nuclear power plant uses electronic sensors linked to computers to continually monitor processes and make instant (real-time) adjustments that control the power generation process. This is an example of a(n):

a) Transaction processing system
b) Decision support system
c) Enterprise collaboration system
d) Process control system
d) Process control system

Officers and directors of a corporation owe to the corporation the subordination of their self-interest to the interest of the corporation and owe constant loyalty to the corporation. This duty is the:

a) fiduciary duty
b) business judgment duty
c) duty of indemnification
d) duty of diligence
a) fiduciary duty

Only one of the following statements is false at the long-run equilibrium for a firm in a monopolistically competitive industry. Which one is false?

a) Price equals Average Total Cost, like a competitive firm

b) Price exceeds marginal cost, like a monopolist

c) Firms make zero economic profit, like a competitive firm

d) Firms produce at the bottom of the ATC curve, like a competitive firm
d) Firms produce at the bottom of the ATC curve, like a competitive firm

On May 31, Company O’s general ledger shows a cash balance of $5,123. The May 31 bank statement shows a balance of $4,905. Other information is available as follows:

A May 31 deposit of $300 does not appear on the bank statement; but a $3 service charge does.
A customer’s $40 insufficient funds check has been returned with the bank statement.
Outstanding checks of $10, $15, and $100 are identified on May

What is the correct cash balance on May 31?

a) $4,905
b) $5,080
c) $5,166
d) $5,204
b) $5,080

An open access good (or common property good), such as a fishery:

a) Is rival but not excludable
b) Is both rival and excludable
c) Is neither rival nor excludable
d) Is not rival but is excludable
a) Is rival but not excludable

The organizational buying process has more steps than the consumer buying process, which can be attributed to:

a) the limited number of suppliers in the B2B marketplace

b) the importance of integrating the responsibilities of the wholesalers or retailers

c) interpersonal and environmental influences not seen in consumer buying decisions

d) business purchasing that introduces new complexities that do not affect consumers
d) business purchasing that introduces new complexities that do not affect consumers

The Organization of the Petroleum Exporting Countries (OPEC) reduces production by
10 percent, and the growth rate of the world economy begins to escalate. How will the
simultaneous occurrence of these events affect the equilibrium price and quantity in the world
petroleum market?

a) Price will increase, but quantity will remain unchanged
b) Price will increase, but quantity is indeterminate
c) Quantity will increase, but price is indeterminate
d) Both price and quantity will increase
b) Price will increase, but quantity is indeterminate

__ planning normally is performed by middle managers and typically has a one-year time frame

a) Strategic planning
b) Tactical planning
c) Operational planning
d) Contingency planning
b) Tactical planning

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

Because pictures of products, either in print or on the Internet, can differ from the actual appearance of a piece of jewelry, Priceless Treasures’ customers are sometimes disappointed by items they have purchased. To reduce customer dissatisfaction, the firm’s customer service representatives call customers to answer any questions they have, confirm their satisfaction with the purchase, and communicate the firm’s refund/return policies.

The firm is seeking to influence the customers’ purchase decision process by:

a) stimulating customers to recognize a need of which they were previously unaware

b) facilitating an information search by providing new information

c) influencing alternative assessment by emphasizing the value of the purchased item

d) reducing cognitive dissonance through the reassurance of personal contact
d) reducing cognitive dissonance through the reassurance of personal contact

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

From data collected by the retail jewelers’ trade association, Ms. Thornton learns that sales of antique jewelry are rising and that the most common purchasers are older, upper-income couples. Though initially reluctant to purchase online, these customers are beginning to overcome their concerns. From United States Census Bureau data, she learns that this population segment is growing in number and will continue to do so throughout the next two decades. At this point what should Ms. Thornton do?

a) Summarize the research findings and recommend implementing the online catalog as the firm’s market is clearly growing.

b) Collect primary data to determine whether these trends and preferences are reflected in
Priceless Treasures’ customer base.

c) Collect primary data on competitors to determine whether the online market for antique jewelry is saturated.

d) End the study and retain the current system as the major customer segment is clearly skeptical of online retailers.
b) Collect primary data to determine whether these trends and preferences are reflected in
Priceless Treasures’ customer base.

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

Ms. Thornton plans to conduct an online survey of her customers. What is the most significant problem with using this survey method rather than a traditional mail approach?

a) Respondents may not answer the survey truthfully.

b) Customers who do not use the Internet will not be in the sample.

c) Respondents will not be able to see the entire survey and thus may answer only part of it.

d) Online surveys cannot prevent multiple or inappropriate responses to complex questions.
b) Customers who do not use the Internet will not be in the sample.

The primary purpose of the statement of cash flows is to report

a) A company’s investing transactions

b) A company’s financing transactions

c) Information about cash receipts and cash payments of a company

d) The net increase or decrease in cash
c) Information about cash receipts and cash payments of a company

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy?

a) differentiation
b) overall cost leadership
c) differentiation focus
d) stuck-in-the-middle
b) overall cost leadership

The principal difference between variable costing and absorption costing centers on:

a) whether variable manufacturing costs should be included as product costs

b) whether fixed manufacturing costs should be included as product costs

c) whether fixed manufacturing costs and fixed selling and administrative costs should be included as product costs

d) none of these
b) whether fixed manufacturing costs should be included as product costs

The principle of diversification tells us that:

a) concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk.

b) concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk.

c) spreading an investment across five diverse companies will not lower the total risk.

d) spreading an investment across many diverse assets will eliminate all of the systematic risk.

e) spreading an investment across many diverse assets will eliminate some of the total risk
e) spreading an investment across many diverse assets will eliminate some of the total risk

The probability that a product will operate properly within an expected time frame is the dimension of quality known as

a) durability
b) reliability
c) performance
d) serviceability
b) reliability

A problem associated with equity theory is that:

a) it focuses on providing incentives for the long run when most workers are mainly concerned with incentives that apply to their current situation

b) managers have a hard time applying it to real-world situations because of its abstract nature

c) worker motivation is based on perceptions of fairness, and the perceptions workers have about their contributions are not always accurate

d) it is concerned with the nature of the job itself rather than with what motivates the workers who perform the job
c) worker motivation is based on perceptions of fairness, and the perceptions workers have about their contributions are not always accurate

The process of collecting information about the external marketing environment is called:

a) environmental management
b) marketing research
c) marketing management
d) environmental scanning
d) environmental scanning

A project consists of 150 jobs. The expected completion time for each job is given in days. The project has three critical paths with two jobs in common, J and K. In order to finish the project one day early, the completion time should be reduced one day for

a) each of the 150 jobs
b) each of the jobs on the three critical paths
c) either Job J or Job K
d) both Job J and Job K
c) either Job J or Job K

A project has a net present value of zero. Which one of the following best describes this project?

a) The project has a zero percent rate of return.

b) The project requires no initial cash investment.

c) The project has no cash flows.

d) The summation of all of the project’s cash flows is zero.

e) The project’s cash inflows equal its cash outflows in current dollar terms
e) The project’s cash inflows equal its cash outflows in current dollar terms

Routine physical examinations are conducted annually as part of a health service program for the employees. It was discovered that 8% of the employees needed corrective shoes, 15% needed major dental work and 3% needed both corrective shoes and major dental work. What is the probability that an employee selected at random will need either corrective shoes or major dental work?

a) 0.20
b) 0.25
c) 0.50
d) 1.00
e) None of the above
a) 0.20

Saint Martin Hospital boasts one of the world’s leading medical imaging programs. Its radiology department specializes in the early detection of particularly serious forms of stomach, intestinal, and colon cancer. The hospital plans to invest in a new system of digital medical imaging and image transmission technologies that will enable its radiologists to view and evaluate intestinal scan results from anywhere in the world.

