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1.

Net Interest income is


a. Interest earned on advances
b. Interest earned on investments
c. Total interest earned on advances and investment
d. Difference between interest earned and interest paid
2. Interest rate risk is a type of
a. Credit risk
b. Market risk
c. Operational risk
d. All the above
3. European opinion can be exercised on any day at the option of the
buyer on or before the expiry of the option.
a. True
b. False
c. None
d. Cant Say
4. What is the beta factor for corporate finance under Standardized
approach ?
a. 15%
b. 18%
c. 12%
d. None of the above
5. A bank suffers loss due to adverse market movement of a security.
The security was however held beyond the defeasance period. What is
the type of the risk that the bank has suffered?
a. Market Risk
b. Operational Risk
c. Market Liquidation Risk
d. Credit Risk
6. Which of the following is not a type of credit risk?
a. Default risk
b. Credit spread risk
c. Intrinsic risk
d. Basis risk
7. 8% Government of India security is quoted at RS 120/- The current
yield on the security, will be----
a. 12%
b. 9.6%
c. 6.7%
d. 8%
8. Risk of a portfolio with over exposure in steel sector will be
a. More than systematic risk
b. Equal to intrinsic risk
c. Less than intrinsic risk
d. None of these
9. A company declares RS 2/- dividend on the equity share of face value
of RS 5/-. The share is quoted in the market at RS 80/- the dividend
yield will be----
a. 20%
b. 4%
c. 40%
d. 2.5%
10.The risk that arises due to worsening of credit quality is
a. Intrinsic Risk
b. Credit spread Risk
c. Portfolio risk
d. Counterparty risk
11.A debenture of face value of As. 100 carries a coupon of 15%. If the
current yield is 12.5%. What is the current market price?
a. Rs.100
b. Rs.120
c. Rs.150
d. Rs.125
12.An increase in cash reserve ratio will cause yield curve to
a. Shift downward
b. Remain unchanged
c. Become steeper
d. Become flatter
13.The model that combines five financial ratios using reported
accounting information and equity values to produce on objective
measure of borrowers financial health is
a. Altmans 2 score
b. Credit Metrics
c. Credit Risk +
d. None of the above
14.A bank holds a security that is rated A+. The rating of the security
migrates to A. What is the risk that the bank has faced ?
a. Market risk
b. Operational risk
c. Market liquidation risk
d. Credit risk
15.When interest rates go up, prices of fixed interest bonds
a. Go up
b. Go down
c. Remain unchanged
d. Cant Say
16.VaR is not enough to assess market risk of a portfolio. Stress testing is
desirable because
a. It helps in calibrating VaR module
b. It helps as an additional risk measure
c. It helps in assessing risk due to abnormal movement of
market parameters
d. It is used as VaR measure is not accurate enough
17.A transaction where financial securities are issued against the cash
flow generated from a pool of assets is called
a. Securitization
b. Credit Default Swaps
c. Credit Linked Notes
d. Total Return Swaps
18.Growth Fund is a mutual fund that
a. assures growth in income
b. invests in fixed income securities
c. gives fixed return
d. invests primarily in equities
19.Operational Risk arises from
a. Inadequate or failed internal processes
b. People and systems
c. External Events
d. Defaults
20. Which of the following is true?
a. All of them
b. None of them
c. (a) , (b) and (c)
d. (a) , (b) and (e)
21.A decline in cash reserve ratio will cause the yield curve to
a. shift upward
b. shift downward
c. become flatter
d. remain unchanged
22.12% Government of India security is quoted at Rs.120. If interest rates
go down by 1%, the market price of the security will be.....
a. Rs. 120
b. Rs.133.3
c. Rs. 109
d. Rs. 140
23.A bank expects fall in price of a security if it sells it in the market.
What is the risk that the bank is facing?
a. Market risk
b. Operational risk
c. Asset Liquidation risk
d. Market liquidity risk
24.11% Government of India security is quoted at Rs. 110, the yield will
be
a. 11%
b. 10%
c. 9%
d. None of these
25. 1 day VaR of a portfolio is Rs.500, 000 with 95% confidence level. In a
period of six months (125 working days) how many times the loss on
the portfolio may exceed Rs.500, 000?
a. 4 days
b. 5 days
c. 6 days
d. 7 days
26. A fall in interest rates will make prices of Government Securities -

a. Go down
b. Go up
c. Remain unchanged
d. None of these
27.Systemic risk the risk of
a. Failure of a bank, which is not adhering to regulations
b. Failure of two banks simultaneously due to bankruptcy of one
bank
c. Where a group of banks fail due to contagion effect
d. Failure of entire banking system
28. 11% Govt. of India security is quoted at Rs.110. If the interest rates go
down by 1% the market price of the security will be
a. Rs.110
b. Rs.109
c. Rs.122.2
d. Rs.130
29.Balanced fund is a mutual fund that
a. Assures income
b. Invests in debt and equity
c. Assure growth
d. Gives fixed returns
30.Back testing is done to
a. Test a model
b. Compare model results and actual performance
c. Record performance
d. None of the above
31.Under Basel II, Capital requirement under the accord is
a. The maximum Capital that is required to be maintained
b. The minimum Capital that is required to be maintained
c. The capital as specified by the regulatory authority is
required to be maintained
d. None of the above
32.Capital charge for credit risk requires input for PD, LGD, EAD and M.
Under advanced IRB approach, who provide the input for LGD.
a. Bank
b. Supervisor
c. Function provided by BCBS
d. None of the above
33.A debenture of Rs.100 carrying 15% coupon rate is quoted in the
market at Rs.135/-. The current yield on this debenture will be
a. 13.5%
b. 15%
c. 11.11%
d. 10%
34.Investment in Post Office time deposit is
a. Zero risk investment
b. Low risk investment
c. Medium risk investment
d. High risk investment
35.If the short term interest rates are temporarily higher than the long
term interest rates, the yield curve will be
a. Sloping upward
b. Inverted
c. Zigzag
d. Horizontal
36. Premature payment of a term loan will result in interest rate risk of
type
a. Basis risk
b. Yield curve risk
c. Embedded option risk
d. Mismatch risk

37.A company with equity capital of Rs.50 crores (Face Value of Rs.10/-
per share) makes gross profit of Rs.70 crores and net profit after tax of
Rs.25 crores. If the market price of its equity share is Rs.50, the PE
ratio will be
a. 50
b. 5
c. 10
d. 20
38. Daily volatility of a stock is 1%. What is its 10 days volatility
approximately?
a. 3%
b. 10%
c. 1%
d. 4%
39.If call money rates are temporarily higher than the long term interest
rates, the yield curve will be
a. Slopping upwards
b. Zigzag
c. Inverted
d. Horizontal
40.Equity oriented mutual funds
a. Assure income
b. Assure growth
c. Invest in debentures
d. Invest in shares
41.A bank funds its assets from a pool of composite liabilities. Apart from
credit and operational risks, it faces
a. Basis risk
b. Mismatch risk
c. Market risk
d. Liquidity risk
42.A rise in Government securities prices will make yield curve
a. Slope upward
b. Shift downward
c. Remain stable
d. Shift upward

