The Ultimate Test On Business Studies

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The Ultimate Test On Business Studies - Quiz

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Questions and Answers
  • 1. 

    When an organization sets a level of standards and then evaluates a  manager’s activities to determine if organizational goals are being met, this  function of business management is being performed:

    • A.

      Planning.

    • B.

      Organizing.

    • C.

      Directing.

    • D.

      Controlling.

    Correct Answer
    D. Controlling.
    Explanation
    Controlling is the correct answer because it involves evaluating a manager's activities to ensure that they align with the organization's standards and goals. This function of business management focuses on monitoring and measuring performance against predetermined criteria, making adjustments if necessary, and ensuring that organizational objectives are being achieved. Planning, organizing, and directing are important functions as well, but they do not specifically involve the evaluation and monitoring of activities to ensure goal attainment.

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  • 2. 

     What is the segment of a business plan that lays out the methods and  activities that will be used to reach revenue goals, specifies sales programs,  and projects revenue outcomes? 

    • A.

      Financial Plan.

    • B.

      Sales and Marketing Plan.

    • C.

      Executive Summary.

    • D.

      Description of Products and Services.

    Correct Answer
    B. Sales and Marketing Plan.
    Explanation
    The segment of a business plan that lays out the methods and activities that will be used to reach revenue goals, specifies sales programs, and projects revenue outcomes is the Sales and Marketing Plan. This section outlines the strategies and tactics that will be implemented to generate sales and attract customers. It includes details about target markets, pricing, promotion, distribution channels, and sales forecasts. By focusing on sales and marketing strategies, businesses can effectively plan and execute their revenue generation efforts.

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  • 3. 

    The financial plan aspect of a business plan accomplishes all of the  following except:

    • A.

      Establishing a system of financial controls.

    • B.

      Estimates cost of labor and materials.

    • C.

      Market research to support sales projections.

    • D.

      Monthly revenue projections for the first two years.

    Correct Answer
    B. Estimates cost of labor and materials.
    Explanation
    The financial plan aspect of a business plan accomplishes several tasks, including establishing a system of financial controls, conducting market research to support sales projections, and creating monthly revenue projections for the first two years. However, it does not specifically focus on estimating the cost of labor and materials. This task is usually covered in the operational plan section of the business plan, which focuses on the day-to-day operations and resources needed to run the business.

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  • 4. 

    Gross Domestic Product (GDP) is different from Gross National Product  (GNP) because GDP does not include the following financial measurement:

    • A.

      Net exports.

    • B.

      Government purchases

    • C.

      Quarterly products of goods and services

    • D.

      Net income from foreign sources.

    Correct Answer
    D. Net income from foreign sources.
    Explanation
    Gross Domestic Product (GDP) measures the total value of goods and services produced within a country's borders, regardless of who owns the resources. On the other hand, Gross National Product (GNP) includes the GDP plus net income from foreign sources, which represents the income earned by a country's residents from investments or work abroad. Therefore, the correct answer is net income from foreign sources because GDP does not take into account this financial measurement.

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  • 5. 

    Which of the following is not a goal of labor management?

    • A.

      Increase commission-based compensation.

    • B.

      Improve productivity.

    • C.

      Get new workers trained and “up to speed” more quickly.

    • D.

      Increase employee retention.

    Correct Answer
    A. Increase commission-based compensation.
    Explanation
    The goal of labor management is to efficiently utilize and manage the workforce to achieve organizational objectives. This involves improving productivity, ensuring quick training and onboarding of new workers, and increasing employee retention. However, increasing commission-based compensation is not a specific goal of labor management. While it may be a strategy to motivate and incentivize employees, it is not a primary goal of labor management itself.

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  • 6. 

    Which of the following equations is used to determine Return on Equity  (ROE)?

    • A.

      ROE = Net income/ Sales

    • B.

      ROE= Gross profit/ Net equity

    • C.

      ROE= Net income/ Average equity

    • D.

      ROE= Net equity/ Net income

    Correct Answer
    C. ROE= Net income/ Average equity
    Explanation
    The correct answer is ROE = Net income/ Average equity. Return on Equity (ROE) is a financial ratio that measures a company's profitability and efficiency in generating profit from its shareholders' investments. It is calculated by dividing the net income of the company by its average equity. This equation helps determine how effectively a company is using its equity to generate profit.

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  • 7. 

    Profitability can be measured through  the following ways, except:

    • A.

