I

1. What is the importance of management control system? How is this done? Who is responsible
for this?
2. What is the importance of financial control system? How is this done? Who is responsible for
this?

II. EXPLAIN each of the following: Number is done for you.

1. Increase operating costs can be caused by some environmental laws have on businesses.
Example: Environmental laws are intended to conserve and protect the natural
environment. Many of these laws have an impact on the way businesses operate by requiring
them to decrease pollution or control waste. As a result, businesses often need to spend money
to comply with the rules and regulations, which leads to an increase in operating costs. For
example, a business might need to purchase pollution-control devices. Environmental laws do
not require businesses to hire more employees or develop exterior landscapes. The laws do not
limit equipment purchases. In fact, businesses may need to buy more equipment to comply
with the laws.

2. Provide information to investors so they can make informed decisions is an important purpose
of full-disclosure laws and regulations.

3. Which of the following are potential risks to a business that fails to follow government
regulations? Explain.

A. Bankruptcy, higher sales, and lower stock values

B. Penalties, higher stock values, and lower credibility
C. Lower stock values, fines, and higher sales
D. Fines, penalties, and bankruptcy.

4.The XYZ Bank recently merged with the ABC Insurance Company. Which of the following did the
companies do? Explain your answer.
A. consolidation C. tactical planning
B. convergence D. licensing

5. Which of the following results from a decrease in interest rates? Explain.

A. stock prices to increase. C. a stock market to crash.
B. stock prices to decrease. D. no change in stock prices.