Roll No ___________________ Set-1

Desh Bhagat University, Mandi Gobindgarh

Faculty of Industry Integrated Program
(Class Name: M.Com/ MBA- 3rd Sem.- Jan Intake/4th Sem )
(Subject Name: Family Business Management & Succession Planning)
(Subject Code: M.Com-402_MBA 402)

Time Allotted: 1 Hrs. Max Marks: 50

Instructions:-
a) Question paper booklet carries 50 Multiple Choice Questions (As per the scheme)
b) Attempt all the questions, each question carries one mark.
c) No negative marking for wrong answer.
d) Each question carries 4 multiple choice answers
e) Only one option to be darkened on OMR Sheet with blue or black pen only, multiple
options marked will be treated as invalid answer.
f) Question booklet to be handed over along with OMR sheet.

1. Which of the following statements is true of family owned businesses?

A. They have less potential financial risks
B. They can be a source of unsolved family business conflicts
C. They can remove all obstacles to achieving the basic business goals
D. They rarely have family members with different value systems
2. _________ refer to family-owned businesses run by husband wife teams
A. Appreneurs
B. Intrapreneurs
C. Copreneurs
D. Ecopreneurs
3. Expansion of small family owned businesses may be limited by:
A. The size of the family
B. The low motivational level of employees
C. The amount of family business available
D. The retirement age of the owner
4. If the family owned business is a corporation, replacement of ownership is decided by:
A. The spouse of the former owner
B. A court appointed attorney
C. The board of directors
D. The non family employees
5. In order to cope with the daily challenges of a family-owned business, the family should:
A. hire more relatives to work in the business.
B. keep children out of the decision-making process.
C. reduce time spent on home activities.
D. develop an appropriate family mission statement.
6. A developing trend in family businesses is that young people:
A. offer an executive position to their parents in their company in return for funding.
B. show disinterest in continuing the work of their parents.
C. prefer to look for jobs in major corporations rather than focus on the business.
D. are not interested in gaining experience by working part-time.
7. Which of the following situations should copreneurs avoid?
A. Agreeing to disagree on several business issues
B. Ignoring business conflicts in an attempt to save the relationship
C. Setting aside time for the family and sticking to it
D. Defining each person’s role and accentuating each other’s talents
8. How can copreneurs efficiently manage their family-owned business?
A. Keep personal issues aside while holding business arguments.
B. Let one spouse work for the other as an employee.
C. Make major decisions independently, without having to consult the other,
D. Spend more time tending to the business and less time in personal matters.
9. Conflicts are likely to arise in a small family-owned business when:
A. each family member has a different perspective, leading to dissension.
B. a family member is clearly in command, at least in a given area of management.
C. the role of each family member is distinct, based on sound business practices.
D. family members agree to disagree and set ground rules.
10. A way to deal with incompetent family members in a family-owned business is to:
A. allow them to take special privileges.
B. tolerate them when they avoid unpleasant tasks.
C. place them in responsible positions to encourage them to work.
D. assign jobs to them that allow minimal contact with other employees.
11. Which of the following steps should a family-owned business take to compensate family
members?
A. Every relative who wishes to work for the business should be hired.
B. Family members should be financially rewarded on the basis of their position in
the family.
C. A managerial title should be offered to motivate a productive family member.
D. Relatives should be offered positions according to their status in the family.
12. A limitation of a small family-owned business is that a family manager may:
A. refuse to hire family members who want to enter the business.
B. lack general management skills, being proficient in a specific activity.
C. ignore top family members when a matter needs to be cleared.
 D. guard against letting past successes lead to trying to maintain the status quo.
13. Which of the following is an advantage of hiring professional managers to run family-owned
businesses?
A. More employment opportunities for family members
B. Retained “personal touch”
C. Fair treatment of employees
D. Concentration of power in small cliques
14. A disadvantage of organizing a family business into a corporation and hiring professional
managers is the:
A. concentration of power in small cliques.
B. unfair treatment of employees.
C. loss of family time for other purposes.
D. increasing friction between family members.
15. A home-based business is an attractive option for working mothers because:
A. most corporations encourage telecommuting.
B. there has been a decrease in job sharing.
C. many companies are adopting flextime.
D. daycare services are relatively inexpensive.
16. How can children be prepared to enter the family-owned business?
A. Allow them to work in senior management positions and make important
decisions.
B. Give them a permanent leadership position in the business.
C. Promote them rapidly in the business out of turn.
D. Let them work for another company to gain experience.