43.9% Government of India security is quoted at Rs.120. The current yield


on the security will be
a. 12%
b. 9%
c. 7.5%
d. 13.3%
44.Financial Risk is defined as
a. Uncertainties resu1ting in adverse variation of
profitability or outright losses
b. Uncertainties that result in outright losses
c. Uncertainties in cash flow
d. Variations in net cash flows
45.Strategic Risk is a type of
a. Interest Rate Risk
b. Operation Risk
c. Liquidity Risk
d. None of the above
46.Objective of liquidity management is to:
a. Ensure profitability
b. Ensure liquidity
c. Either of two
d. Both
47.A mutual fund charges 1% entry load and no exit load. Its NAV is
Rs.16; its sale and repurchase price will -----
a. Rs.16 and Rs.15.80
b. Rs.16.16 and Rs.15.84
c. Rs.15.84 and Rs.16
d. Rs.16.16 and Rs.16
48.Banks need liquidity to:
a. Meet deposit withdrawal
b. Fund loan demands
c. Both of them
d. None of them
49.A fall in interest rate of long dated government securities with the
short term interest rates remaining unchanged will make the yield
curve.
a. Steeper
b. Slop downward
c. Shift downward
d. Flatter
50.Adequacy of banks liquidity position depends upon:
a. Sources of funds
b. Anticipated future funding needs
c. Present and future earnings capacity
d. All of the above
51.Current yield on a government security is 5%. If the market price of
the bond is Rs.160, the coupon rate on the bond will ----
a. 6%
b. 5%
c. 8%
d. 10%
52.A rise in the short term interest rates with the long term interest rates
remaining unchanged will make the yield curve -----.
a. Steeper
b. Shift upward
c. Flatter
d. Slope upward
53.A scheme of mutual fund has units with face value of Rs.10 and NAV of
Rs.37. The Fund declares a dividend of 35% in the scheme. The ex-
dividend NAV will be ------- per unit.
a. Rs.37
b. Rs.2
c. Rs.33.50
d. Rs.35.5
54.7.5% coupon interest Government Security is quoted at Rs.120. Its
current yield will be -
a. 8.55%
b. 6.25%
c. 7.75%
d. 7%
55.A company with equity capital of Rs.15 crores makes PBIDT of Rs.15
crores and PAT of Rs.10 crores. The face value of its share is Rs.5 and
PE is 10, the market price will be ----
a. Rs.50
b. Rs.66
c. Rs.33
d. Rs.100
56.Which term defines the process of project compliance with policies and
procedures?
a. Quality control
b. Quality assurances
c. Quality audits
d. Quality control management
57.Which process does QA provide and umbrella for?
a. Continuous process improvement
b. Quality assurance
c. Project management plan
d. Quality baseline
58.Which of the processes includes all activities of the performing organization
that determines policies and responsibilities of a project?
a. Performance quality control
b. Project quality management
c. Performance plan management
d. Quality control management
59.Which of the following are negative possibilities if quality requirements are
not met?
a. Overworking team members and poor product quality
b. Customer complaints and late product
c. Poor quality
d. Termination
60.Which of these terms apply to identifying quality standards and how to satisfy
them?
a. Quality projections
b. Quality management
c. Quality planning
d. Quality overview
61.Which of the following definitions apply to the cost of quality?
a. Left over product
b. Total cost of all project efforts
c. Customer satisfaction
d. Redoing entire project
62.Strategic stretch involves:
a. The fit between the organization and its environment.
b. Creating new opportunities by stretching and exploiting
capabilities in new ways.
c. The skills of the senior management.
d. Utilizing all the resources of an organization to their full capacity.
63.Portfolio working is working which is:
a. Not attached to a single employer and contract of employment
b. An individual who works at home for a single employer
c. A person who demonstrates his/her work in a portfolio
d. A person who chooses more than one career
64.Why has the power of managers to act unilaterally in work organizations in
the UK been reduced? Is it due to:
a. More powerful trade unions
b. Management training
c. Benevolent managers
d. UK and European legislation
65.What changes have evolved from inward foreign investment in the UK?
a. The harmonization of terms and conditions of employment
b. Life time employment
c. Multiple union recognition
d. Comprehensive provision of welfare benefits
66.What did the Hawthorne experiments discover?
a. That people need to belong to a 'social group'
b. That people need heat and good lighting to work well
c. Money is a motivator
d. It makes no difference how you treat people at work in relation to their
behavior
67.Post modernist ideas have impacted on our understanding of the role of
rationality in workplaces by recognizing:
a. One type of rationality prevails
b. More than one type of rationality prevails in work
organizations
c. That managements type of rationality is the only true one to exist at
work
d. Employees must learn to respect managements version of rationality
at work
68.According to Cloke and Goldsmith the biggest change to the history of
management is:
a. Decline in hierarchy and bureaucracy
b. The continuation of autocratic management
c. Workers directives
d. Team working
69.A philosophy of management
a. Doesn't exist
b. Is the assumptions managers make about people
c. Is more than a single ingredient
d. Is a style of management
70.Treating employees as people or as an economic resources is:
a. A choice all managers have to make
b. Mutually exclusive
c. A question of balance which will be affected by the context of
each organization
d. A matter of luck
71.The creation of personnel as a specialist function dealing with people issues
from the latter part of the twentieth century has been responsible in part for:
a. Disenfranchising line managers in dealing with key aspects of
people management
b. Reducing the stress and work load of line managers
c. Creating greater workplace efficiency
d. Bureaucratizing the people function in workplaces
72.The origins of Personnel Management was an outcome of:
a. Welfare workers
b. Legislation relating to factory reform
c. The work of nineteenth century social reformers and Quaker
employers
d. The government
73.Scientific management contributed to the development of a more rational
approach to management by developing which characteristics?
a. The planning and organization of work based on scientific
principles
b. Time and motion studies
c. Standardized pay
d. The encouragement of trade unions
74.One final development influencing the practice of Personnel Management in
the 1960s was:
a. The effect of recession
b. Powerful trade unions
c. Globalization
d. Growing importance of training
75.A distinction can be made between 'hard' and 'soft' types of HRM. Soft HRM
can be characterized by:
a. Seeing people as organizational assets
b. A quantitative approach to HRM
c. A mutual commitment of employees and employers to the
goals of the organization
d. Being driven by costs
76.The resource based view of the firm is one that believes the key human
resources are:
a. Those employees not members of trade unions
b. Knowledge workers
c. Used to create new capabilities that help achieve
organizational success
d. Those willing to work overtime
77.SHRM is also about strategic choice, which refers to:
a. The processes and decisions that shape the organizations
philosophy towards its employees
b. Managerial prerogative in decision making
c. Negotiating with trade unions or employee associations over the
direction of the organization
d. Giving employees their 'say' in organizational concerns
78.Do HR activities have an effect on employee and managerial behavior?
a. Yes, but these effects can be negative as well as positive
b. HR impacts on employee behavior but not on managerial
c. HR impacts on employee behavior but not on managerial
d. No, it is managerial behavior which impacts on HR
79.The view that employees are critical to organizational success is now
generally accepted. Does this mean that:
a. All employees have the same value or potential for the organization
b. It reflects the unprecedented success of HR practitioners to deliver
c. Good management of people will prevail
d. Managing the human resource has become even more
important because it is the one resource most difficult to
replicate