      Gross profit on sales.

    • B.

      Return on equity.

    • C.

      Earning per share.

    • D.

      Net present value.

    Correct Answer
    D. Net present value.
    Explanation
    Profitability can be measured through various financial indicators, such as gross profit on sales, return on equity, and earnings per share. These metrics help evaluate the company's ability to generate profits and provide insights into its financial performance. However, net present value is not a measure of profitability but rather a method used to assess the value of an investment by comparing the present value of its expected cash flows to the initial investment. Therefore, net present value is not a suitable measure for evaluating profitability.

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  • 8. 

    The current ratio and quick ratio are used to forecast for the same potential  future event.  What do they forecast? 

    • A.

      The amount of capital that will make up debt.

    • B.

      The possibility of financial difficulty in the future.

    • C.

      The amount of future inventory to be sold.

    • D.

      The possibility of interest rate movement in the future.

    Correct Answer
    B. The possibility of financial difficulty in the future.
    Explanation
    The current ratio and quick ratio are both liquidity ratios that measure a company's ability to meet its short-term obligations. The current ratio includes all current assets, while the quick ratio only includes the most liquid assets. By analyzing these ratios, investors and creditors can assess the company's ability to pay off its current liabilities. If the ratios are low, it indicates a higher possibility of financial difficulty in the future, as the company may struggle to meet its short-term obligations. Therefore, the correct answer is the possibility of financial difficulty in the future.

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  • 9. 

    Which of the following interest rates are both used for long-term  investments? 

    • A.

      Prime rate, discount rate.

    • B.

      Commercial paper rate, treasury bill rate.

    • C.

      Treasury bond rate, corporate bond rate.

    • D.

      Corporate bond rate, treasury bill rate.

    Correct Answer
    C. Treasury bond rate, corporate bond rate.
    Explanation
    Treasury bond rate and corporate bond rate are both used for long-term investments. Treasury bonds are issued by the government and have maturities of 10 years or more, making them suitable for long-term investment strategies. Corporate bonds, on the other hand, are issued by corporations and also have longer maturities, typically ranging from 10 to 30 years. Both of these interest rates are relevant for investors looking to allocate their funds in long-term investments.

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  • 10. 

    The process of recording, reporting, and evaluating economic events and  transactions that affect business enterprise is called:   

    • A.

      Marketing.

    • B.

      Accounting.

    • C.

      Trend analysis.

    • D.

      Financial reliability.

    Correct Answer
    B. Accounting.
    Explanation
    Accounting is the correct answer because it involves the process of recording, reporting, and evaluating economic events and transactions that affect a business enterprise. This includes activities such as bookkeeping, financial statement preparation, and analysis of financial data. Marketing, trend analysis, and financial reliability are not directly related to the recording and reporting of economic events and transactions.

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  • 11. 

    Which aspect of change theory deals with developing awareness for the  need to change? 

    • A.

      Precontemplation.

    • B.

      Contemplation.

    • C.

      Planning.

    • D.

      Maintenance.

    Correct Answer
    B. Contemplation.
    Explanation
    Contemplation is the aspect of change theory that deals with developing awareness for the need to change. During this stage, individuals acknowledge that a problem exists and begin to consider the possibility of making a change. They weigh the pros and cons of changing and may start to gather information and resources to support the change process. This stage is crucial as it sets the foundation for further action and commitment to change.

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  • 12. 

    12. Within organizational cultures, open systems allow new employees to:

    • A.

      A) Come and go until a permanent schedule is assigned.

    • B.

      B) Work without a contract.

    • C.

      C) Mesh easily within communication and social culture.

    • D.

      D) Advance within the company based upon performance, not seniority.

    Correct Answer
    C. C) Mesh easily within communication and social culture.
    Explanation
    Open systems within organizational cultures refer to environments that encourage communication, collaboration, and adaptability. In such systems, new employees are able to seamlessly integrate and fit in with the existing communication and social culture of the organization. This means that they can easily connect with their colleagues, understand the norms and values of the organization, and effectively participate in the exchange of ideas and information. By meshing easily within the communication and social culture, new employees can quickly become productive and contribute to the overall success of the organization.

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  • 13. 

    13. Informal organizations are responsible for all of the following except:

    • A.

      A) Pressuring group members to conform to the status quo.

    • B.

      B) Spreading of information, true or false, from employee to employee.

    • C.

      C) Providing support to management.

    • D.

