MGTA04 - 30 Sample Practice Questions from Chapters 1 – 4

Please Note: No answer key is supplied. You are responsible for finding the
correct answers in the textbook, and in your lecture notes
1) The accounting equation is:

A) owners' equity - assets = liabilities

B) assets = liabilities + owners' equity
C) assets + owners' equity = liabilities
D) assets + liabilities = owners' equity
E) owners' equity - liabilities = assets

2) __________ is concerned with external users of information: consumer groups, unions, stockholders,
and government agencies.

A) Stock market accounting

B) Managerial accounting
C) Government accounting
D) Financial accounting

3) A current liability is

A) additional money, above proceeds from a stock sale, paid directly to a firm by its owners.
B) the amount paid for an existing business above the value of its other assets.
C) a debt that is not due for at least one year.
D) a debt that must be paid within the year.
E) the process of distributing the cost of an asset over its useful life.

4) Which financial statement shows the cost of obtaining materials to make products that were sold
during the year?

A) statement of retained earnings

B) balance sheet
C) operating expenses statement
D) income statement
E) statement of cash flows

5) One of the key differences between service and manufacturing operations is:

A) services focus on the outcome of the production process

B) manufacturing operations feature a unique link between process and outcome
C) services are performed, and goods are produced
D) manufacturing products are characterized by intangibility, and customization

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6) Economic output per hour worked differs from nation to nation. This is due to all of the following
factors except:

A) economic policies
B) human skills
C) traditions
D) size of the nation
E) natural resources

7) What kind of transformation occurs in an assembly process?

A) raw materials are mechanically altered

B) various components are transported from one location to another
C) various components are put together to create a new product
D) data is combined into useable information for a management report
E) finished products are taken apart for inspection

8) A management information system is

A) a system of hardware and software that imitates human behavior.

B) an information processing application for routine business activities involving well-defined
processing steps.
C) an interactive system that locates and presents information needed to support the decision-making
process.
D) a quick-reference, easy-access application of information systems specifically designed for instant
access by upper-level managers.
E) a system that supports an organization's managers by providing daily reports, schedules, plans, and
budgets that can be used for making decisions.

9) The term data refers to

A) controlled flow of words for a useful purpose.

B) raw facts and figures.
C) the useful interpretation of facts and figures.
D) conclusions made from information.
E) names and numbers from a large phonebook.

10) A manager would like to make quality improvements. Where should she begin?

A) knowledge of current cost levels

B) competitive product analysis
C) statistical process control
D) attention to customer needs
E) total productivity ratios and quality/cost studies
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11) Which of the following is the best description of quality?

A) a measurement of how much is produced

B) the additional output in the current year compared to the output for the previous year
C) a measurement of how much is produced relative to the resources used to produce the product or
service
D) how closely a product adheres to quality standards
E) a product's fitness for use by consumers

12) Which of the following is NOT classified as an asset?

A) inventory
B) equipment
C) debts
D) land
E) buildings

13) What is the meaning of "operations control"?

A) monitoring production performance by comparing results with plans and schedules

B) purchasing the right raw materials, in the right quantity, at the right price, and at the right time
C) stocking items needed for production that are themselves produced within the firm
D) planning and organizing the flow of materials
E) checking to ensure that production decisions are being implemented

14) Which of the following is NOT a potential user of accounting information?

A) employees
B) unions
C) managers
D) investors
E) All are potential users of accounting information.

15) What purpose does the balance sheet serve?

A) it shows investors how much profit the firm made during the last year
B) it shows a firm's financial condition on a particular date in terms of its assets, liabilities, and owners'
equity
C) it shows short- and long-term liquidity ratios, profitability ratios, and activity ratios
D) it shows the stock price of the firm during the last year and how much fluctuations there have been in
the stock price
E) it shows a firm's sources and uses of cash

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16) Under which condition is owners' equity positive?

A) assets and liabilities are equal

B) debits exceed credits
C) liabilities are greater than assets
D) assets are greater than liabilities
E) credits exceed debits

17) Individuals responsible for managing a firm's data and information must do all of the following
except:

A) control the flow of information to only those that need it

B) gather the data needed
C) determine what information is needed
D) decide who needs data
E) convert data into desired information

18) Which term is used to identify the assets that can be or will be converted into cash in the following
year?

A) intangible assets
B) quick ratio
C) current liabilities
D) depreciation
E) current assets

19) Service products are characterized by three key qualities:

A) tangibility, uncustomized, storability

B) intangibility, customization, storability
C) tangibility, customization, storability
D) intangibility, uncustomized, unstorability
E) intangibility, customization, unstorability

20) What is a database in a computer system?

A) the manner in which information is entered into the computer system

B) a centralized and organized collection of related data
C) a method of transforming data into information
D) the size of the computer memory
E) the operating system

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21) All of the following are costs of correcting external failures except:
A) refunds to customers
B) factory recalls
C) transportation costs to return bad boxes to the factory
D) possible lawsuits
E) higher wages

22) Which of the following would be most likely to be a knowledge management system in a business?

A) a simulation of the entire industry

B) an inventory management system
C) a system helping decide where to locate a new plant
D) a human relations management system
E) a data warehouse displaying sales trends

23) The Internet and the World Wide Web are examples of:

A) office automation
B) artificial intelligence
C) multimedia communications systems
D) expert system
E) data communication networks

24) The balance sheet, income statement, and statement of cash flows are __________ statements.

A) overview
B) summary
C) profit
D) financial
E) accounting

25) If the total resources needed to create a product decrease, productivity has:

A) decreased
B) decreased and quality has increased
C) not changed
D) increased
E) cannot determine from information provided

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26) Which of the following is not a feature of a business firm with high productivity?

A) costs are lower

B) greater profits may be made on each item sold
C) greater competitive advantage is created
D) products may be offered at a lower price
E) the standard of living will be lowered

27) __________ is an ongoing commitment to improving products and processes in the pursuit of ever-
increasing customer satisfaction.

A) Supply network exchanges

B) Supply chain management
C) Distribution chain management
D) Continuous improvement
E) Value chain decentralization

28) Which term is used to identify the systematic direction and control of the processes that transform
resources into finished goods and services?

A) quality assurance management

B) financial management
C) purchasing management
D) operations management
E) marketing management

29) Which of the following is the most common reason for increases in labour productivity?

A) the dollar value of output is increased by raising prices

B) inflation increases the value of the output
C) the number of workers is increased
D) non-labour resources are added so that fewer workers can accomplish more
E) wages for workers are reduced

30) __________ consists of money originally invested by owners and profits earned and reinvested in the
company.

A) Inventory
B) Owners' equity
C) Remaining liabilities
D) Debits
E) Assets