With this investment, the hospital is attempting to overcome which of the constraints of services
marketing?

a) Inventory
b) Intangibility
c) Inconsistency
d) Inseparability
d) Inseparability

A sample of assistant professors on the business faculty at state supported institutions in Ohio revealed the mean income to be $32,000 for 9 months with a standard deviation of $3,000. Using Chebyshev’s Theorem, what proportion of the faculty earns more than $26,000 but less than $38,000?

a) At least 50%
b) At least 25%
c) At least 75%
d) At least 100%
c) At least 75%

Sessler Manufacturers made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.75 a share. Secondly, all dividends after that will decrease by 1.5 percent annually. What is the maximum amount you should pay to purchase a share of this stock today if you require a 14 percent rate of return?

a) $11.29
b) $12.64
c) $13.27
d) $14.00
e) $14.21
a) $11.29

A small number of people with complementary skills who are committed to a common purpose, a set of performance goals, and an approach for which they hold themselves mutually accountable is referred to as a

a) committee
b) task force
c) group
d) team
d) team

Standard deviation measures which type of risk?

a) total
b) nondiversifiable
c) unsystematic
d) systematic
e) economic
a) total

A standard marketing strategy that is modified only minimally for use in each of the firm’s foreign markets is a _ marketing strategy.

a) lateral entry
b) unipolar
c) global
d) multidomestic
c) global

A standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and providing measures of schedule and budget variation as activities are completed is referred to as

a) program evaluation and review technique (PERT)
b) the critical path method (CPM)
c) a Gantt chart
d) earned value analysis (EVA)
d) earned value analysis (EVA)

Steel, paper, paints, and chemicals are examples of industries that most likely use

a) batch production systems
b) repetitive production systems
c) continuous production systems
d) mass production systems
c) continuous production systems

A student received an A on the first test of the semester. The student wants to calculate the probability of scoring an A on the second test. Historically, the instructor knows that the joint probability of scoring A’s on the first two tests is 0.5. Also, historically, the probability that a student scores and “A” on the second test given that a student scored an A on the first test is 0.9. What is the probability that a student will score an A on the second test?

a) 0.50
b) 0.95
c) 0.55
d) 0.90
c) 0.55

Sue and Neal are twins. Sue invests $5,000 at 7 percent when she is 25 years old. Neal invests $5,000 at 7 percent when he is 30 years old. Both investments compound interest annually. Both Sue and Neal retire at age 60. Which one of the following statements is correct assuming that neither Sue nor Neal has withdrawn any money from their accounts?

a) Sue will have less money when she retires than Neal.

b) Neal will earn more interest on interest than Sue.

c) Neal will earn more compound interest than Sue.

d) If both Sue and Neal wait to age 70 to retire, then they will have equal amounts of savings.

e) Sue will have more money than Neal as long as they retire at the same time
e) Sue will have more money than Neal as long as they retire at the same time

A SWOT analysis examines a company’s:

a) strategies, weaknesses, opportunities, and threats

b) strengths, weaknesses, opportunities, and threats

c) strategies, weaknesses, opportunities, and tactical plans

d) strengths, weaknesses, operational plans, and threats
b) strengths, weaknesses, opportunities, and threats

A system whereby products are delivered to warehouses on a continual basis, where they are sorted, repackaged and distributed to stores without sitting in inventory is known as

a) postponement
b) cross-docking
c) continuous replenishment
d) direct-response delivery
b) cross-docking

The term “net working capital” refers to

a) inventories, receivables, and current notes and investments

b) assets divided by liabilities

c) current assets less short-term liabilities

d) net assets left over after subtracting cost of goods sold
c) current assets less short-term liabilities

There are 10 rolls of film in a box and 3 are defective. Two rolls are to be selected without replacement. What is the probability of selecting a defective roll followed by another defective roll?

a) 1/2, or 0.50
b) 1/4, or 0.25
c) 1/120, or about 0.0083
d) 1/15, or about 0.07
d) 1/15, or about 0.07

The two international treaties that govern patent protection are

a) Paris Convention and Patent Cooperation Treaty

b) International Patent Patrol and Patent Treaty

c) Patent Protection Treaty and International Patent Patrol

d) Patent Protection Treaty and Patent Cooperation Treaty
a) Paris Convention and Patent Cooperation Treaty

Under the common law, the _ must be the mirror image of the _

a) contract, consideration.
b) contract, offer
c) offer, acceptance
d) acceptance, offer
d) acceptance, offer

Under the Uniform Commercial Code (UCC) statute of frauds, which of the following terms must be included in writing in order to satisfy the writing requirement?

a) The price of the goods.
b) The quantity of the goods.
c) The signatures and names of the buyer and the seller
d) The time and place for delivery
b) The quantity of the goods

U.S. dollars deposited in a bank in Switzerland are called:

a) foreign depository receipts
b) international exchange certificates
c) francs
d) Eurocurrency
e) Eurodollars
d) Eurocurrency

A valid contract may be unenforceable for which reason(s)?

a) Failure to satisfy the Statute of Frauds.
b) Running of the Statute of Limitations
c) Both (A) and (B)
d) A valid contract is always enforceable.
c) Both (A) and (B)

Web 2.0 is best represented by which of the following phenomena?

a) Social networking sites
b) Word processing
c) Internet browsers
d) Text messaging
a) Social networking sites

What can we conclude if the coefficient of determination is 0.94?

a) Strength of relationship is 0.94

b) Direction of relationship is positive

c) 94% of total variation of one variable is explained by variation in the other variable

d) All of the above are correct
c) 94% of total variation of one variable is explained by variation in the other variable

What is the major distinction between executive and independent agencies?

a) Executive agencies govern business issues while independent agencies regulate individual matters.

b) The president has greater control over executive agencies.

c) The Administrative Procedure Act regulates independent agencies but not executive agencies.

d) Subpoenas may be issued by independent agencies; executive agencies do not have subpoena power.
b) The president has greater control over executive agencies.