      D) Voting on dress codes, status symbols, and other informalities on the job.

    Correct Answer
    D. D) Voting on dress codes, status symbols, and other informalities on the job.
    Explanation
    Solution: d). Informal organizations are the unofficial communication chains that
    develop as a result of employee interaction. They can apply peer pressure to
    increase conformity among employees, support the initiatives of management,
    provide stability to the environment, and providing useful communication channels
    for the organization.

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  • 14. 

    14. The primary purpose of the Equal Employment Opportunity Commission  in regulating human resource management within a business  organization is to ensure that: 

    • A.

      A) Work history, indebtedness, race, and gender have no bearing on an applicant vying for a job.

    • B.

      B) Recruitment efforts are not targeted toward groups already financially established.

    • C.

      C) Underrepresented groups within the local population are proportionally represented among the organization’s employees.

    • D.

      D) All decisions about hiring, discipline, and termination are based on objective, job-related criteria.

    Correct Answer
    D. D) All decisions about hiring, discipline, and termination are based on objective, job-related criteria.
    Explanation
    The primary purpose of the Equal Employment Opportunity Commission in regulating human resource management within a business organization is to ensure that all decisions about hiring, discipline, and termination are based on objective, job-related criteria. This means that factors such as work history, indebtedness, race, and gender should not have any bearing on an applicant vying for a job. The EEOC aims to prevent discrimination in the workplace and promote equal opportunities for all individuals, regardless of their background or characteristics.

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  • 15. 

    16. An accountant that takes a correct trial balance at the end of an  accounting period can establish with certainty that:   

    • A.

      The total debits recorded during the accounting period equal the total credits recorded during the period.

    • B.

      Every transaction that occurred during the accounting period has been recorded appropriately.

    • C.

      Every transaction that occurred during the accounting period has been posted to the correct debit and credit accounts in the ledger.

    • D.

      All accounts have been debited or credited appropriately for each transaction that occurred during the accounting period.

    Correct Answer
    A. The total debits recorded during the accounting period equal the total credits recorded during the period.
    Explanation
    By taking a correct trial balance at the end of an accounting period, an accountant can establish with certainty that the total debits recorded during the period equal the total credits recorded. This is because a trial balance is a summary of all the debit and credit balances in the ledger accounts. If the total debits and credits match, it indicates that all transactions have been properly recorded and balanced. However, it does not guarantee that every transaction has been recorded appropriately or posted to the correct accounts in the ledger. It also does not ensure that all accounts have been debited or credited appropriately for each transaction.

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  • 16. 

    17. Which of the following roles in the buying center is incorrect?

    • A.

      Users are the people in the organization who actually use the product or service, such as an account manager who uses a computer.

    • B.

      Influencers affect the buying decision by helping define the specifications for what is bought. An information system manager would influence the decision to purchase a new mainframe computer.

    • C.

      Buyers have formal authority and responsibility to select the supplier and negotiate terms of the contract.

    • D.

      Deciders control the flow of information in the buying center. Purchasing personnel and technical experts belong to this group.

    Correct Answer
    D. Deciders control the flow of information in the buying center. Purchasing personnel and technical experts belong to this group.
    Explanation
    The incorrect role in the buying center is "Deciders control the flow of information in the buying center. Purchasing personnel and technical experts belong to this group." This is incorrect because deciders are actually responsible for making the final decision on whether to make a purchase or not. They may include top-level executives or key decision-makers within the organization. Purchasing personnel and technical experts, on the other hand, belong to the influencers or users category in the buying center.

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  • 17. 

    Compared with the first in, first out (FIFO) method of inventory  accounting, the last in, first out (LIFO) method of inventory accounting has which of the following characteristics? 

    • A.

      The cost of goods sold tends to magnify net income.

    • B.

      Balance sheet figures provide a more accurate assessment of inventory value.

    • C.

      The cost of goods sold is lower in times of rising prices.

    • D.

      The cost of goods sold is closer to prices at the time of sale.

    Correct Answer
    D. The cost of goods sold is closer to prices at the time of sale.
    Explanation
    The LIFO method of inventory accounting assumes that the most recently purchased items are the first to be sold. Therefore, the cost of goods sold under LIFO is closer to the prices at the time of sale, as it reflects the current market prices. This is in contrast to the FIFO method, where the cost of goods sold is based on the older, lower-priced inventory, which may not accurately reflect the current market prices.

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  • 18. 

