MGT 8803: Comprehensive Business Fundamentals Examination
With A+ Graded Solutions.
1. A company purchases a machine for $100,000 with a 5-year useful life and a $10,000 salvage
value. Calculate the annual depreciation expense using the straight-line method.
correct answer ($100,000 - $10,000) / 5 = $18,000.
2. Which financial statement acts as a "snapshot" of a company's financial position at a specific
point in time?
correct answer The Balance Sheet.
3. Under accrual accounting, when is an expense recognized?
correct answer In the period it is incurred to generate revenue, regardless of when cash is
paid.
4. If a company has Assets of $500,000 and Liabilities of $320,000, what is the Total
Shareholders' Equity?
correct answer $180,000.
5. What is the normal balance of an "Expense" account?
correct answer Debit.
6. A firm has $200,000 in Sales, $120,000 in COGS, and $30,000 in Operating Expenses.
Calculate the Gross Profit.
correct answer $80,000.
7. How does an increase in Accounts Payable affect the Statement of Cash Flows under the
indirect method?
correct answer It is added back to Net Income as a source of cash.
8. Calculate the Current Ratio if Current Assets are $150,000 and Current Liabilities are
$50,000.
correct answer 3.0.
9. What is the primary purpose of the "Matching Principle" in accounting?
correct answer To report expenses in the same period as the revenues they helped earn.
10. If a company issues common stock for $50,000 cash, which two accounts are affected?
correct answer Cash (Asset) increases and Common Stock (Equity) increases.
11. Calculate the Net Present Value (NPV) of a project with an initial cost of $1,000 and a single
cash inflow of $1,210 in two years, given a 10% discount rate.
correct answer ($1,.10^2) - $1,000 = $0.
12. In the CAPM formula, what does Beta represent?
correct answer The systematic risk of a stock relative to the market.
13. What is the "Rule of 72" used to estimate?
correct answer The number of years required to double an investment at a fixed interest
rate.
14. A firm has a Debt-to-Equity ratio of 1.0. If Total Assets are $400,000, what is the Total Debt?
correct answer $200,000.
, 15. What is the Weighted Average Cost of Capital (WACC)?
correct answer The average rate a company pays to finance its assets, weighted by the
proportion of debt and equity.
16. If a bond's Coupon Rate is 5% and the Market Interest Rate is 7%, will the bond sell at a
premium or discount?
correct answer Discount.
17. Define "Free Cash Flow" (FCF).
correct answer The cash a company produces through its operations, less the cost of
expenditures on assets.
18. What is the Internal Rate of Return (IRR)?
correct answer The discount rate that makes the NPV of all cash flows from a particular
project equal to zero.
19. How does an increase in the discount rate affect the Present Value (PV) of a future cash
flow?
correct answer It decreases the Present Value.
20. What is the "Agency Problem" in Finance?
correct answer The conflict of interest between a company's management and its
stockholders.
21. In Marketing, what does "STP" stand for?
correct answer Segmentation, Targeting, and Positioning.
22. What are the "4 Ps" of the Marketing Mix?
correct answer Product, Price, Place, and Promotion.
23. Define "Customer Lifetime Value" (CLV).
correct answer The total worth to a business of a customer over the whole period of their
relationship.
24. What is "Price Elasticity of Demand"?
correct answer A measure of how much the quantity demanded of a good responds to a
change in the price of that good.
25. In the BCG Matrix, what is a "Star"?
correct answer A business unit with high market share in a fast-growing industry.
26. What is "Cognitive Dissonance" in consumer behavior?
correct answer The inner tension (buyer's remorse) a consumer experiences after
recognizing an inconsistency between behavior and values or opinions.
27. Define "Market Penetration" strategy.
correct answer Seeking increased sales of present products in present markets through
greater marketing efforts.
28. What is the difference between primary and secondary marketing research?
correct answer Primary research is new data collected for a specific purpose; secondary
research is existing data collected by others.
