Trivia Quiz On GMAT Reading Comprehension Test: Multiple Choice Questions

8 Questions | Total Attempts: 568

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Welcome to GMAT Reading Comprehension test. There are 8 questions associated with this passage. Read the passage completely, then answer each question. This quiz has been designed to test your comprehension of the written passage. Take your time. All the best!


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Questions and Answers
  • 1. 
    According to the passage, why did Enron seek advice regarding its business transactions?
    • A. 

      To structure transactions that met or approximated legal requirements.

    • B. 

      To learn more about tax laws

    • C. 

      To test transactions and measure their results.

    • D. 

      To see if the IRS would flag their transactions.

    • E. 

      To determine whether they were breaking the law.

  • 2. 
    What was the ultimate goal of a structured transaction at Enron?
    • A. 

      To turn a profit on ordinary economic events.

    • B. 

      To gain favorable tax and accounting treatments for transactions.

    • C. 

      To generate a virtual economic loss and then deduct it.

    • D. 

      To generate long-term capital.

    • E. 

      To increase the deductibility of depreciable assets.

  • 3. 
    How did Enron use its tax department?
    • A. 

      Devise large transactions to increase its financial accounting income.

    • B. 

      Monitor the repayment of principal on its notes.

    • C. 

      Originate unsecured loans

    • D. 

      Generate false tax reports

    • E. 

      Emphasize short term profitability and cash flow

  • 4. 
    According to the author, what did Enron's approach to structured transactions raise questions about?
    • A. 

      The integrity of Enron's executives.

    • B. 

      The oversight provided by the Internal Revenue Service

    • C. 

      Congress' ability to write meaningful tax legislation.

    • D. 

      The nature of the tax system

    • E. 

      The need for better tax code enforcement.

  • 5. 
    According to the author, what was the obvious weakness in most of Enron's structured transactions?
    • A. 

      Enron's advisors did not have a good grasp on the tax code.

    • B. 

      The transactions could not be documented.

    • C. 

      The transactions were overvalued.

    • D. 

      The transactions were highly complex.

    • E. 

      The transactions lacked a credible business purpose.

  • 6. 
    What motivated Enron to engage in structured transactions in the first place?
    • A. 

      To improve its financial statement income.

    • B. 

      To keep disappointing news from investors.

    • C. 

      To break into new markets.

    • D. 

      To diversify its income sources.

    • E. 

      To avoid paying taxes on $1B in income.

  • 7. 
    Based on the information about Enron in the passage, which of the following strategies might the tax department at Enron have employed to achieve its goals?
    • A. 

      Engaging in transactions that emphasized short-term profitability.

    • B. 

      Filing for bankruptcy.

    • C. 

      Shifting the tax basis from non-depreciable assets to depreciable assets.

    • D. 

      Converting short-term liabilities to long-term liabilities.

    • E. 

      Under-reporting income to avoid paying taxes.

  • 8. 
    According to the author, what was the primary failure of Enron's counsel during the period of time covered by the report?
    • A. 

      They provided bad advice.

    • B. 

      They took Enron's explanations at face value.

    • C. 

      They did not understand the transactions Enron had put together.

    • D. 

      They misinterpreted the law in Enron's favor.

    • E. 

      They did not understand the tax code well enough to see what Enron was doing.