What is the measure that indicates how precise a prediction of Y is based on X or, conversely, how inaccurate the prediction might be?

a) Regression equation
b) Slope of the line
c) Standard error of estimate
d) Least squares principle
c) Standard error of estimate

What is the median of 26, 30, 24, 32, 32, 31, 27 and 29?

a) 32
b) 29
c) 30
d) 29.5
e) 30.5
d) 29.5

What is the unemployment rate?

a) the percentage of the Labor Force that is unemployed

b) the percentage of the Adult Population that is unemployed

c) the percentage of the Adult Population that is not in the Labor Force

d) all of the above
a) the percentage of the Labor Force that is unemployed

When a domestic firm permits a foreign company to manufacture and sell its product in exchange for a fee or royalty, the process is termed

a) importing
b) exporting
c) licensing
d) countertrading
c) licensing

When a trial is conducted with a jury, the judge determines issues of _ and the jury determines questions of _

a) evidence, law.
b) law, evidence
c) law, fact
d) fact, law
c) law, fact

When employees use email, word processors, electronic scheduling / calendars, they are using which of the following?

a) Transaction processing systems
b) Process control systems
c) Office automation systems
d) Decision support systems
c) Office automation systems

When using a flexible budget, a decrease in activity within the relevant range:

a) decreases variable cost per unit
b) decreases total costs
c) increases total fixed costs
d) increases variable cost per unit
b) decreases total costs

Which Foreign Direct Investment (FDI) attempts to acquire particular resources at a lower real cost than could be obtained in the home country?

a) Market-seeking FDI
b) Efficiency-seeking FDI
c) Resource-seeking FDI
d) Strategic asset-seeking FDI
c) Resource-seeking FDI

Which of the following consists of factors that influence consumer buying power and marketing strategies?

a) competitive environment
b) cultural environment
c) economic environment
d) regulatory environment
c) economic environment

Which of the following is an appropriate Federal Reserve action to stimulate the United States economy?

a) Selling government bonds on the open market
b) Increasing the discount rate
c) Reducing the reserve requirement
d) Cutting taxes
c) Reducing the reserve requirement

Which of the following is an assumption of Theory Y as developed by Douglas McGregor?

a) Workers seek responsibility
b) Workers dislike work
c) Workers prefer direction
d) Workers are interested in monetary gains
a) Workers seek responsibility

Which of the following is not one of the four primary functional areas of a firm?

a) human resources
b) legal
c) marketing
d) operations
b) legal

Which of the following is not part of the accounting process?

a) Recording
b) Identifying
c) Financial decision making
d) Communicating
c) Financial decision making

Which of the following is true with regard to an exculpatory clause?

a) An exculpatory clause excuses one party from liability for his/her own tortious conduct.

b) Where one party has a superior bargaining position that has enabled him/her to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision.

c) An exculpatory clause may be unenforceable for unconscionability.

d) All of the above are true
d) All of the above are true

Which of the following should be shown net of tax on a corporation’s income statement?

a) Discontinued operations
b) Operating income
c) Gross profit
d) Gain on sale of delivery truck
a) Discontinued operations

Which of the following statements about a systems flowchart is true?

a) It is used in systems design to define and describe each piece of data.

b) It is a method of writing programs using only three basic constructs: sequence, selection,
and repetition.

c) It documents the sequence of processing steps that take place in an information system.

d) It documents the logical design of an information system.
c) It documents the sequence of processing steps that take place in an information system.

Which of the following statements about the tort of negligence is true?

a) It cannot be used as a basis for liability for defective products.

b) It is a strict liability tort with no defenses.

c) It requires proof of some intentional conduct.

d) It requires proof of breach of a statutory or common-law duty.
d) It requires proof of breach of a statutory or common-law duty.

Which of the following statements is NOT correct concerning the Cash Budget?

a) It is not necessary to prepare any other budgets before preparing the Cash Budget

b) The Cash Budget should be prepared before the Budgeted Income Statement

c) The Cash Budget should be prepared before the Budgeted Balance Sheet

d) The Cash Budget builds on earlier budgets and schedules as well as additional data
a) It is not necessary to prepare any other budgets before preparing the Cash Budget

Which of the following terms refers to the phenomenon in which group members are pressured to conform in decision making?

a) Group consensus
b) Brainstorming
c) Group norms
d) Groupthink
d) Groupthink

Which of the following would most likely occur as a result of the United States government’s imposing tariffs on foreign steel imports?

a) The price of steel produced in the United States would decrease.

b) The price of imported steel in the United States would decrease.

c) Employment in the United States steel industry would increase.

d) Government tax revenue would fall.
c) Employment in the United States steel industry would increase.

Which one of the following is NOT a major dimension of global IT cultural, political and geo-economic challenges?

a) Global business and IT strategies
b) Global business and IT application portfolios
c) Global IT platforms
d) Global software management
d) Global software management

Which one of the following statements does NOT apply to the concept of an information system model?

a) An information system transforms data into input

b) An information system transforms information into data

c) An information system transforms information into output

d) An information system transforms input into information
d) An information system transforms input into information

Which one of the following statements is correct given the following exchange rates?

US $ per 1 foreign unit

Country FRI THU
South Africa 0.1028 0.1023
Thailand 0.0284 0.0286

a) On Thursday, one U.S. dollar was equal to 0.1023 South African rand.

b) On Friday, one Thai baht was equal to $35.21.

c) Both the South African rand and the Thai baht appreciated against the U.S. dollar from Thursday to Friday.

d) The South African rand appreciated from Thursday to Friday against the U.S. dollar.

e) The U.S. dollar depreciated from Thursday to Friday against the Thai baht.
d) The South African rand appreciated from Thursday to Friday against the U.S. dollar.

Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a percentage of total product cost and where there is __ diversity among the various products that they produce.

a) low, little
b) low, considerable
c) high, little
d) high, considerable
d) high, considerable

Within the context of the capital asset pricing model (CAPM), the risk measure known as beta is often computed by regressing the return of the company’s stock against the

a) return on the company’s bonds
b) return on the market portfolio
c) change in the gross domestic product
d) change in the consumer price index
b) return on the market portfolio

You are investing $100 today in a savings account at your local bank. Which one of the following terms refers to the value of this investment one year from now?

a) future value
b) present value
c) principal amounts
d) discounted value
e) invested principal
a) future value

You are viewing a graph that plots the NPVs of a project to various discount rates that could be applied to the project’s cash flows. What is the name given to this graph?

a) project tract
b) projected risk profile
c) NPV profile
d) NPV route
e) present value sequence
c) NPV profile

You want to have $1 million in your savings account when you retire. You plan on investing a single lump sum today to fund this goal. You are planning on investing in an account which will pay 7.5 percent annual interest. Which of the following will reduce the amount that you must deposit today if you are to have your desired $1 million on the day you retire?