    A primary characteristic of a computer’s dynamic RAM (random-access  memory) is that it:

    • A.

      Stores information or instructions that do not change.

    • B.

      Contains the command necessary to boot the computer.

    • C.

      Uses an area called firmware to store its instructions.

    • D.

      Erases programs and stored data when the computer is shut off.

    Correct Answer
    D. Erases programs and stored data when the computer is shut off.
    Explanation
    Dynamic RAM (random-access memory) is a type of computer memory that stores data in capacitors within integrated circuits. Unlike static RAM (SRAM), which retains its data as long as power is supplied, dynamic RAM requires constant power to maintain the stored data. When the computer is shut off, the power is cut off, causing the capacitors in dynamic RAM to discharge and lose their stored data. Therefore, dynamic RAM erases programs and stored data when the computer is shut off.

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  • 19. 

    Managers at a company determine that they could improve productivity if  their accounting department had access to information stored by their  shipping department.  Which of the following is the most appropriate  solution to this problem? 

    • A.

      Link the computers via a local area network (LAN).

    • B.

      Load the same software applications on the computers of the two departments.

    • C.

      Link the computers via modems and phone lines.

    • D.

      Link the computers to a CD-ROM file server.

    Correct Answer
    A. Link the computers via a local area network (LAN).
    Explanation
    Linking the computers via a local area network (LAN) would be the most appropriate solution to improve productivity in this case. LAN allows for the sharing of information and resources between different departments within a company. By connecting the accounting department's computers to the shipping department's computers through a LAN, the accounting department would have access to the information stored by the shipping department, enabling them to work more efficiently and effectively. This solution would facilitate seamless communication and collaboration between the two departments, ultimately leading to improved productivity.

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  • 20. 

    Which of the following is not a function of telecommunications?

    • A.

      Establish interface between sender and receiver.

    • B.

      Perform editorial tasks on data.

    • C.

      Release control of information flows.

    • D.

      Convert flow of information.

    Correct Answer
    C. Release control of information flows.
    Explanation
    The correct answer is "Release control of information flows." This option does not align with the functions of telecommunications. Telecommunications is primarily responsible for establishing an interface between the sender and receiver, converting the flow of information, and performing editorial tasks on data. However, releasing control of information flows is not a function typically associated with telecommunications.

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  • 21. 

    In general, which of the following resultsa tariff on an imported product? 

    • A.

      Foreign producers of the product increase supply to stimulate demand.

    • B.

      Domestic producers of the product increase their prices.

    • C.

      Foreign producers of the product gain a comparative advantage.

    • D.

      Domestic producers of the product become more efficient.

    Correct Answer
    B. Domestic producers of the product increase their prices.
    Explanation
    When a tariff is imposed on an imported product, it increases the cost of the product for domestic consumers. This leads to a decrease in demand for the imported product, allowing domestic producers to increase their prices without losing customers. As a result, domestic producers are able to gain a larger market share and increase their profits. This is why the correct answer is "Domestic producers of the product increase their prices."

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  • 22. 

    Which of the following actions by the Federal Reserve System would be  most likely to increase consumer spending?

    • A.

      Increasing reserve requirements for member banks.

    • B.

      Increasing the discount rate to member banks.

    • C.

      Decreasing the discount rate to member banks.

    • D.

      Selling large amounts of government securities.

    • E.

      Keeping reserve requirements of member banks constant.

    Correct Answer
    C. Decreasing the discount rate to member banks.
    Explanation
    Decreasing the discount rate to member banks is most likely to increase consumer spending. When the Federal Reserve decreases the discount rate, it makes it cheaper for member banks to borrow money from the central bank. As a result, member banks can offer lower interest rates to consumers, making it easier for them to access credit and borrow money. This increase in access to credit encourages consumers to spend more, thereby stimulating consumer spending in the economy.

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  • 23. 

    In information processing, a byte is: 

    • A.

      A unit of power.

    • B.

      A machine for inputting data.

    • C.

      A unit of information.

    • D.

      An on or off switch.

    Correct Answer
    C. A unit of information.
    Explanation
    A byte is a unit of information in information processing. It represents a sequence of 8 bits, each of which can be either a 0 or a 1. It is commonly used to measure the storage capacity of computer systems and represents the amount of data that can be stored or transmitted. Therefore, the correct answer is that a byte is a unit of information.

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  • 24. 

    An account payable entry appears in the:

    • A.

      Asset section of the balance sheet.