With A+ Graded Solutions.
1. A company purchases a machine for $100,000 with a 5-year useful life and a $10,000 salvage
value. Calculate the annual depreciation expense using the straight-line method.
correct answer ($100,000 - $10,000) / 5 = $18,000.
2. Which financial statement acts as a "snapshot" of a company's financial position at a specific
point in time?
correct answer The Balance Sheet.
3. Under accrual accounting, when is an expense recognized?
correct answer In the period it is incurred to generate revenue, regardless of when cash is
paid.
4. If a company has Assets of $500,000 and Liabilities of $320,000, what is the Total
Shareholders' Equity?
correct answer $180,000.
5. What is the normal balance of an "Expense" account?
correct answer Debit.
6. A firm has $200,000 in Sales, $120,000 in COGS, and $30,000 in Operating Expenses.
Calculate the Gross Profit.
correct answer $80,000.
7. How does an increase in Accounts Payable affect the Statement of Cash Flows under the
indirect method?
correct answer It is added back to Net Income as a source of cash.
8. Calculate the Current Ratio if Current Assets are $150,000 and Current Liabilities are
$50,000.
correct answer 3.0.
9. What is the primary purpose of the "Matching Principle" in accounting?
correct answer To report expenses in the same period as the revenues they helped earn.
10. If a company issues common stock for $50,000 cash, which two accounts are affected?
correct answer Cash (Asset) increases and Common Stock (Equity) increases.
11. Calculate the Net Present Value (NPV) of a project with an initial cost of $1,000 and a single
cash inflow of $1,210 in two years, given a 10% discount rate.
correct answer ($1,.10^2) - $1,000 = $0.
12. In the CAPM formula, what does Beta represent?
correct answer The systematic risk of a stock relative to the market.
13. What is the "Rule of 72" used to estimate?
correct answer The number of years required to double an investment at a fixed interest
rate.
14. A firm has a Debt-to-Equity ratio of 1.0. If Total Assets are $400,000, what is the Total Debt?
correct answer $200,000.
, 15. What is the Weighted Average Cost of Capital (WACC)?
correct answer The average rate a company pays to finance its assets, weighted by the
proportion of debt and equity.
16. If a bond's Coupon Rate is 5% and the Market Interest Rate is 7%, will the bond sell at a
premium or discount?
correct answer Discount.
17. Define "Free Cash Flow" (FCF).
correct answer The cash a company produces through its operations, less the cost of
expenditures on assets.
18. What is the Internal Rate of Return (IRR)?
correct answer The discount rate that makes the NPV of all cash flows from a particular
project equal to zero.
19. How does an increase in the discount rate affect the Present Value (PV) of a future cash
flow?
correct answer It decreases the Present Value.
20. What is the "Agency Problem" in Finance?
correct answer The conflict of interest between a company's management and its
stockholders.
21. In Marketing, what does "STP" stand for?
correct answer Segmentation, Targeting, and Positioning.
22. What are the "4 Ps" of the Marketing Mix?
correct answer Product, Price, Place, and Promotion.
23. Define "Customer Lifetime Value" (CLV).
correct answer The total worth to a business of a customer over the whole period of their
relationship.
24. What is "Price Elasticity of Demand"?
correct answer A measure of how much the quantity demanded of a good responds to a
change in the price of that good.
25. In the BCG Matrix, what is a "Star"?
correct answer A business unit with high market share in a fast-growing industry.
26. What is "Cognitive Dissonance" in consumer behavior?
correct answer The inner tension (buyer's remorse) a consumer experiences after
recognizing an inconsistency between behavior and values or opinions.
27. Define "Market Penetration" strategy.
correct answer Seeking increased sales of present products in present markets through
greater marketing efforts.
28. What is the difference between primary and secondary marketing research?
correct answer Primary research is new data collected for a specific purpose; secondary
research is existing data collected by others.