17. Why is management succession a problem for family-owned businesses?

A. Employees may dislike the chosen successor.
B. Children may choose their own successor.
C. Potential candidates may be groomed too early.
D. There is a defined hierarchy for decision-making.
18. A number of entrepreneurs are turning to formal succession plans for their family-owned
businesses to:
A. ensure they get proper returns on their investment.
B. allow themselves to go on a short leave.
C. prevent endless disputes over ownership between their heirs.
D. devote time to face-to-face teaching and training.
19. A(n) _____ is a document that contains instructions about what should be done with the
family-owned business if the owner suddenly dies or becomes incapacitated.
A. bequest
B. will
C. instrument
 D. claim
20. If a family-owned business is a corporation, replacement of ownership is decided by:
A. the spouse of the former owner.
B. a court-appointed attorney.
C. the board of directors.
D. family law.
21. Which of the following is an advantage of selling a family-owned business to family
members?
A. Fewer family members are hired in the business.
B. The former owner has to take some responsibility toward the business.
C. Family bonds are strengthened and additional friction is reduced.
D. The former owner still owns the business until retirement.
22. An advantage of selling a family-owned business to outsiders is that:
A. the former owner receives an assured income.
B. it provides a constant source of income to all the family members.
C. the stature of the family is maintained.
D. the owner assumes more responsibility with resultant happiness.
23. The transition of a family-owned business to a successor can be made easier for the
former owner by:
A. devoting lesser time to hobbies and other outside activities.
B. keeping the owner engaged in a top management position.
C. narrowing his/her skills to focus on a single task.
D. handing over to the successor in phases.
24. What is estate planning?
A. Planning for a new buyer of a family-owned business that is up for sale
B. Compensating the owner of a family-owned business when the family wants to
sell it
C. Preparing for the orderly transfer of the owner’s equity when death occurs
D. Assessing the real-estate value of a family-owned business before it is sold
25. A family limited partnership allows business owners to:
A. choose people who could be considered owners of the business in their absence.
B. remain part of the ownership group when the business is sold.
C. pass assets to heirs with a minimum of income and estate tax costs while retaining
control of assets during their lifetime.
D. name a family member as the successor when the business is up for sale.
26. A _____ provides for a corporation to repurchase a shareholder’s stock when he/she
leaves the company.
A. living trust
B. buy-sell agreement
C. family limited partnership
D. recovery fund
27. In the context of family-owned businesses, which of the following can be used to
minimize estate taxes?
A. Buy-sell agreement
B. Family limited partnership
C. Formal succession planning
D. Selling stock to outsiders
28. A(n) _____ resembles a will, but, in addition to providing for distributing personal assets
on the maker’s death, it also contains instructions for managing those assets, should a
person become disabled.
A. living trust
B. promissory note
C. white paper
D. attestation
29. In the context of a family-owned business, which of the following is a disadvantage of a
living trust?
A. The business goes to the designated heirs without going through probate court.
B. Property can be put into the trust while the owner is alive.
C. The ownership still remains with the owner after transferring the title to the trust.
D. The title on real estate and securities must be changed to the name of the trust.