    • B.

      Liability section of the balance sheet.

    • C.

      Capital section of the balance sheet.

    • D.

      Cost of goods sold section of the income statement.

    • E.

      Operating expense section of the income statement.

    Correct Answer
    B. Liability section of the balance sheet.
    Explanation
    An account payable entry represents an amount owed by a business to its creditors for goods or services received but not yet paid for. It is a liability because the business has an obligation to settle the debt in the future. The balance sheet categorizes accounts payable under the liability section, along with other obligations and debts of the business. This section reflects the company's financial obligations and helps assess its ability to meet its short-term and long-term liabilities.

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  • 25. 

    The federal act that declared the closed shop to be illegal is the:

    • A.

      Landrum-Griffin Act

    • B.

      Norris-La Guardia Act

    • C.

      Taft-Hartley Act

    • D.

      Wagner Act

    • E.

      Robinson-Patman Act

    Correct Answer
    C. Taft-Hartley Act
    Explanation
    The Taft-Hartley Act, also known as the Labor-Management Relations Act, was enacted in 1947. It amended the Wagner Act and introduced several provisions that limited the power of labor unions. One of these provisions was the declaration that closed shops, which require employees to be members of a union in order to be hired, were illegal. The act aimed to balance the power between unions and employers, and promote fair labor practices.

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  • 26. 

    The Wagner Act, developed in 1935 by the National Labor Relations  board, was created with the intention to: 

    • A.

      Prevent employees from having to work under poor conditions.

    • B.

      Protect employers from striking employees.

    • C.

      Protect union members from being terminated because of taking part in union activity.

    • D.

      Preserve productivity standards so employers can enter into union labor negotiations with equal leverage.

    Correct Answer
    C. Protect union members from being terminated because of taking part in union activity.
    Explanation
    The Wagner Act, developed in 1935 by the National Labor Relations board, was created to protect union members from being terminated because of taking part in union activity. This act aimed to ensure that employees who joined or supported labor unions would not face retaliation or discrimination from their employers. It granted employees the right to engage in collective bargaining and protected their rights to organize and participate in union activities without fear of losing their jobs.

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  • 27. 

    The planning, pricing, promotion, and distribution involve din getting goods or services from producers to consumers is known as:

    • A.

      Merchandising.

    • B.

      Retailing.

    • C.

      Wholesaling.

    • D.

      Marketing.

    • E.

      Producing.

    Correct Answer
    D. Marketing.
    Explanation
    Marketing encompasses the entire process of planning, pricing, promoting, and distributing goods or services from producers to consumers. It involves identifying consumer needs, developing products or services to meet those needs, determining appropriate pricing strategies, creating promotional campaigns to generate awareness and interest, and implementing distribution channels to deliver the products or services to the target market. Merchandising, retailing, and wholesaling are all components of marketing, but marketing is the broader term that encompasses these activities.

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  • 28. 

    Dana earns $4500 of cash in one summer from baby-sitting.  Neither party  reports this income to the IRS and no taxes are paid on it.  This income is  considered part of the: 

    • A.

      GDP and GNP.

    • B.

      GDP but not GNP.

    • C.

      Underground economy.

    • D.

      Free-market economy.

    Correct Answer
    C. Underground economy.
    Explanation
    The correct answer is "Underground economy." The scenario described in the question involves earning cash from babysitting without reporting it to the IRS or paying taxes on it. This type of income that goes unreported and untaxed is considered part of the underground economy. The underground economy refers to economic activities that are not regulated or monitored by the government, and therefore, do not contribute to the official calculations of GDP and GNP.

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  • 29. 

    Which is the main objective of business?

    • A.

      Organic objective.

    • B.

      Economic objective.

    • C.

      Social objective.

    • D.

      All of the above.

    Correct Answer
    D. All of the above.
    Explanation
    The main objective of business can be multifaceted and can vary depending on the specific context. The organic objective refers to the goal of sustainability and environmental responsibility. The economic objective focuses on profitability and financial success. The social objective emphasizes the impact on society and stakeholders, such as providing employment opportunities and contributing to community development. Therefore, all of these objectives are important and can coexist in a business's overall objective.

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  • 30. 

    The mindset of identifying unique opportunities in the market place and  creating wealth by bringing resources together belongs to someone in:

    • A.

      Entrepreneurship.

    • B.

      Organization.

    • C.

      Marketing.

    • D.

      Advertisement.