I. Invest in a different account paying a higher rate of interest.
II. Invest in a different account paying a lower rate of interest.
III. Retire later.
IV. Retire sooner.

a) I only
b) II only
c) I and III only
d) I and IV only
e) II and III only
c) I and III only

Zach, a high school junior, has just moved to a new town and cannot wait to get to school to meet new people. He likes sports and hopes he can try out for the soccer team. According to Maslow, Zach is working to fulfill his _ needs:

a) social
b) esteem
c) self-actualization
d) Safety
a) social

The principal difference between variable costing and absorption costing centers on:

a) whether variable manufacturing costs should be included as product costs

b) whether fixed manufacturing costs should be included as product costs

c) whether fixed manufacturing costs and fixed selling and administrative costs should be included as product costs

d) none of these.
B

a) Consumers are more relaxed at home in front of their computers, therefore it is more likely the responses will be truthful

b) Online research has been standardized for each industry, making it easier to understand them

c) A well-designed, Internet-based marketing research project can cost less and yield information faster than offline research

d) Person-to-person methods most often incorporate researcher bias into the surveys and observations
C

Which of the following is an appropriate Federal Reserve action to stimulate the United States economy?

a) Selling government bonds on the open market

b) Increasing the discount rate

c) Reducing the reserve requirement

d) Cutting taxes
C

a) committee

b) task force

c) group

d) team
D

a) 50,000 units

b) 5,000 units

c) 2500 units

d) 500 units
B

A problem associated with equity theory is that:

a) it focuses on providing incentives for the long run when most workers are mainly concerned with incentives that apply to their current situation

b) managers have a hard time applying it to real-world situations because of its abstract nature

c) worker motivation is based on perceptions of fairness, and the perceptions workers have about their contributions are not always accurate

d) it is concerned with the nature of the job itself rather than with what motivates the workers who perform the job
C

All of the financial statements are for a period of time except the

a) Income statement

b) Owner’s equity statement

c) Balance sheet

d) Statement of cash flows
C

By assembling computers only after customers have paid them for, resulting in a lower finished goods inventory, Dell Computer Co. achieved:

a) Increased quality

b) A competitive advantage

c) Increased responsiveness

d) Increased innovation

e) None of the above
B

The Bill of Rights refers to:

a) the inalienable rights found at the beginning of the Constitution

b) the first ten amendments to the Constitution

c) a specific listing of individual rights found in the original text of the Constitution.

d) a grouping of individual rights set forth by the United States Supreme Court shortly after the Constitution was ratified by the states
B

Fiedler proposes that all of the following determine whether a task- or relationship-oriented style is more effective except:

a) Situational favorableness

b) Leader-member relations

c) Task structure

d) Position power
A

Which one of the following statements is correct given the following exchange rates?

US $ per 1 foreign unit
Country FRI THU
South Africa 0.1028 0.1023
Thailand 0.0284 0.0286

a) On Thursday, one U.S. dollar was equal to 0.1023 South African rand.

b) On Friday, one Thai baht was equal to $35.21.

c) Both the South African rand and the Thai baht appreciated against the U.S. dollar from Thursday to Friday.

d) The South African rand appreciated from Thursday to Friday against the U.S. dollar.

e) The U.S. dollar depreciated from Thursday to Friday against the Thai baht.
D

Family branding refers to a group of

a) similar brands of products from different makers

b) different brands of products from different makers within the same industry

c) different products marketed under a single brand name

d) similar products sold by small, family-owned firms
C

A project has a net present value of zero. Which one of the following best describes this project?

a) The project has a zero percent rate of return.

b) The project requires no initial cash investment.

c) The project has no cash flows.

d) The summation of all of the project’s cash flows is zero.

e) The project’s cash inflows equal its cash outflows in current dollar terms
E

A firm that would like to know whether it has enough cash to meet its bills would be most likely to use which category of financial ratio?

a) Liquidity

b) Leverage

c) Efficiency

d) Profitability
A

A major competitor of XYZ, Inc. suddenly creates a new type of product that makes XYZ’s products obsolete. This is an example of which type of force in the environment?

a) General environment

b) Task environment

c) Economic environment

d) Legal environment

e) Political environment
B

Which of the following is not one of the four primary functional areas of a firm?

a) human resources

b) legal

c) marketing

d) operations
B

When employees use email, word processors, electronic scheduling / calendars, they are using which of the following?

a) Transaction processing systems

b) Process control systems

c) Office automation systems

d) Decision support systems
C

Which of the following statements about a systems flowchart is true?

a) It is used in systems design to define and describe each piece of data.

b) It is a method of writing programs using only three basic constructs: sequence, selection,
and repetition.

c) It documents the sequence of processing steps that take place in an information system.

d) It documents the logical design of an information system.
C

The primary purpose of the statement of cash flows is to report

a) A company’s investing transactions

b) A company’s financing transactions

c) Information about cash receipts and cash payments of a company

d) The net increase or decrease in cash
C

In service blueprinting, which line separates front office activities from back office activities?

a) Line of visibility

b) Line of intervention

c) Line of influence

d) Line of support
A

The common characteristic possessed by all assets is

a) Long life

b) Great monetary value

c) Tangible nature

d) Future economic benefit
D

The longest path through the network, in terms of time, is referred to as the

a) activity-on-node path

b) path of greatest slack

c) critical path

d) scheduling path
C

A legal institution associated with an independent judiciary relying on case precedents is called

a) common law system

b) civil law system

c) theocratic law system

d) None of the above
A

Which of the following is not part of the accounting process?

a) Recording

b) Identifying

c) Financial decision making

d) Communicating
C

What is the median of 26, 30, 24, 32, 32, 31, 27 and 29?

a) 32

b) 29

c) 30

d) 29.5

e) 30.5
D

Under the common law, the _ must be the mirror image of the _

a) contract, consideration.

b) contract, offer

c) offer, acceptance

d) acceptance, offer
D

a) Sue will have less money when she retires than Neal.

b) Neal will earn more interest on interest than Sue.

c) Neal will earn more compound interest than Sue.

d) If both Sue and Neal wait to age 70 to retire, then they will have equal amounts of savings.

e) Sue will have more money than Neal as long as they retire at the same time
E

In general, the _ difficult it is for an organization to enter an industry as a new competitor, the _ are the barriers to entry to this industry

a) Less; lower

b) More; lower

c) More; higher

d) Less; higher
C

An open access good (or common property good), such as a fishery:

a) Is rival but not excludable

b) Is both rival and excludable

c) Is neither rival nor excludable

d) Is not rival but is excludable
A

A differentiation strategy enables a business to address the five competitive forces by

a) lessening competitive rivalry by distinguishing itself

b) having brand-loyal customers become more sensitive to prices

c) increasing economies of scale

d) serving a broader market segment
A

Only one of the following statements is false at the long-run equilibrium for a firm in a monopolistically competitive industry. Which one is false?