80.The most common activities performed by HR, which are often outsourced,
are:
a. Recruitment an selection
b. Occupational health, payroll, pensions and training
c. Human resource planning
d. Assessment centers
81.Recruitment and selection must be effective to ensure it:
a. Offsets high labor turnover
b. Delivers the highest caliber of individuals at optimum most
c. To have a surplus in case of sickness and absence
d. Encourages new blood into the organization
82.Can the assessment and selection of applicants be carried out in such a way
that the 'best' or 'right' person will always be identified?
a. Yes
b. No
c. If enough money is invested in the process
d. If managers use their intuition or 'gut reaction' in making recruitment
decisions
83.The solution to many so-called 'people problems' is often associated with
improving the effectiveness of the recruitment process by:
a. Having a robust HR department to carry out the process
b. Outsourcing the HR department
c. Careful selection of the right people for the job
d. Devolving to line managers
84.The science and engineering sectors reflect significant under representation
of which group of employees?
a. Highly skilled operators
b. Young people
c. Over 50s
d. Women
85.The target figure of the Sussex Police Race Equality Scheme to increase ethic
representation in its work force is:
a. 10.5%
b. 20%
c. 3.5%
d. 5%
86.Are the best and most productive employees likely to be:
a. The least costly in terms of recruitment and employment costs
b. A matter of 'pot luck' in terms of recruitment decisions
c. The most costly to employ
d. Have no bearing on recruitment and selection costs

87.Too great a reliance on internal recruitment can result in:


a. Reduced job performance
b. High labor turnover
c. Internal conflict
d. Poor group dynamics
88.What strategies deployed by HR for attracting potential candidates to apply
for vacancies might be seen to result in indirect discrimination?
a. Advert in local press
b. Word of mouth
c. Now recruiting banners/notices
d. Agency or job centre
89.According to O'Leary et al (2002) the most important property of the
assessment instruments used to measure or assess applicants against set
criteria is their ability to predict what?
a. Whether a person will be a good team player
b. Length of service
c. Future job performance
d. Time it will take to train the person
90.The employment contract provides a set of rights, responsibilities and
obligations that structure the behavior of whom?
a. Both parties
b. The employee
c. The employer
d. Trade unions
91.What did the Whitely Councils establish? Was it:
a. Tripartite employee relations
b. Collective bargaining framework
c. Trade unions
d. Employer associations
92.Substantive rules are those which determine:
a. Rules governing redundancy
b. Rules governing discipline and grievance
c. Trade union recognition
d. Rates of pay and how levels are determined
93.Are those employers that reflect a unitary perspective to employee relations
generally:
a. Welcoming of them
b. Hostile to trade unions
c. Seeking agreement with single unions
d. None committal either way

94.What % of membership does a trade union have to demonstrate amongst the


group it is wishing to represent before it can apply to the Central Arbitration
Committee (CAC)?
a. 10%
b. 40%
c. 20%
d. 5%
95.If a local collective agreement on pay and conditions is in place, who
benefits?
a. Only those employees who are members of the trade union
b. All employees regardless of union membership
c. All employees in that industry nationwide
d. All employees regardless of union membership who are in the
grade of work covered by the agreement
96.Apart from pay what is the second most common reason for employees to
join a trade union?
a. Group solidarity
b. Friendship groups
c. Political reasons
d. Wide range of personal benefits
97.In organizing industrial action a Union is encouraging its members to break
their contractual obligation to attend work. Is this action:
a. Protected by union immunity
b. Unlawful
c. Referred to as a 'wild cat strike
d. Such that employers can sue the union for loss of earnings
98.What are the types of industrial action a union is most likely to engage in?
a. Unofficial action
b. Strike action
c. Action short of a strike
d. Absence
99.The psychological contract refers to the obligations that an employer and an
employee perceive to exist between each other as part of the employment
relationship. As such it will include:
a. The loyalty and trust of employees
b. Pay and working conditions
c. Managers pay only 'lip service' to consultation
d. Managers reneges on commitments to employees
100.Which recent case brought against a corporation's top management lead to
new rules on 'corporate governance'?
a. The Enron affair
b. BP
c. Texaco
d. Northern Rock

101.The purpose and function of discipline in contemporary organizations seems


at odds with developments in contemporary management thinking with its
emphasis on:
a. Tight control
b. A disciplined workforce
c. Commitment
d. Sanctions and punishments
102.Why is 'procedural justice' important in the context of the management of
misconduct?
a. It reflects on the integrity of HR professionals
b. To ensure that individuals have a sense that they have been
treated fairly
c. It reflects on the values and attitudes of top management
d. To protect line managers
103.What does discipline mean in the context of the workplace?
a. Enforcing compliance and order
b. A system of rules designed to improve and correct behavior
through teaching or training
c. Punishment
d. Exercising control
104.Why can altruism as an approach to discipline be regarded as an essential
element?
a. It is an essential requirement for survival
b. To maintain good employee relations
c. To demonstrate who's boss
d. To re-establish a welfare approach to HR
105.What might be the reason for why HR is not often informed of incidents that
could result in a disciplinary action being taken?
a. Those involved often agree to contain the incident
b. Those involved would be concerned about reprisals
c. Due to lenient managers
d. It would impact on the relationships between subordinates and
superiors
106.Which organization provides established guidelines for disciplinary
procedures?
a. TUC
b. ACAS
c. CIPD
d. Employers
107.What is the meaning of the term 'gross misconduct' in the context of a
company's disciplinary procedures?
a. Breaches of standards and rules that are serious and
unacceptable in any circumstances
b. Stealing company property
c. Being repeatedly late for work
d. Absence without leave

108.Should confidentiality be guaranteed to people who report breaches of rules


which could lead to disciplinary action taken on a fellow employee?
a. Depends on the circumstances
b. It should not be guaranteed
c. Management should attempt to guarantee confidentiality
d. It should be guaranteed
109.Is it important to have two managers responsible for leading a disciplinary
investigation because:
a. Provides support for each other when dealing with stressful situations
b. It ensures a degree of impartiality
c. It a requirement by tribunals
d. Provides cover in the event of absence through ill health
110.Which aspect of employment is fairness in the management of HR linked to?
a. Just recruitment and selection
b. Grievance and discipline
c. Reward management
d. All aspects of HR
111.What expresses the commitment management has made to embrace the
concepts of equality and diversity?
a. Investors in people
b. Strategic HRM
c. An 'equal opportunity employer'
d. Diversity management
112.An equal opportunities approach to fairness at work is essentially about:
a. Taking a business perspective
b. Taking a more strategic approach
c. Having a diverse workforce
d. Compliance and maintaining minimum standards
113.A stereotype is a fixed idea or misconception about an individual or group of
people. The basis of stereotyping is:
a. Based on objective and rational considerations
b. Seeing people as a group with similar characteristics rather
than recognizing differences between people
c. Gut reaction
d. Formed from personal experience of different groups of people
114.The first elements in the legal framework for equal opportunities legislation
were introduced in:
a. The 1940s
b. The 1970s
c. The 1920s
d. 2000