    Correct Answer
    A. Entrepreneurship.
    Explanation
    The mindset of identifying unique opportunities in the market place and creating wealth by bringing resources together is characteristic of entrepreneurship. Entrepreneurs are individuals who take risks and start their own businesses, utilizing their innovative ideas and skills to create value and generate profits. They are driven by the desire to identify and capitalize on market gaps, and they bring together various resources such as capital, talent, and technology to turn their ideas into successful ventures. The other options, organization, marketing, and advertisement, may be related to entrepreneurship but do not encompass the entire concept of identifying unique opportunities and creating wealth.

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  • 31. 

    50,000 air conditioner units were sold in your region last year.  Your  company sold 10,000 of them.  What is your market share?

    • A.

      8,08,000

    • B.

      2,000

    • C.

      10%

    • D.

      20%

    Correct Answer
    D. 20%
    Explanation
    The company sold 10,000 air conditioner units out of the total 50,000 units sold in the region last year. To calculate the market share, we need to divide the company's sales by the total sales and multiply by 100. So, (10,000 / 50,000) * 100 = 20%. Therefore, the company's market share is 20%.

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  • 32. 

    Wally’s Department Store is having a 35% markdown sale.  What is the  sale price of a sweater that retails for $60?

    • A.

      $30

    • B.

      $48

    • C.

      $45

    • D.

      $39

    Correct Answer
    D. $39
    Explanation
    During the 35% markdown sale, the sweater's price is reduced by 35% of its original price. To find the sale price, we need to subtract this markdown from the original price. 35% of $60 is $21, so the sweater's sale price is $60 - $21 = $39.

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  • 33. 

    Wally’s Department Store received all new inventories and must price it.   Each pair of jeans wholesales for $15, and Wally’s sells it for $25 retail.   What is the markup for these jeans?

    • A.

      66.6%

    • B.

      60%

    • C.

      50%

    • D.

      10%

    Correct Answer
    A. 66.6%
    Explanation
    The markup for these jeans is 66.6%. Markup is calculated by subtracting the wholesale cost from the retail price, dividing that difference by the wholesale cost, and then multiplying by 100 to get the percentage. In this case, the difference between the retail price ($25) and the wholesale cost ($15) is $10. Dividing $10 by $15 gives us 0.6667. Multiplying by 100 gives us 66.67%, which rounds to 66.6%. This means that the jeans are marked up by 66.6% from the wholesale cost to the retail price.

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  • 34. 

    Capital raised through bank or trade credit is known as:

    • A.

      Fixed capital.

    • B.

      Working capital.

    • C.

      Marginal capital.

    • D.

      None of the above.

    Correct Answer
    B. Working capital.
    Explanation
    Working capital refers to the capital required for the day-to-day operations of a business, including the purchase of inventory, payment of wages, and other short-term expenses. It is the capital that is used to fund the company's current assets and liabilities. Capital raised through bank or trade credit is often used to finance working capital needs, as it provides the necessary funds to support the ongoing operations of the business. Therefore, the correct answer is working capital.

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  • 35. 

    While visiting a web site about walrus food, Agnes sees a banner  advertisement for a new pet treat for walrus.  She clicks on the banner  and places an order.  This is an example of:

    • A.

      Creative marketing.

    • B.

      Online retailing.

    • C.

      Telemarketing.

    • D.

      Direct marketing.

    Correct Answer
    B. Online retailing.
    Explanation
    Agnes seeing a banner advertisement on a website and placing an order for a new pet treat for walrus demonstrates online retailing. Online retailing refers to the process of selling products or services directly to consumers through the internet. In this case, Agnes is browsing a website, comes across a banner advertisement, and makes a purchase online, which aligns with the concept of online retailing.

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  • 36. 

    Accounting equation can be written as:

    • A.

      Equity + Liabilities = Assets.

    • B.

      Equity + Assets = Liabilities.

    • C.

      Liabilities + Assets = Equity.

    • D.

      Equity + Subsidy = Assets.

    Correct Answer
    A. Equity + Liabilities = Assets.
    Explanation
    The accounting equation states that the sum of a company's equity and liabilities must equal its assets. This equation is the foundation of double-entry bookkeeping, where every transaction affects both sides of the equation. Equity represents the owner's interest in the business, while liabilities are the company's debts and obligations. Assets are the resources owned by the company, including cash, inventory, and property. By ensuring that the equation remains balanced, companies can track their financial position and ensure accurate record-keeping.