a) Price equals Average Total Cost, like a competitive firm

b) Price exceeds marginal cost, like a monopolist

c) Firms make zero economic profit, like a competitive firm

d) Firms produce at the bottom of the ATC curve, like a competitive firm
D

a) 417

b) 500

c) 625

d) 875.
C

The correct answer is 625 Pillows Gross Profit = Net Sales – Cost of Goods Sold
Since you are buying pillows and not manufacturing pillows your variables costs are the cost of purchasing each pillow which is $12. Although the problem doesn’t specifically state it, you should assume that $12 buys the whole pillow (labor and materials). You still have to cover the cost of the lease of $4,000 but since you don’t have employees to supervise you can avoid the fixed cost of supervision.
Break Even Analysis Selling Price = 20 Variable Costs = 12
Contribution Margin per unit = 8 Contribution Margin Ratio = 8/20 = .4 or 40%
Fixed Costs = 4000 (unavoidable cost of the factory lease)
Break-Even Units = 4000/8 = 500 Units ($0.00 Gross Profit)
Break-Even Sales = 4000/.4 = $10,000 (also 500 x 20)
Desired Profit of $1,000
Fixed Costs ($1000) + Desired Profit ($4000) = $5,000
5000/8=625 Units or 5000/.4 = $12,500 in Sales

When a trial is conducted with a jury, the judge determines issues of _ and the jury determines questions of _

a) evidence, law.

b) law, evidence

c) law, fact

d) fact, law
C

The central processing unit (CPU) in a personal computer contains the

a) control unit and primary memory

b) control unit and arithmetic/logic unit

c) arithmetic/logic unit and bus

d) arithmetic/logic unit only
B

Marketers must constantly monitor their competitors’ products, prices, distribution, and promotional efforts because the:

a) competitors may be violating the truth-in-advertising laws

b) actions of competitors may threaten the firm’s monopoly position

c) actions of competitors may create an oligopoly within an industry

d) new product offerings by a competitor may require adjustments to one or more components of the firm’s marketing mix
D

What is the major distinction between executive and independent agencies?

a) Executive agencies govern business issues while independent agencies regulate individual matters.

b) The president has greater control over executive agencies.

c) The Administrative Procedure Act regulates independent agencies but not executive agencies.

d) Subpoenas may be issued by independent agencies; executive agencies do not have subpoena power.
B

a) differentiation

b) overall cost leadership

c) differentiation focus

d) stuck-in-the-middle
B

Managers at ABC, Inc. analyze the current situation of their organization and then develop plans to help their organization to accomplish its mission and achieve its goals. This is known as:

a) Synergy planning

b) Strategy formulation

c) Functional planning

d) SWOT analysis
B

Which of the following terms refers to the phenomenon in which group members are pressured to conform in decision making?

a) Group consensus

b) Brainstorming

c) Group norms

d) Groupthink
D

If the Federal Reserve decides to decrease the money supply, which of the following most likely will occur?

a) An increase in private investment and consumer expenditure

b) A decrease in private investment and consumer expenditure

c) An increase in private investment and a decrease in consumer expenditure

d) A decrease in private investment and an increase in consumer expenditure
B

Business torts consist of:

a) interference with contractual relations.

b) disparagement.

c) fraudulent misrepresentation

d) All of the above
D

a) $12.23

b) $12.55

c) $12.67

d) $12.72
B

The incomes of a group of 50 loan applicants are obtained. Which level of measurement is income?

a) Nominal

b) Ordinal

c) Interval

d) Ratio

e) None of the above
D

Which of the following is an assumption of Theory Y as developed by Douglas McGregor?

a) Workers seek responsibility.

b) Workers dislike work.

c) Workers prefer direction.

d) Workers are interested in monetary gains.
A

Steel, paper, paints, and chemicals are examples of industries that most likely use

a) batch production systems

b) repetitive production systems

c) continuous production systems

d) mass production systems
C

How many pillows must Dreamland produce and sell each month to earn a monthly gross profit of $1,000?

a) 300

b) 350

c) 600

d) 700
D

What is the measure that indicates how precise a prediction of Y is based on X or, conversely, how inaccurate the prediction might be?

a) Regression equation

b) Slope of the line

c) Standard error of estimate

d) Least squares principle
C

An example of an unfair trade practice is:

a) EU Government policy prohibiting imports of U.S. Beef

b) EU prohibitions of Latin American bananas

c) US tariffs on European steel

d) All of the above
D

The channels of distribution create all of the following utilities EXCEPT

a) time

b) place

c) form

d) possession
C

a) 0.20

b) 0.25

c) 0.50

d) 1.00

e) None of the above
A

a) $11.29

b) $12.64

c) $13.27

d) $14.00

e) $14.21
A

In _, provincial governments play a substantial role in trade and investment regulation

a) China

b) Norway

c) Indonesia

d) Canada
D

a) Project A should be accepted as its IRR is closer to the crossover point than is Project B’s IRR.

b) Project B should be accepted as it has the higher IRR.

c) Both projects should be accepted as both of the project’s IRRs exceed the crossover rate.

d) Neither project should be accepted since both of the project’s IRRs exceed the crossover rate.

e) You cannot determine which project should be accepted given the information provided.
E

There are 10 rolls of film in a box and 3 are defective. Two rolls are to be selected without replacement. What is the probability of selecting a defective roll followed by another defective roll?

a) 1/2, or 0.50

b) 1/4, or 0.25

c) 1/120, or about 0.0083

d) 1/15, or about 0.07
D

The process of collecting information about the external marketing environment is called:

a) environmental management

b) marketing research

c) marketing management

d) environmental scanning
D

Which Foreign Direct Investment (FDI) attempts to acquire particular resources at a lower real cost than could be obtained in the home country?

a) Market-seeking FDI

b) Efficiency-seeking FDI

c) Resource-seeking FDI

d) Strategic asset-seeking FDI
C

__ planning normally is performed by middle managers and typically has a one-year time frame

a) Strategic planning

b) Tactical planning

c) Operational planning

d) Contingency planning
B

The two international treaties that govern patent protection are

a) Paris Convention and Patent Cooperation Treaty

b) International Patent Patrol and Patent Treaty

c) Patent Protection Treaty and International Patent Patrol

d) Patent Protection Treaty and Patent Cooperation Treaty
A

a) 0.20

b) 0.25

c) 0.33

d) 0.50
A

a) product

b) distribution

c) promotional

d) marketing
B

The principle of diversification tells us that:

a) concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk.

b) concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk.

c) spreading an investment across five diverse companies will not lower the total risk.

d) spreading an investment across many diverse assets will eliminate all of the systematic risk.

e) spreading an investment across many diverse assets will eliminate some of the total risk
E

The effect whereby slight demand variability is magnified as it moves back upstream in the supply chain is known as

a) the bullwhip effect

b) postponement

c) collaborative replenishment

d) direct-response delivery
A

a) Transaction processing system

b) Decision support system

c) Enterprise collaboration system

d) Process control system
D

Within the context of the capital asset pricing model (CAPM), the risk measure known as beta is often computed by regressing the return of the company’s stock against the

a) return on the company’s bonds

b) return on the market portfolio

c) change in the gross domestic product

d) change in the consumer price index
B

a) Upward

b) Lateral

c) Downward

d) Hierarchical.
B

Information systems are either operations or management systems. Which one of the following would NOT be classified as an operations system?

a) Transaction processing systems

b) Process control systems

c) Functional information systems

d) Executive support systems
D

a) low, little

b) low, considerable

c) high, little

d) high, considerable
D

When a domestic firm permits a foreign company to manufacture and sell its product in exchange for a fee or royalty, the process is termed

a) importing

b) exporting

c) licensing

d) countertrading
C

Which of the following statements is NOT correct concerning the Cash Budget?

a) It is not necessary to prepare any other budgets before preparing the Cash Budget

b) The Cash Budget should be prepared before the Budgeted Income Statement

c) The Cash Budget should be prepared before the Budgeted Balance Sheet

d) The Cash Budget builds on earlier budgets and schedules as well as additional data
A

A manager who chooses the wrong goals for the organization and makes poor use of the organization’s resources in pursuing these goals is said to have:

a) Low effectiveness/low efficiency

b) Low effectiveness/high efficiency

c) High effectiveness/low efficiency

d) High effectiveness/high efficiency

e) None of the above
A

In the late 1970’s and 1980’s, the U.S. car manufactures sought to limit __ import to the U.S.?

a) Cuban

b) Asian

c) Japanese

d) Chinese
C

A standard marketing strategy that is modified only minimally for use in each of the firm’s foreign markets is a _ marketing strategy.

a) lateral entry

b) unipolar

c) global

d) multidomestic
C

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

Ms. Thornton plans to conduct an online survey of her customers. What is the most significant problem with using this survey method rather than a traditional mail approach?

a) Respondents may not answer the survey truthfully.

b) Customers who do not use the Internet will not be in the sample.

c) Respondents will not be able to see the entire survey and thus may answer only part of it.

d) Online surveys cannot prevent multiple or inappropriate responses to complex questions.
B

a) each of the 150 jobs

b) each of the jobs on the three critical paths

c) either Job J or Job K

d) both Job J and Job K
C

The term “net working capital” refers to

a) inventories, receivables, and current notes and investments

b) assets divided by liabilities

c) current assets less short-term liabilities

d) net assets left over after subtracting cost of goods sold
C

U.S. dollars deposited in a bank in Switzerland are called:

a) foreign depository receipts.

b) international exchange certificates.

c) francs.

d) Eurocurrency.

e) Eurodollars
D

Carefully dismantling and inspecting a competitor’s product to look for design features that can be incorporated into your own product is known as

a) concurrent design

b) design for manufacturability

c) benchmarking

d) reverse engineering
D

A SWOT analysis examines a company’s

a) strategies, weaknesses, opportunities, and threats

b) strengths, weaknesses, opportunities, and threats

c) strategies, weaknesses, opportunities, and tactical plans

d) strengths, weaknesses, operational plans, and threats
B

With this investment, the hospital is attempting to overcome which of the constraints of services
marketing?

a) Inventory

b) Intangibility

c) Inconsistency

d) Inseparability
D

Under the Uniform Commercial Code (UCC) statute of frauds, which of the following terms must be included in writing in order to satisfy the writing requirement?

a) The price of the goods.

b) The quantity of the goods.

c) The signatures and names of the buyer and the seller

d) The time and place for delivery
B

A company’s buying center encompasses:

a) a representative from each department within an organization

b) only a gatekeeper and a buyer

c) everyone who is involved in any aspect of the buying process

d) an exclusive top-notch buying department
C

The degree to which a product meets pre-established standards is known as

a) conformance

b) performance

c) reliability

d) none of the above
A

The control of the money supply by the Federal Reserve System is known as

a) fiscal policy

b) supply-side policy

c) congressional policy

d) monetary policy
D

The economic entity assumption requires that the activities

a) Of different entities can be combined if all the entities are corporations

b) Must be reported to the Securities and Exchange Commission

c) Of a sole proprietorship cannot be distinguished from the personal economic events of its owners

d) Of an entity be kept separate from the activities of its owner
D

In general, as the order size increases,

a) ordering costs decrease and carrying costs increase

b) ordering costs increase and carrying costs decrease

c) both ordering and carrying costs increase

d) both ordering and carrying costs decrease
A

The essence of common law is:

a) its prospective nature.

b) the concept of stare decisis

c) its flexibility.

d) the plain meaning doctrine.
B

Natural Monopolies are characterized by…

a) Economies of Scale (Increasing returns to scale)

b) Constant Returns to Scale

c) Diseconomies of Scale (Decreasing returns to scale)

d) Non-existent returns to Scale
A

A company had sales of $920,000 and fixed costs were $160,000. What was the income from operations if the contribution margin ratio was 30 percent?

a) $116,000

b) $276,000

c) $484,000

d) $644,000
A

The organizational buying process has more steps than the consumer buying process, which can be attributed to:

a) the limited number of suppliers in the B2B marketplace

b) the importance of integrating the responsibilities of the wholesalers or retailers

c) interpersonal and environmental influences not seen in consumer buying decisions

d) business purchasing that introduces new complexities that do not affect consumers
D

In marketing research, a firm might consider using secondary data over primary data because

a) secondary data usually cost less

b) secondary data are usually more accurate

c) primary data are usually non specific

d) primary data are likely to be outdated.
A

The probability that a product will operate properly within an expected time frame is the dimension of quality known as

a) durability

b) reliability

c) performance

d) serviceability
B

a) Price will increase, but quantity will remain unchanged.

b) Price will increase, but quantity is indeterminate.

c) Quantity will increase, but price is indeterminate.

d) Both price and quantity will increase.
B

What can we conclude if the coefficient of determination is 0.94?

a) Strength of relationship is 0.94

b) Direction of relationship is positive

c) 94% of total variation of one variable is explained by variation in the other variable

d) All of the above are correct
C

Money is the key motivator in

a) Herzberg’s motivation-hygiene theory

b) Maslow’s hierarchy of needs

c) McGregor’s Theory X and Theory Y

d) Taylor’s scientific management
D

In the calculation of the arithmetic mean for grouped data, which value is used to represent all the values in a particular class?