115.Circumstances in which discrimination can be justified include:


a. Where the employer prefers to employ someone of a specific sex
b. Where the employer believes the tasks are more suitable for someone
of a specific sex
c. Where a person is employed to provide authenticity such as
employing a black person to play a black role in a play
d. Where there has been a tradition of employing a person of one sex as
opposed to the other sex
116.Unreasonable adjustments in light of a person's disability might include:
a. Alterations to a persons working conditions
b. Acquiring or modifying equipment
c. Building access ramps to buildings
d. Altering hours of work or duties
117.Approximately what % of the UK working population is classified as
disabled?
a. One in 5 people of working age
b. 1 in 10 people of working age
c. 1 in 20 people of working age
d. 1 in 30 people of working age
118.The CIPD survey of 2005 found that the impact of poor work-life balance
affecting performance was perceived by what % of employees?
a. 60%
b. 40%
c. 20%
d. 5%
119.Which of the following is the main reason for why harassment and bullying
need to be taken seriously at work?
a. It is costly for the employer
b. It can lead to impairment of an employee's physical and/or
mental health
c. It impacts on social relations at work
d. It could lead to dismissal of the perpetrator
120.A Sole Trader is a firm which
a. sells fish
b. is operated by a single person
c. is unincorporated
d. can be taken to court instead of its owner
121.The main aim of any private business is to
a. increase market share
b. survive
c. make a profit
d. employ people

122.The secondary sector of the economy is concerned with


a. banking
b. manufacturing
c. farming
d. education
123.The fourth element in a SWOT analysis is
a. internal threats
b. external threats
c. internal trials
d. external trials
124.All of the following are examples of the advantages of being a plc except
a. being able to sell shares on the Stock Exchange
b. being liable to hostile take-over
c. being able to raise capital from many sources
d. being a legal entity separate from the owners and directors
125.Limited liability when applied to an incorporated firm means that
a. it only has to pay 50% of its bills
b. the shareholders and the directors share the responsibility to pay any
debts the firm may have
c. the firm is liability limited to the fully paid-up share capital of
the firm
d. the firm is only partially responsible for the safety and reliability of its
product
126.What do we mean by the term 'unfair competition
a. A market in which there exists output that exceeds current market
demand
b. A market in which participants have an opportunity to earn
very high profits
c. The market demand for a products exceeds its current levels of
production
d. The management tool used to look at internal and external factors
affecting the business
127.Which type of market competition is characterized by many firms
differentiating a similar product
a. Perfect competition?
b. Oligopolistic competition?
c. Monopolistic competition?
d. A monopolist?
128.Skimming pricing is best described as
a. Keeping prices very low in an attempt to destroy or drive out
competitors
b. Setting a high price to yield a high profit margin
c. The price set by the largest company in the market which influences
the price other, smaller rivals must follow
d. Setting the price low so as to break into a market
129.All of the following are features of a sole trader, except that
a. they are very flexible to changes in circumstances or competition
b. they have limited liability for their debts
c. they are very private
d. they are easy to start up
130.All of the following are suitable methods of market research for a new, small
firm, except
a. use of Yellow Pages or local directories
b. market mapping
c. published data in libraries, government publications, or on the Internet
d. regional field surveys and market trials
131.All of the following statements are true of a patent, except
a. A patent gives its holder exclusive rights to make and sell a product for
16 to 20 years
b. A patent is valid in all countries of the World
c. The patent holder has to take firms who seem to copy the patent to
court himself, not the police
d. The patent is published, so everybody can find out how it works, and
can try to develop a 'legal' copy
132.A budget is
a. a statement showing how much must be spent in a period of time
b. a plan, in financial terms, of a companys expenditure for a period of
time in the future
c. A plan, in financial terms, of a companys revenues and
expenditures for a period of time ahead
d. a statement, in financial terms, showing how much was received and
spent last year
133.All of the following are fixed assets except
a. buildings
b. stock
c. production plant
d. vehicles
134.The following are examples of variable costs except
a. raw materials
b. directors salaries
c. packing materials
d. commission payments
135.One difference between an ordinary share and a preference share is that
a. dividends on ordinary shares have to be paid
b. ordinary shares are a loan and have to be repaid on demand
c. The ordinary share gives the owner the right to one vote at an
AGM
d. In the event of a firm going into liquidation, ordinary shares are paid
back first

136.The following are all examples of possible causes of cash flow problems,
except
a. over-investment
b. overtrading
c. selling on credit
d. buying on credit
137.In the context of break-even analysis, the Margin of Safety for a firm is
a. The difference between the sales revenue achieved and the break-
even revenue
b. The difference between planned (or actual) output and the
break-even quantity in a particular time period
c. The percentage difference between planned (or actual) output and the
break-even quantity
d. The difference between planned (or actual) output and the break-even
quantity
138.In the business sense, and for a particular business, a debtor is
a. Someone, firm or individual, that the business owes money to
b. A current asset of a business
c. A current liability of a business
d. the Inland Revenue
139.Variances in costs can be caused by changes in all of the following, except
a. storage and waste of materials
b. efficiency
c. wages of staff
d. price of the product
140.The liquidity of a firm is a measure of
a. its ability to pay bills as they come due
b. its ability to respond to changes in demand
c. how flexible it is in its production planning
d. how quickly and easily a firm could relocate to another site
141.Profit can be defined as
a. A firm's revenue less its costs for an accounting period
b. An accounting concept, the difference between the revenue obtained
from the sale of something less all the costs incurred in its
manufacture and sale
c. An accounting concept, the difference between the revenue
obtained from the sale of something less all the costs incurred
in its manufacture and sale, irrespective of any credits given
or taken
d. The difference between the money in the bank at the start and end of
a trading period
142.In the context of accounting, the margin is
a. the value of materials wasted during production
b. the percentage added to costs to determine the price
c. the difference between the price of something and all the
costs involved in its production and sale
d. the edge of the balance sheet

143.All of the following are examples of current assets except


a. stocks of raw materials
b. unpaid bills
c. customers who have not paid their bills yet
d. money in a current account
144.The main disadvantage of an overdraft is that it
a. can only be repaid at the end of the agreed period
b. the bank can demand repayment at a moments notice
c. is very inflexible
d. must be supported by some security
145.In the context of accounting, liabilities are
a. things that you have to put up with
b. items of money owed to a business
c. a firms debts
d. people who do not work efficiently
146.All of the following are examples of fixed assets except
a. a firms buildings
b. a firms stock of fuel oil and lubricants
c. a firms motor vehicles
d. a firms computer equipment
147.A firm may raise money internally or externally. All of the following are
internal sources, except
a. retaining profits within a business rather than paying them out as
dividends
b. selling assets that are not needed any more
c. reducing the working capital requirements
d. organizing and using an overdraft
148.All of the following are aims of budgeting, except
a. to establish priorities
b. to assign responsibilities
c. to be able to assign blame
d. to encourage forward planning
149.What is meant by the term cost-plus pricing?
a. Charging a higher price to those customers who will pay it
b. Setting the price at the average cost plus the agreed sum of
profit needed to make the investment viable for the company
c. Setting a price that covers variable costs and makes a contribution to
fixed costs
d. Looking at ones rivals and copying their prices