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  • 37. 

    What is Equity?

    • A.

      Owner’s Claim.

    • B.

      Private property.

    • C.

      Bank Balance.

    • D.

      None.

    Correct Answer
    A. Owner’s Claim.
    Explanation
    Equity refers to the owner's claim or ownership interest in a company or property. It represents the residual interest in the assets of an entity after deducting liabilities. In other words, it is the value that remains for the owners after all debts and obligations have been settled. Therefore, "Owner's Claim" is the correct answer as it accurately describes equity as the ownership stake or claim that an individual or entity has in a business or property.

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  • 38. 

    Which of the following is a short term loan?

    • A.

      One year.

    • B.

      More than one year.

    • C.

      About eight years.

    • D.

      Five and a half years.

    Correct Answer
    A. One year.
    Explanation
    A short term loan typically refers to a loan that is repaid within a relatively short period of time, usually within one year. In this case, the option "One year" is the only choice that fits this definition, as the other options suggest longer loan durations.

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  • 39. 

    In December, Jaquin sells a $5,000 sewing machine to a woman for  $200/month, with no interest.  He reports it as $200 of income earned that  year.  What type of accounting method is Joe using?

    • A.

      FIFO.

    • B.

      LIFO.

    • C.

      Cash and Accrual.

    • D.

      Federal.

    Correct Answer
    C. Cash and Accrual.
    Explanation
    The correct answer is Cash and Accrual. This accounting method combines both cash basis and accrual basis accounting. In this scenario, Jaquin records the income earned from selling the sewing machine as $200 per month, which represents the cash received. This is the cash basis part of the method. However, he also recognizes the entire $5,000 sale as income earned in that year, which is the accrual basis part of the method. By using both cash and accrual accounting, Jaquin is able to accurately report his income by considering both cash inflows and the overall financial activity.

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  • 40. 

    Which of the following is not a fixed asset?

    • A.

      Furniture.

    • B.

      Inventory.

    • C.

      Cash.

    • D.

      Land and Building.

    Correct Answer
    B. Inventory.
    Explanation
    Inventory is not considered a fixed asset because it is a current asset that can be easily converted into cash within a short period of time. Fixed assets, on the other hand, are long-term assets that have a useful life of more than one year and are not intended for sale. Examples of fixed assets include land, buildings, and furniture, which are used for the long-term operations of a business. Cash, although a current asset, is also not a fixed asset as it is a liquid asset that can be readily used for transactions.

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  • 41. 

    Cost of Sales = Cost of Good Sold + ________

    • A.

      Selling Expenses.

    • B.

      Purchase Price.

    • C.

      Administrative Expenses.

    • D.

      Direct Expenses.

    Correct Answer
    A. Selling Expenses.
    Explanation
    The correct answer is Selling Expenses. Cost of Sales is calculated by adding the Cost of Goods Sold (the direct cost of producing goods or services) to the Selling Expenses (expenses directly related to selling the goods or services). This includes costs such as advertising, sales commissions, and shipping expenses. The other options, Purchase Price, Administrative Expenses, and Direct Expenses, are not directly included in the calculation of Cost of Sales.

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  • 42. 

    Which of the following is not an inventory valuation method?

    • A.

      FIFO.

    • B.

      LIFO.

    • C.

      Average Price.

    • D.

      Depreciation.

    Correct Answer
    D. Depreciation.
    Explanation
    Depreciation is not an inventory valuation method because it is a method used to allocate the cost of an asset over its useful life, not to determine the value of inventory. Inventory valuation methods, on the other hand, are used to determine the cost of goods sold and the value of ending inventory. FIFO, LIFO, and Average Price are all examples of inventory valuation methods commonly used in accounting.

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  • 43. 

    What would be the total assets of a firm?

    • A.

      Liabilities + Owner’s Capital.

    • B.

      Liabilities + Fixed Asset.

    • C.

      Fixed Asset + Current Asset.

    • D.

      Equity Shares + Assets.

    Correct Answer
    A. Liabilities + Owner’s Capital.
    Explanation
    The total assets of a firm can be calculated by adding the liabilities and owner's capital. Liabilities represent the debts and obligations of the firm, while owner's capital represents the investment made by the owner into the business. By adding these two components together, we can determine the total value of the firm's assets.

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  • 44. 

    Percentage of the working force that is not currently employed is known  as: 

    • A.