a) The upper limit of the class

b) The lower limit of the class

c) The frequency of the class

d) The cumulative frequency preceding the class

e) The class midpoint.
E

On May 31, Company O’s general ledger shows a cash balance of $5,123. The May 31 bank statement shows a balance of $4,905. Other information is available as follows:

A May 31 deposit of $300 does not appear on the bank statement; but a $3 service charge does.
A customer’s $40 insufficient funds check has been returned with the bank statement.
Outstanding checks of $10, $15, and $100 are identified on May

What is the correct cash balance on May 31?

a) $4,905

b) $5,080

c) $5,166

d) $5,204
B

What is the correct reconciled cash balance for May 31? $5,080
There are two parts of a reconciliation: Bank and General Ledger. The Bank has
information that has not recorded in the general ledger and the general ledger has
information that has not been recorded by the bank. Some things to keep in mind about the bank statement. Bank Credits are positive and recorded as Debits (additions) in your general ledger cash account. Bank Debits are negative and are recorded as credits (negatives) in your general ledger cash account.
Start with the Bank Balance $4,905 and add any deposits that were made but did not clear the bank in time to appear on the statement: $300. Then subtract the outstanding checks that were written but have not yet cleared through the bank: $125. Your adjusted bank
balance is $5,905+300-125 = $5,080
The ending balance in the General Ledger for cash is $5,123. Until you saw the bank
statement you were not aware of the $3 bank service charge or the returned (NSF) check you deposited for $40. You need to subtract both of these items from the general ledger.
$5,123-3-40 = $5,080.

Based on his scientific management theory, Frederick Taylor developed what pay principle?

a) Hourly pay

b) Incentive pay

c) Profit sharing

d) Monthly salary with bonus
B

When using a flexible budget, a decrease in activity within the relevant range:

a) decreases variable cost per unit

b) decreases total costs

c) increases total fixed costs

d) increases variable cost per unit
B

Which of the following is true with regard to an exculpatory clause?

a) An exculpatory clause excuses one party from liability for his/her own tortious conduct.

b) Where one party has a superior bargaining position that has enabled him/her to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision.

c) An exculpatory clause may be unenforceable for unconscionability.

d) All of the above are true
D

If the spread between the spot and forward exchange rates of two currencies equals the interest rate difference between the two countries, this phenomenon is referred to as

a) purchasing-power equality

b) commodity arbitrage

c) currency hedging

d) interest-rate parity
D

As the size of the sample increases, what happens to the shape of the sampling means?

a) Cannot be predicted in advance

b) Approaches a normal distribution

c) Positively skewed

d) Negatively skewed
B

An information system that enables all business departments in the same firm to share relevant information and data is called

a) an enterprise resource planning (ERP) system

b) a material requirements planning (MRP) system

c) a decision support system (DSS)

d) a point-of-sale (POS) system
A

Green desires to form a new company to manufacture lawn mowers. Green is concerned
about having his personal assets exposed to liability for the new company’s contracts and torts.
Furthermore, he wants to retain control over the company’s operations and growth for the next few years. He will need an infusion of equity capital to begin operations. He hopes to take the company public in about five years if it is advantageous to do so at the time. Which of the following types of associations would be best for Green’s new company?

a) Corporation

b) General partnership

c) Limited partnership

d) Member-managed limited-liability company
A

A valid contract may be unenforceable for which reason(s)?

a) Failure to satisfy the Statute of Frauds.

b) Running of the Statute of Limitations

c) Both (A) and (B)

d) A valid contract is always enforceable.
C

Keith is working on a computerized search through one of his company’s massive data files. The purpose of the search is to try to detect patterns in product sales. Keith is engaged in:

a) data forecasting

b) marketing decision support systems

c) data mining

d) sales forecasting.
C

A system whereby products are delivered to warehouses on a continual basis, where they are sorted, repackaged and distributed to stores without sitting in inventory is known as

a) postponement

b) cross-docking

c) continuous replenishment

d) direct-response delivery
B

In the statement of cash flows, the section for cash flows from operating activities will include which of the following?

a) Dividends paid

b) Issuance of common stock

c) A decrease in accounts payable

d) Purchase of a building financed entirely by a mortgage
C

Which of the following consists of factors that influence consumer buying power and marketing strategies?

a) competitive environment

b) cultural environment

c) economic environment

d) regulatory environment
C

Standard deviation measures which type of risk?

a) total

b) nondiversifiable

c) unsystematic

d) systematic

e) economic
A

Based on the central limit theorem, the size of the sampling error is

a) Directly related to the sample size, i.e., the larger the sample size the larger the sampling error

b) Directly related to the population mean, i.e., the larger the mean, the larger the sampling error

c) Inversely related to the sample size, i.e., the larger the sample size the smaller the sampling error

d) Inversely related to the population standard deviation, i.e., the smaller the standard deviation, the larger the sampling error
C

In monopolistic competition, there are:

a) Many firms selling identical products

b) Many firms selling similar, but not identical products

c) A few firms selling similar, but not identical products

d) A few firms selling unique products with no close substitutes
B

Kershaw Bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:
Date Purchases Sales Jan 14 375 @ $28
Jan 17 250 @ $20
Jan 25 250 @ $22
Jan 29 250 @ $32
Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units were on hand at January 31.

The cost of the inventory at January 31, under the LIFO method is:

a) $1,000

b) $6,750

c) $7,750

d) $8,000
B

In a period of rising prices, which inventory valuation method would generally yield both the
lowest ending inventory value and the lowest net income figure?

a) First in, first out (FIFO)

b) Last in, first out (LIFO)

c) Weighted average

d) Standard cost
B

Which of the following statements about the tort of negligence is true?

a) It cannot be used as a basis for liability for defective products.

b) It is a strict liability tort with no defenses.

c) It requires proof of some intentional conduct.

d) It requires proof of breach of a statutory or common-law duty.
D

M-commerce:

a) Involves buying, selling, marketing and servicing of products, services and information over variety of networks

b) Uses commercial processes like multimedia advertising, product information and customer support on the Web

c) Involves Internet security and payment mechanisms that ensure completion of delivery and payment processes

d) All of the choices are correct
D

A company issued a $600,000, 12 percent, 90-day note payable to acquire an office building. What is
the maturity value of the note?

a) $72,000

b) $600,000

c) $618,000

d) $672,000
C

In an economy the unemployment rate is 10 percent and the inflation rate is 1 percent. An
appropriate fiscal policy in this phase of the business cycle would be to

a) increase government spending

b) increase income taxes

c) decrease transfer payments

d) decrease the money supply
A

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

a) Summarize the research findings and recommend implementing the online catalog as the firm’s market is clearly growing.