150.All of the following are examples of short-term liabilities except


a. debentures with a repayment date in 2 years time
b. unpaid VAT
c. declared but unpaid dividends
d. overdrafts
151.In following the procedure known as 'zero budgeting'
a. managers are not allowed to spend any money on capital items for the
period of the budget
b. managers have to justify any expenditure in order to ensure
that allocations to departments are not excessive
c. managers may apply for their budgets to be changed within the
budgeting period
d. managers are not allowed to use money saved against one periods to
budget in the next period
152.All the following are fixed costs, except
a. a salary
b. a wage
c. a commission payment
d. a weekly retainer
153.All the following are examples of fixed costs, except
a. insurance fees
b. rent payments
c. directors fees
d. license fee on a product sold
154.The value of break-even analysis to a firm is limited by all of the following
factors except
a. the assumption that all items made are sold
b. the assumption that all fixed costs do not change with output
c. all costs vary with time
d. that all costs and price can change independently of each other
155.All of the following are examples of profit centers within an airline, except
a. in-flight magazine
b. merchandising
c. aircraft maintenance
d. ticketing
156.A Cash Cow is
a. a product which generates a significant amount of profit for a company
b. a product with a high market share, and a high rate of growth
c. a product with a low market share and a low rate of growth
d. a product which generates a significant amount of money for a
company

157.A product life cycle


a. shows how a products sales or profits, depending on the units
used, may rise and fall over its life
b. tells you how long a product will sell for and make a profit
c. is divided into three stages
d. shows how profitable a product will be
158.When performing primary research
a. you spend a lot of time sitting at a desk, using a computer, and
researching through old data
b. you are obtaining first hand data, specifically targeted at a
particular marketing problem
c. you are spending little money
d. you are researching into the farming, fishing and mining industries
159.All of the following are examples of extension strategies, except
a. selling overseas
b. developing a new market for the product
c. finding new uses for the product
d. stretching the quantity available over a wider geographical
region
160.The demand for a product varies with all of the following except
a. the income of prospective customers
b. its price
c. the costs of production
d. The amount of successful advertising expenditure
161.What is meant by the term psychological pricing?
a. The process of raising the customer awareness of the supposed
values/qualities of your product, so building its brand image
b. The cutting out of wholesalers from the distribution chain
c. Setting prices that reinforce the concept of value. e.g. 99 and
not 100
d. The forces of supply and demand and how they determine price
162.All of the following are roles of wholesalers , except
a. breaking bulk
b. sharing the risk of new products with the manufacturer
c. servicing the needs of small customers
d. selling directly to consumers
163.The price elasticity of demand for a product tells you
a. how sensitive price is to changes in demand
b. how sensitive the demand for a product is to changes in the
products price
c. How demand changes with changes in the prices of competitors goods
d. how sensitive demand is to changes in the costs of production

164.Market share tells you


a. how well a firm is doing
b. how much power a firm has in a market
c. how many firms there are in a particular market
d. how big a market is
165.Market segmentation is done by firms for all of the following reasons, except
a. to increase market share
b. to assist new product development
c. so that they can develop multi-purpose advertising campaigns
d. to extend products into new markets
166.The income elasticity of demand for a product is negative. Such products
are known as
a. normal goods
b. inferior goods
c. luxury goods
d. necessities
167.In the marketing mix what is meant by the term 'place'?
a. The process of getting products to the places where customers
can buy them
b. Recognizing that consumers change their tastes over a period of time
c. The building-in of reliability to a product
d. Launching a new product that extends the product range
168.The Boston Matrix is a visual presentation, or model, which
a. shows if a product is likely to be a success or not
b. allows firms to classify their products according to their
market share and the growth of the
c. The building-in of reliability to a product
d. Launching a new product that extends the product range
169.A 'Star' is
a. A product with a high market share and a high rate of growth
b. A product with a low market share and a low rate of growth
c. A product with a high market share but a low rate of growth
d. A product with a low market share but a high rate of growth
170.The price elasticity of a product is influenced by all of the following factors,
except
a. necessity
b. habit
c. brand loyalty
d. the level of VAT in operation at the time

171.Market share can be measured by


a. counting the number of customers there are in a market, and for a
particular firm within it
b. comparing the sales value for a company with the total unit sales for
the whole market
c. comparing the sales value for a company with the total sales
value for the whole market
d. comparing the number of outlets a firm has with the total number of
outlets within the market
172.All of the following are extension strategies for a product, except
a. finding new uses for the product
b. encouraging more frequent use and purchase of the product
c. developing new markets for the product
d. repackaging the product
173.Explain what is meant by the term advertising elasticity
a. The responsiveness of demand to price changes
b. How much advertising influences sales
c. It measures the responsiveness of the demand for a product to
changes in the amount of advertising spent on it
d. The change in demand caused by a change in income
174.When looking at firms marketing strategy you notice the term 'asset-led'
marketing. What does this mean?
a. The selling of those fixed assets which are no longer needed to
maintain current capacity needs
b. The use of names to sell products
c. The use by a company of its assets as a major part of its
marketing strategy
d. The process of buying a company and then selling some of its most
valued assets
175.Our 'below the line operations' continue to be disappointing. What does the
Chief Executive mean by this?
a. That the profit after tax deduction is less than forecast
b. A range of promotional activities over which the company has
little direct control
c. The feedback that comes from a survey
d. Research conducted by using publications that are available on a
subject
176.'We should have referred to the Boston matrix exercise we carried out.' Who
or what is the Boston Matrix?
a. A mathematical exercise that puts data into a series of boxes
b. A management tool that allows firms to classify their products
according to their market share and the growth of the
c. The feedback that comes from a survey
d. Research conducted by using publications that are available on a
subject