30. The relation of a HUF arises from __________ _

A. Status
B. Contract
C. Agreement
D. None of these

31. Lala and sons, a Hindu undivided family, carrying on business of food grain agents has
total income of Rs.`10,25,000. It has paid health insurance premium of Rs.`25,000 of
karta. The tax liability of Hindu undivided family is _
A. Rs.`1,33,390
B. Rs.`1,28,750
C. Rs.`1,17,000
D. Rs.`3,09,000

32. Subject to the provisions of Section 64(2), any sum received by an individual as a
member of a HUF from HUF shall be _
A. Taxable
 B. Exempt
C. Regarded as personal income
D. Non of these

33. The types of partition of a HUF includes-

A. Complete
B. Partial
C. A AND B both
D. Not allowed

34. Partial partition in HUF affected after which year is not recognized for tax purpose –
A. 31 march, 1960
B. 31 march, 1970
C. 31 march, 1978
D. 31 march, 1982

35. What is the place of Karta in HUF-

A. Major member
B. Minor member
C. Male member only
D. any one of above

36. Interest of member in HUF is decided by-

A. Hindu law
B. Indian constitution
C. Muslim law
D. Income tax authority

37. Under which section HUF is not entitle to deduction from GTI-
A. 80C
B. 80G
C. 80E
D. 80DD

38. Who is liable to pay tax in HUF-

A. Karta
B. Coparceners
 C. Minor member
D. None of the above

39. Income included in the income of family-

A. Only family business income
B. Only ancestral property income
C. Income from other head except salary
D. Karta’s income

40. Income of property transferred after 31st Dec. 1969 by member to family shall be-
A. Included
B. Not included
C. Partially included
D. none of above

41. Which of the following can be delegated?

A. responsibility.

B. authority.

C. accountability.

D. a and b.

42. Which of the following types of organizations provide the best indicator of
decentralization?

A. A company is organized into revenue centers.

B. A company is organized into cost centers.

C. A company is organized into profit centers.

D. A company is organized into investment centers.

43. Economic value added, or residual income is a measurement mainly used to evaluate

A. revenue centers.

B. cost centers.
 C. profit centers.

D. investment centers.

44. Which concept (or concepts) listed below is (are) consistent with traditional
responsibility accounting?

A. vertical structure.

B. cross functional measurements.

C. bottom up control.

D. a and b.

45. In relation to the responsibility accounting controversy, goal displacement means

A. assigning responsibility for profits rather than revenue and costs.

B. assigning responsibility for financial results rather than activities and processes.

C. assigning responsibility to individuals rather than groups.

D. assigning functional responsibility rather than cross functional responsibility.

46. According to C. J. McNair, reward systems should change to emphasize

A. salary increases based on individual performance.

B. salary increases based on responsibility center performance.

C. base pay plus bonuses based on individual performance.

D. base pay plus bonuses based on team performance.

47. J. McNair’s concept of activity based responsibility accounting emphasizes

A. interdependence, outcomes, individuals, and cost control.

B. interdependence, processes, individuals, and activities.

C. interdependence, processes, the organization, and activities.

 D. independence, outcomes, the organization and cost control.

48. Decomposing, or separating, ROI into two parts provides the

A. return on investment ratio and residual income ratio.

B. net income to investment ratio and sales dollars to costs ratio.
C. sales to net income ratio and investment to net income ratio.
D. sales to investment ratio and net income to sales ratio.

49. Which investment basis (or bases) for the ROI calculation tend (or tends) to cause
managers to dispose of assets too soon?

A. gross book value.

B. net book value.

C. replacement costs.

D. a and b.

50. Which investment basis (or bases) for the ROI calculation tend (or tends) to cause
managers to keep assets too long?

A. gross book value.

B. net book value.

C. replacement costs.

D. a and b.
 Desh Bhagat University, Mandi Gobindgarh
Faculty of Industry Integrated Program
(Class Name: M.Com/ MBA- 3rd Sem.- Jan Intake/4th Sem )
(Subject Name: Family Business Management & Succession Planning)
(Subject Code: M.Com-402_MBA 402)
Set – 1

Answer Keys

Question Answer Question Answer

Number Number
1 B 26 B
2 C 27 B
3 C 28 A
4 C 29 D
5 D 30 A
6 A 31 C
7 B 32 B
8 A 33 C
9 A 34 C
10 D 35 A
11 C 36 A
12 B 37 C
13 C 38 A
14 A 39 C
15 B 40 B
16 D 41 B
17 A 42 D
18 C 43 D
19 B 44 A
20 D 45 B
21 C 46 D
22 A 47 C
23 D 48 A
24 D 49 A
25 C 50 B