b) Collect primary data to determine whether these trends and preferences are reflected in
Priceless Treasures’ customer base.

c) Collect primary data on competitors to determine whether the online market for antique jewelry is saturated.

d) End the study and retain the current system as the major customer segment is clearly skeptical of online retailers.
B

I. Invest in a different account paying a higher rate of interest.
II. Invest in a different account paying a lower rate of interest.
III. Retire later.
IV. Retire sooner.

a) I only

b) II only

c) I and III only

d) I and IV only

e) II and III only
C

The most appropriate level of market coverage for shopping goods is

a) intensive distribution

b) selective distribution

c) uniform distribution

d) exclusive distribution
B

requires proof of breach of a statutory or common-law duty
the tort of negligence

documents the sequence of processing steps that take place in an information system
systems flowchart

The Organization of the Petroleum Exporting Countries (OPEC) reduces production by 10 percent, and the growth rate of the world economy begins to escalate. How will the simultaneous occurrence of these events affect the equilibrium price and quantity in the world petroleum market?
Price will increase, but quantity is indeterminate

what would most likely occur as a result of the United States government’s imposing tariffs on foreign steel imports?
Employment in the United States steel industry would increase

In an economy the unemployment rate is 10 percent and the inflation rate is 1 percent. An appropriate fiscal policy in this phase of the business cycle would be to
increase government spending

what is an appropriate Federal Reserve action to stimulate the United States economy?
Reducing the reserve requirement

If the spread between the spot and forward exchange rates of two currencies equals the interest rate difference between the two countries, this phenomenon is referred to as
interest-rate parity

Based on his scientific management theory, Frederick Taylor developed what pay principle?
incentive pay

When a domestic firm permits a foreign company to manufacture and sell its product in exchange for a fee or royalty, the process is termed
licensing

An information system that enables all business departments in the same firm to share relevant information and data is called
an enterprise resource planning (ERP) system

The central processing unit (CPU) in a personal computer contains the
control unit and arithmetic/logic unit

refers to the difference between a company’s cash inflows and outflows in a given period. In the strictest sense, net cash flow refers to the change in a company’s cash balance as detailed on its cash flow statement.
Net Cash Flow

A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities. The general idea behind CAPM is that investors need to be compensated in two ways: time value of money and risk.
CAPM (Capital Asset Pricing Model)

Required When combined they tell you all about the company Each provide unique financial information and no one statement will tell you everything about a company’s finances
Income Statement
Statement of Change in Equity
Balance Sheet
Statement of Cash Flows
Required When combined they tell you all about the company Each provide unique financial information and no one statement will tell you everything about a company’s finances

Assets= Liabilities + Equity
Balance Sheet

Revenue – Expenses

Short run measurement for a fixed time period, all it tells you is whether or not the company was profitable
Income Statement

Measures the change in owners’ investment in the company from the beginning of the accounting period to the end of the accounting period
Statement of Change in Equity

Describes an unincorporated business, the owners investment
Capital

Describes a corporation, or the owners investment
Equity

In the statement of cash flows, the section for cash flows from operating activities will include which of the following?
(A) Dividends paid
(B) Issuance of common stock
(C) A decrease in accounts payable
(D) Purchase of a building financed entirely by a mortgage
C

All of the following are true regarding a seller’s rights to reduce legal liability in the sale of non-consumer goods EXCEPT:
(A) The seller can disclaim consequential
damages if it is done clearly and conspicuously.
(B) The seller can limit the remedy available to the buyer if he or she does so clearly and
fairly.
(C) The seller can place reasonable conditions on the warranty coverage and a shorter time limit of warranty coverage.
(D) The seller can disclaim all implied warranties by simply stating that there are no implied warranties.
D

Which of the following should be shown net of tax on a corporation’s income statement?
(A) Discontinued operations
(B) Operating income
(C) Gross profit
(D) Gain on sale of delivery truck
A

Net income $100,000;Depreciation expense $10,000;Net increase in accounts: receivable $5,000;Net increase in accounts: payable $3,000;On the basis of the information provided in the table above for a corporation, the corporation’s net cash flow from operating activities for the current year is:
(A) $98,000
(B) $102,000
(C) $108,000
(D) $118,0008
C

Littleton, Inc., has fixed costs of $75,000 per month, variable costs of $5 per unit, and a sales price per unit of $30. What is the break-even quantity per month?
(A) 2,143
(B) 2,500
(C) 3,000
(D) 15,000
C

Web 2.0 is best represented by which of the following phenomena?
(A) Social networking sites
(B) Word processing
(C) Internet browsers
(D) Text messaging
C

are the business documents that companies use to report
the results of activities to various external user groups.
Financial Statements

is an information system. It measures business activities, processes date into reports (including financial statements) and communicates results to
decision makers. Accounting is the “language of business”
Accounting

Provides information for decision makers outside the entity.
Investors
Creditors
Government agencies
And the public
Financial Accounting

Provides information for internal users, management
Managerial Accounting

is a single owner.
proprietorship

Two or more parties are co-owners and each owner is a partner.
Partnership

One in which the business (not the owner) is liable for the company’s debt.
Limited Liability Company (LLC)

Is a business owner by stockholder or shareholders who own stock (common or
preferred) representing shares of ownership in that corporation.
Corporation

GAAP
Generally Accepted Accounting Principles

FASB
Financial Accounting Standards Board

IASB
International accounting Standards Board

The Accounting Equation
Assets = Liabilities + Owners Equity

Economic resources that are expected to produce a benefit in the future
Assets

expected to be converted to cash, sold or consumed during
the next 12 months or business operations cycle. Whichever is longer.
Current assets

Outside claims. Debts payable to creditors
Liabilities

Insider claims.
Owners’ Equity or Shareholders Equity

Revenues minus expenses to equal Net Income.
The Income Statement or Statement of Operations

Shows What a company did with it’s Net Income.
Retained Earnings is the portion of net income that has been kept by t he
company
The Statement of Retained Earnings

Assets,
Liabilities
And Stockholders Equity
Or the accounting equation
The Balance Sheet or Statement of Financial Position reporting

reports three types of activities: Operating, investing, and financing.
The Statement of Cash Flows

Cash flows from selling goods and providing services to customers
Operating:

Cash flows from the purchase and sale of long-term assets
Investing:

Borrowing and repayment of borrowed funds
Equity transactions, such as issuing stock, paying dividends, and repurchase of company stock
Financing:

are the company’s debts that are due within one year or the company’s operating cycle, whichever is longer.
Current Liabilities

a group of accounts. All the accounts of a business grouped together form a book called the
ledger (or general ledger).
Ledger

is a listing, in general ledger order (assets, liabilities, then stockholders’ equity), of the
debit or credit balance in each account.
The trial balance

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