177.Explain, using examples what is meant by the term 'above the line'
marketing
a. The use of point of sale materials such as cut outs of artists in record
stores
b. A marketing term referring to promotional expenditure using
independent media channels, such as television and radio
c. The accounting profit before profit and tax are deducted
d. Using various ways to promote fast moving consumer goods by
changing their appearance or contents
178.Which of the following is an example of a loss leader?
a. The use of advertising via newspapers and television
b. Engaging a public relations firm to promote your company
c. Using very low prices to encourage customers to buy
d. An advertising campaign that aims to increase public awareness of
your product
179.What does a business mean by the term 'advertising'?
a. various ways of communicating the qualities of products to potential
consumers
b. The placing of advertisements in newspapers and magazines
c. Through the use of various media channels the firm tries to
inform potential customers of its products
d. Selling products to people
180.One advantage of Just-In-Time (JIT) management of stocks is
a. it reduces the need to plan and organize
b. it removes the need for delivery Quality Control
c. it reduces the costs of holding stock within the factory
d. it works very well with competitive tendering
181.A firm is capital intensive if
a. it is based in the capital cities of the countries it operates in
b. it has borrowed a lot of capital from the bank
c. it has a high proportion of fixed costs in its cost structure,
rather than variable costs
d. has a very steep total cost line on its break-even chart
182.A firm is productively efficient when
a. it is producing its product or service at the lowest unit cost
that it can
b. it is selling at the lowest price possible
c. it has the highest labor productivity that it can
d. it is making what its customers want
183.'Kaisen' is
a. a word meaning 'continuous improvement'
b. a method of stock control
c. a modern way of operating a production line
d. another word for Quality Circles
184.All of the following are examples of economies of scale, except
a. being able to employ specialist staff efficiently
b. the effective division of labor
c. having better communications
d. bulk buying
185.Which of the following is NOT a sign that labor shortages are hitting a
company
a. The need to outsource part of its production
b. A lack of accurate records as to staff training
c. The introduction of university place sponsorship
d. An increase in basic rates of pay for current employees
186.External economies of scale are
a. savings that are made possible by outside agencies
b. savings that can be made in distribution and selling
c. savings that are available to a firm as a result of the
concentration of an industry in a region
d. savings that can be made in export markets only
187.All of the following are justifications for holding large stocks of raw
materials, except
a. the seasonal supply of materials such as coffee beans or even garden
peas
b. in anticipation of a future shortage and rapid rise in price
c. large quantities are available on the market
d. to take advantage of significant bulk buying reductions
188.Which of the following are NOT a benefit thought to accompany the
introduction of technology
a. Improved efficiency and reductions in waste
b. Increased strains in industrial relations
c. The introduction of new and better products
d. Advances in communication
189.The opportunity cost to a business of an investment is
a. the amount of capital that has to be borrowed to be able to make the
investment
b. the cost of all the fixed assets that are to be purchased
c. the next best investment now foregone
d. the amount by which the project will have risen due to inflation, on a
monthly basis
190.When a firm in the secondary sector of the economy takes over a related
business in the tertiary sector, this is an example of
a. horizontal integration
b. backward integration
c. Forward vertical integration
d. Forward horizontal integration
191.A bank takes over a fishing company, a steel works, a vegetable processing
firm and an airline. This is an example of
a. forward integration
b. a firm becoming a conglomerate
c. horizontal integration
d. company mergers

192.Cell production is the modern production method where


a. buildings are made from prefabricated units, or cells
b. production is done in small rooms
c. the output from the Prison Service factories
d. production on assembly lines is managed and run by groups of
workers who are responsible for the quality of their work
193.The long-run for a company is when
a. the scale of production itself, and thus capacity can be
increased
b. 5 years
c. the time it takes to buy and install new plant
d. the time interval between the payment of a firms fixed costs
194.In the interests of efficiency and obtaining more economies of scale, two
firms agree to join together and become one. This is an example of a
a. hostile take-over
b. hostile merger
c. friendly merger
d. friendly take-over
195.A firm can be considered to be efficient when it
a. is producing its product or service at the lowest possible
average cost
b. is fully utilizing its capacity
c. has minimized the amount of waste that it produces
d. employs the maximum number of workers
196.The short-run for a company is
a. one month, being the payment base for salaries
b. the period where output can only be changed by altering the
utilization of existing plant and equipment
c. the time it takes to terminate staff
d. when it is working on a short-time basis
197.What is meant by the term 'management by objectives'?
a. A system of giving the authority to carry out certain jobs by those
lower down the management hierarchy
b. The system of management that is based on bringing together experts
into a team
c. The setting of objectives to bring about the achievement of the
corporate goals
d. The control of the organization by those in the 'head office'
198.A manager may delegate any of the following except
a. authority
b. workload
c. responsibility
d. attendance at meetings to represent the department

199.Workforce planning involves all of the following except


a. organizing the training of staff
b. forecasting future personnel requirements
c. examining production plans in a factory
d. preparing and maintaining personnel records
200.Maslow, in his triangle of human needs, showed that
a. having challenging new tasks is a basic human need
b. money always motivates workers
c. safety and security is a low order human need
d. workers will not give of their best unless they have good social events
provided by the firm
201.Piecework is a payment system where the worker is
a. paid overtime for any hours worked beyond 25 per week
b. rewarded for good conduct
c. is paid a minimum of 4.20 per hour
d. is paid for what he or she achieves
202.Which of the following will NOT result following the introduction of a more
decentralized system of management?
a. Increased motivation amongst those empowered to make decisions
b. Greater consistency in the decisions made
c. The development of skills amongst the junior members of the
management team
d. An increase in the speed at which essential decisions are made
203.An advantage of recruitment from outside the company is
a. that it is cheaper than internal recruitment
b. that there is no need to advertise the vacancy
c. that it brings in new experience and skills to the firm
d. that it avoids jealousy within the firm
204.When designing his hierarchy of needs triangle Maslow did NOT include one
of these. Was it?
a. Good wages and salaries and working conditions
b. The need to feel secure at work with adequate financial rewards such
as pensions to assist one later in life
c. The need to build a career path
d. Opportunities for team working and social events that allow a sense of
belonging to emerge
205.When deciding on objectives for management it is advised that companies
should aim to achieve 'SMART' within these. Which of the following is NOT
part of the SMART scheme?
a. The need to be Specific in the choice of objectives
b. The need to make objectives Tangible
c. All objectives must be Measurable
d. For personnel to feel capable of reaching objectives they must be
Achievable

206.Which of the following is a reason for introducing a matrix management


system?
a. Because it allows for an easily understood functional responsibility
chart to designed
b. The management can increase the use of delegation within the
organization
c. The senior management wants to develop a clearly defined set of
responsibilities
d. A more centralized system of control is required
207.What is meant by the term functional management?
a. A system of business organization that is based on an individual having
a wide range of skills needed to administer a business
b. A type of management that is based more on personality
c. A system that groups together various jobs and is organized by
departments, sections or functions
d. A system that supports a flat form of command chain
208.What is meant by the term delegation?
a. A system of management that relies on consulting employees before
making decisions
b. The process of using goals as the best way of motivating managers to
achieve corporate targets/objectives
c. The giving of tasks by a manager to a subordinate
d. A style of management supported by FW Taylor
209.Which of the following is a reason for supporting a wider span of control
within an organization?
a. The management wants to reduce the opportunities for delegation
b. There is a need for tighter control within the business
c. The business accepts that within its management there will be
increased contact between managers and employees
d. Management wishes to introduce a process of de-layering
210.Which of the following is NOT a characteristic of a narrow span of control?
a. There is less opportunity to delegate
b. This form of span of control creates a smaller hierarchy within
the business
c. Supervision and control are tighter
d. The distance between the top and bottom of the organization is
greater
211.The effectiveness of wide spans of control will depend on
a. The ability of the chosen manager to control effectively those
under their control
b. Designing a complex set of tasks for less senior personnel to perform
c. Employees being treated in a more Theory X way (McGregor) and not
left to supervise their own working environment
d. The senior management wishing to encourage promotion from within
its current staff
212.Which of the following is the best definition of a centralized management
system?
a. A system that encourages empowerment of workers
b. A management structure that concentrates on developing the skills of
junior personnel
c. A system that involves authority and responsibility for
decision-making being in the hands of senior managers
d. A system that encourages faster decision-making
213.Most management teams use 'appraisal' but what is meant by this term?
a. A system used to improve the performance of personnel
b. The main way in which an employees wages are determined
c. A system of reward points offered by retailers to attract customer
loyalty
d. The evaluation of an individual employee's performance over a
given period of time
214.In recent years autonomous working groups have come to play an important
part in many businesses. What are their essential features?
a. The group reports directly to the senior management above them in
the hierarchy of the firm
b. The creation of teams which have a high level of autonomy and
control over their immediate working environment
c. The bringing together of various individuals who have a common
interest in solving certain problems
d. A group of experts brought into research new ways of producing a
product
215.Authoritarian leadership is a term often seen in textbooks. What does it
mean
a. A style of leadership where the leader keeps a very tight
control on all information and decision-making processes
b. A system of leadership that allows maximum participation by all
employees
c. A chain of command that is flat and allows considerable personal
freedom to make decisions
d. The selling of debts to an agency, who take responsibility for their
collection
216.Ineffective planning of workforce would be highlighted by
a. Recruitment and selection problems
b. The need to outsource some of the production
c. A need to offer retraining to current employees
d. An opportunity to increase the use of mechanization
217.Which of the following is one of the factors that might influence the style of
leadership used by a firm?
a. Accepting that employees who agree are favored
b. Workers should be left to be more in control of their own working
environment
c. Offering profit sharing as part of employees remuneration package
d. The skills expected from each employee
218.Which of the following will influence the style of management used by a
company?
a. The desire by the owner to have the workforce treat him in a fatherly
way
b. The need to focus discussions on policy as a joint process between
employees and employer / manager
c. The culture of the company, the nature of its work and the
preferences of the individual managers
d. The use of distinct penalties for poor performance