      Unemployment rate.

    • B.

      Ratio of unemployed workers to employed workers.

    • C.

      Population rate.

    • D.

      Working force rate.

    Correct Answer
    A. Unemployment rate.
    Explanation
    The correct answer is "Unemployment rate." This term refers to the percentage of the working force that is currently not employed. It is a commonly used measure to assess the health of an economy and the availability of job opportunities. The other options mentioned, such as the ratio of unemployed workers to employed workers, population rate, and working force rate, do not accurately describe the concept of the percentage of the working force that is not currently employed.

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  • 45. 

    As product demand decreases:

    • A.

      Price increases.

    • B.

      Supply increases.

    • C.

      Price decreases.

    • D.

      Supply decreases.

    Correct Answer
    C. Price decreases.
    Explanation
    As product demand decreases, there is less competition among buyers, leading to a decrease in the price of the product. With lower demand, sellers may be forced to lower their prices in order to attract buyers and stimulate demand. This decrease in price helps to balance the market by aligning supply with the reduced demand.

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  • 46. 

    Which of the following equations is correct for an ending accounts  ledger? 

    • A.

      Debits (DR) = Credits (CR).

    • B.

      Debits (DR) > Credits (CR).

    • C.

      Debits (DR) < Credits (CR).

    • D.

      Debits (DR) + Credits (CR) = 0.

    Correct Answer
    A. Debits (DR) = Credits (CR).
    Explanation
    The equation "Debits (DR) = Credits (CR)" is correct for an ending accounts ledger. This equation represents the fundamental principle of double-entry bookkeeping, where every debit entry must have a corresponding credit entry of equal value. This ensures that the total debits equal the total credits, maintaining the balance in the accounts ledger.

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  • 47. 

    Uncontrollable elements are always:

    • A.

      Beyond the influence of the business.

    • B.

      Under the influence of the business.

    • C.

      Effected by the country.

    • D.

      Depends on the business scale.

    Correct Answer
    A. Beyond the influence of the business.
    Explanation
    Uncontrollable elements refer to factors that are outside the control of a business. These factors are beyond the influence of the business and cannot be manipulated or controlled by the business's actions or decisions. Examples of uncontrollable elements include economic conditions, political stability, natural disasters, and changes in consumer behavior. The business may need to adapt and respond to these elements, but ultimately, they cannot control or influence them.

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  • 48. 

    A monopoly in a given industry can be qualified as:

    • A.

      One or only a few firms dominate.

    • B.

      No firm dominates.

    • C.

      Full market gets profit.

    • D.

      Uncontrollable growth.

    Correct Answer
    A. One or only a few firms dominate.
    Explanation
    A monopoly in a given industry can be qualified as "one or only a few firms dominate" because in a monopoly market structure, there is a single seller or a small number of dominant firms that have significant control over the market. These firms have the ability to set prices, control supply, and restrict competition, resulting in limited choices for consumers and potential barriers to entry for new firms.

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  • 49. 

    Which of the following always causes equilibrium prices to fall?

    • A.

      Supply increases and demand increases.

    • B.

      Supply increases and demand decreases.

    • C.

      Supply decreases and demand increases.

    • D.

      Supply decreases and demand decreases.

    Correct Answer
    B. Supply increases and demand decreases.
    Explanation
    When supply increases, there is more of a product available in the market, which leads to a surplus. At the same time, if demand decreases, there is less desire for the product. The combination of increased supply and decreased demand creates an imbalance, causing prices to fall as sellers try to attract buyers by lowering prices. This decrease in equilibrium prices occurs because there is more supply than demand, resulting in a downward pressure on prices.

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  • 50. 

    What is the difference between Gross National Product (GNP) and Gross  Domestic Product (GDP)? 

    • A.

      GNP minus spending equals GDP.

    • B.

      GDP minus spending equals GNP.

    • C.

      GNP does not include foreign business income made within the USA.

    • D.

      GDP does not include foreign business income made within the USA.

    Correct Answer
    C. GNP does not include foreign business income made within the USA.
    Explanation
    The correct answer is that GNP does not include foreign business income made within the USA. This means that when calculating GNP, only the income generated by domestic residents, regardless of where it is earned, is taken into account. On the other hand, GDP includes all income generated within the country's borders, regardless of whether it is earned by domestic or foreign residents. This difference in calculation methods helps to highlight the economic contribution of domestic residents, regardless of their location, in the case of GNP.

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