219.What is meant by the term empowerment?


a. A process of giving employees greater autonomy and decision-
making powers
b. A system that encourages workers to move more freely within the
workforce
c. The opportunity to share in the company's profits
d. A formal system of leadership that relies greatly on control
220.Which of the following will influence the method of recruitment and
selection used by a company?
a. The state of the economy
b. The size of the organization
c. The type of training programs used by the company
d. The possible expansion of UK business in Europe
221.Which of the following is an accurate definition of recruitment?
a. The process of attempting to fill gaps that exist in the skills of the
current labor force
b. The system of following someone around and noting how they perform
their duties
c. The process by which companies fill the need to find new
employees
d. A statement that enshrines the fundamental objectives of the company
222.Which of the following is NOT normally a sign of poor morale amongst a
workforce?
a. High levels of absenteeism
b. High levels of turnover
c. Increased levels of personal productivity
d. A poor external image and difficulties attracting good recruits
223.Which of the following IS one of Herzberg's 'motivational factors'?
a. Opportunities to achieve some personal advancement within
the organization
b. The application of respected supervision of employees by those
responsible for this role within the organization
c. Within organizations it is the workings of groups that influence codes of
behavior
d. People are primarily motivated by money and little else
224.Which of the following is one of Herzberg's 'hygiene factors'?
a. Recognition in the workplace
b. A reasonable salary
c. An opportunity to take some responsibility in ones place of work
d. Developing a sense of achievement in the working environment
225.An increase in the rate of interest may reduce the profits of a company
because
a. the customers will have more money to spend
b. exports will become easier and cheaper
c. costs will increase since overdrafts and loans will be more
expensive
d. it will become more rewarding to invest in new products and projects
226.All of the following are examples of external stakeholders of a company
except
a. shareholders
b. suppliers
c. customers
d. local government
227.Structural unemployment can be caused by all of the following, except
a. a collapse in the demand for coal, leading to pit closures in South
Wales
b. a slowing of the economy
c. growth of the textile industry in India, leading to the failure of the
industry in Lancashire
d. collapse of the market for valves after the invention of transistors
228.A market is said to be oligopolistic when
a. it is dominated by a single supplier of a product
b. a few significant suppliers dominate the market for a product
c. there are many small firms supplying the same product
d. there are many branded varieties of the product on the market
229.All of the following are examples of unfair competition, except
a. two firms agreeing to fix their prices
b. three companies agreeing to share a market between them
c. a monopolist charging excess prices for its product
d. exploiting a patent that the firm has on a product it has
developed itself
230.A firm will have monopoly power if
a. it is the sole producer of its product
b. it has a market share of at least 25%
c. it can set its price
d. it is making high profits
231.All of the following are examples of unfair competition, except
a. restricting supply to retailers who agree to take a complete range of
items
b. a monopoly charging excessive prices because of lack of competition
c. market sharing; where a group of firms agree to share a market and fix
prices in their favor
d. a firm taking out a patent for a drug it has invented
232.The dominant firm in a market is operating at near full capacity, and the
other firms can do little to significantly increase their supply to the market.
This will lead to all of the following, except
a. rising prices as demand begins to outstrip supply
b. high and rising profit margins
c. increased levels of marketing, especially advertising
d. new firms considering entering the market
233.A rise in interest rates, followed by a rise in the exchange rate, will result in
all of the following effects, except
a. The price of imported raw materials will rise
b. The price of imported raw materials will fall
c. The price of exported goods will rise
d. Domestic producers will find it harder to compete against imported
goods
234.The business cycle is the regular pattern of upturns and relative downturns
in output and demand within an economy. All of the following can cause this,
except
a. Government policies which effectively achieve steady,
sustainable growth
b. changes in business confidence, leading to more of less capital
investment
c. stock building, followed by destocking
d. Irregular buying of consumer durables such as cars and household
appliances
235.Which of the following might cause a downturn in the economy?
a. The demand for a product is exceeding its supply
b. A total fall in output and expenditure
c. Distinct signs of growing business confidence
d. Stocks are starting to exceed demand
236.If the pound increased in value against the dollar what would happen to the
price of exports?
a. Imports will become more expensive and exports will be less expensive
b. An increase in the exchange rate means dearer exports but
cheaper imports
c. The exchange is influenced by government action in order to prevent it
changing to an undesirable level
d. The government will buy the currency in order to support its value
237.Rising interest rates can have all but one of the following implications for an
economy. Which one is it?
a. Credit sales will fall
b. Investment may start to fall as business loses confidence
c. Potential exporters will see the UK market as one worth selling
to
d. As the cost of maintaining working capital rises so stocks will need to
be reduced
238.Which of the following is an accurate definition of interest rates?
a. The cost of borrowing money
b. The price of one currency expressed in terms of another
c. The level of unemployment that is normally apparent in an economy as
some people are in between jobs or searching for a new one
d. The setting of the exchange rate by the forces of the market for
currency
239.Which of the following would probably NOT be the result of a period of
relatively high inflation?
a. Lower sales within the economy
b. A loss in international competitiveness
c. An increase in the trade surplus of the country
d. Workers demand higher wages
240.Which of the following is NOT a primary cause of inflation in an economy?
a. Large increases in consumer demand that cannot be adequately meet
by current supply
b. Increases in costs, wages, imported goods / components/ raw materials
and other expenses
c. A belief amongst many in the population that prices will be rising in the
future
d. Falls in the amount of money in circulation beneath the growth
rates being recorded by the economy
241.Which of the following is an accurate definition of price inflation
a. An increase in prices
b. A persistent increase in the general level of prices
c. Decreases in the general level of prices
d. The index that measures monthly movements in prices
242.Which of the following is a clear sign that an economy is heading for
recession?
a. A rise in the demand for consumer goods
b. Companies start to post growing amounts of bad debts
c. The capacity within the economy is being fully used
d. Potential bottlenecks start to appear within the economy
243.Which of the following might cause cyclical unemployment?
a. A downturn in world export trade
b. The replacement of coal by gas in many of the UK power stations
c. A fall in the competitiveness of UK clothing products
d. Some workers in the hotel trade being laid off in late October
244. Financial statements are prepared
a. Only for publicly owned business organizations
b. For corporations, but not for sole proprietorships or partnerships
c. Primarily for the benefit of persons outside of the business
organization

d. In either monetary or nonmonetary terms, depending upon the


need of the decision maker
245.The basic purpose of an accounting system is to
a. Develop financial statements in conformity with generally accepted
accounting principles
b. Provide as much useful information to decision makers as possible,
regardless of cost
c. Record changes in the financial position of an organization by applying
the concepts of double-entry accounting
d. Meet an organization's need for accounting information as
efficiently as possible
246.Information is cost effective when
a. The information aids management in controlling costs
b. The information is based upon historical costs, rather than upon
estimated market values
c. The value of the information exceeds the cost of producing it
d. The information is generated by a computer-based accounting system
247.Although accounting information is used by a wide variety of external
parties, financial reporting is primarily directed toward the information needs
of
a. Investors and creditors
b. Government agencies such as the Internal Revenue Service
c. Customers
d. Trade associations and labor unions

248.A complete set of financial statements for Hartman Company, at December


31, 1999, would include each of the following, except
a. Balance sheet as of December 31, 1999
b. Income statement for the year ended December 31, 1999
c. Statement of projected cash flows for 2000
d. Notes containing additional information that is useful in interpreting
the financial statements
249.All of the following are characteristics of managerial accounting, except
a. Reports are used primarily by insiders rather than by persons outside
of the business entity
b. Its purpose is to assist managers in planning and controlling business
operations
c. Information must be developed in conformity with generally
accepted accounting principles or with income tax regulations
d. Information may be tailored to assist in specific managerial decisions
250.In comparison with a financial statement prepared in conformity with
generally accepted accounting principles, a managerial accounting report is
more likely to
a. Be used by decision makers outside of the business organization
b. Focus upon the operation results of the most recently completed
accounting period
c. View the entire organization as the reporting entity
d. Be tailored to the specific needs of an individual decision
maker
251.The nature of an asset is best described as
a. Something with physical form that is valued at cost in the accounting
records
b. An economic resource owned by a business and expected to
benefit future operations
c. An economic resource representing cash or the right to receive cash in
the near future
d. Something owned by a business that has a ready market value
252.The balance sheet item that represents the resources invested by the owner
is
a. Accounts receivable
b. Cash
c. Note payable
d. Owner's equity
253.Arguments that the cost principle is not a satisfactory basis for the valuation
of assets in financial statements are usually based on
a. The lack of objective evidence to permit verification of cost data
b. Increased availability and capacity of computers
c. Stronger internal control structures
d. Continued inflation

254.The amount of owner's equity in a business is not affected by


a. The percentage of total assets held in cash
b. Investments made in the business by the owner
c. The profitability of the business
d. The amount of dividends paid to stockholders
255.An income statement communicates information regarding revenues and
expenses
a. For a period of time
b. At a given point in time
c. For some point of time in the future
d. At the beginning of the fiscal year
256. The realization principle indicates that revenue usually should be
recognized and recorded in the accounting records
a. When goods are sold or services are rendered to customers
b. When cash is collected from customers
c. At the end of the accounting period
d. Only when the revenue can be matched by an equal dollar amount of
expenses
257.The matching principle is best demonstrated by
a. Using debits to record decreases in owner's equity and credits to
record increases
b. The equation A = L + OE
c. Allocating the cost of an asset to expense over the periods
during which benefits are derived from ownership of the asset
d. Offsetting the cash receipts of the period with the cash payments
made during the period
258.The matching principle
a. Applies only to situations in which a cash payment occurs before an
expense is recognized
b. Applies only to situations in which a cash receipt occurs before
revenue is recognized
c. Is used in accrual accounting to determine the proper period in which
to recognize revenue
d. Is used in accrual accounting to determine the proper period
for recognition of expenses
259.The reason that both expenses and dividends are recorded by debit entries
is that
a. All dividend and expense transactions involve offsetting credit entries
to the Cash account
b. Both expenses and dividends are offset against revenue in the income
statement
c. Both expenses and dividends reduce owner's equity
d. The statement is untrue-expenses are recorded by debits, but
withdrawals are recorded by credits to the owner's drawing account

260.The concept of adequate disclosure


a. Does not apply to information which is immaterial
b. Grants users of the financial statements access to a company's
accounting records
c. Does not apply to events occurring after the balance sheet date
d. Specifies which accounting methods must be used in a company's
financial statements
261.The concept of adequate disclosure requires a company to inform financial
statement users of each of the following, except
a. The accounting methods in use
b. The due dates of major liabilities
c. Destruction of a large portion of the company's inventory on January
20, three weeks after the balance sheet date, but prior to issuance of
the financial statements
d. Income projections for the next five years based upon
anticipated market share of a new product; the new product
was introduced a few days before the balance sheet date
262.When a business closes its accounts only at year-end
a. Financial statements are prepared only at year-end
b. Adjusting entries are made only at year-end
c. Revenue and expense accounts reflect year-to-date amounts
throughout the year
d. Monthly and quarterly financial statements cannot be prepared
263.When a business adjusts its records monthly, but closes its accounts only at
year-end
a. Interim financial statements are prepared using the amounts shown in
an adjusted trial balance at the end of the interim period desired
b. Only annual financial statements can be prepared
c. Interim financial statements are prepared by subtracting prior balances
from current balances for all accounts
d. The revenue and expense accounts in an adjusted trial balance
reflect year-to-date amounts
264.Which of the following amounts appears in both the Income Statement debit
column and the Balance Sheet credit column of a worksheet?
a. Net income
b. Net loss
c. Dividends
d. Retained earnings
265.Which of the following is not included in an end-of-period worksheet?
a. Information for adjusting entries
b. Financial statement information
c. Trial balance
d. Closing entries

266.Preparation of interim financial statements


a. Makes the preparation of year-end financial statements unnecessary
b. Requires the journalizing and posting of adjusting entries
c. Requires the journalizing and posting of closing entries
d. Is done monthly or quarterly-in between the year-end financial
statements
267.If monthly financial statements are desired by management
a. Journalizing and posting adjusting entries must be done each month
b. Journalizing and posting closing entries must be done each month
c. Monthly financial statements can be prepared from
worksheets; adjustments and closing entries need not be
entered in the accounting records
d. Adjusting and closing entries must be entered in the accounting
records before preparation of interim financial statements