ETS MFT MBA EXAM QUESTIONS AND
CORRECT ANSWERS
Question 1
Which of the following organizations is most likely
to use project financing?
(A) A small start-up
(B) A financial services firm with an extensive client list
(C) A large consumer goods company
(D) A large public utility involved in
infrastructure development
Correct Answer
(D) A large public utility involved in infrastructure development
Question 2
After an extensive recruitment process to select well-qualified individuals, a large
percent of a company's new hires resigned within the first month of the job. Which of
the following is the most likely explanation for this situation?
(A) The training process to prepare the new hires for their assigned tasks was
inadequate.
(B) The health benefits provided by the company were not competitive with those of
the rest of the industry.
(C) The starting salary for the new hires was not competitive with that of the rest of
the industry.
(D) The new hires lacked the basic skills required to learn the job.
Correct Answer
(A) The training process to prepare the new hires for their assigned tasks was
inadequate.
Page 1 of 37
,Question 3
Prosco Ltd. employs a process cost system. Inspection of units occurs at the 50
percent mark. Defective units are then removed from the process,
and their cost ($4.50) is absorbed by the good units. Prosco has recently been
approached by a firm wishing to buy the defective units for a special use. The firm
would require Prosco to modify the defective units at a unit cost of $2.00. If Prosco
sells the defective units to the firm for $5.00 each, how would Prosco's reported
income be affected?
(A) It would decrease by $4.50 per unit sold.
(B) It would decrease by $1.50 per unit sold.
(C) It would increase by $3.00 per unit sold.
(D) It would increase by $5.00 per unit sold.
Correct Answer
(C) It would increase by $3.00 per unit sold.
Question 4
Some companies have little, if any, net income or earnings, yet they seem to have all
the money they
need for capital expenditures. Which of the following best explains how such
companies operate?
(A) They have good cash flows.
(B) They lease capital equipment that does not show up on balance sheets.
(C) They have accounts with many different banks.
(D) They issue warrants to their officers.
Correct Answer
(A) They have good cash flows.
Page 2 of 37
,Question 5
The Sintar Corporation has just announced that it will pay $1.10 per share in dividends
to its stockholders in the current quarter. The prior quarter's dividend was $1.00 per
share. The announcement indicates which of the following?
(A) Management is sending a signal that it expects the economy to expand.
(B) Management is sending a signal that the company has good projected future
earnings.
(C) While the company was able to pay a higher dividend, management preferred a
more conservative figure.
(D) The company has overextended its cash position and may have liquidity problems
in the future.
Correct Answer
(B) Management is sending a signal that the company has good projected future
earnings.
Question 6
Wave Inc. is a telecommunications company that wants to become involved in e-
commerce. It has to
decide whether to develop a business-to-business or business-to-consumer strategy.
As Wave's strategic planner, you have been asked to develop a business plan for each
opportunity and present these to senior management. The answer to which of the
following questions is most important to know before starting your plan?
(A) What are the company's core competencies?
(B) What is the potential market size?
(C) What is the impact on the estimated revenue?
(D) Does the company have e-commerce
capabilities?
Correct Answer
(A) What are the company's core competencies?
Page 3 of 37
, Question 7
If you were the holder of a call option (having cost you $2) on some stock with an
exercise price of
$20, it would be best for you to exercise your option when the market price is at
(A) $18
(B) $20
(C) $22
(D) $24
Correct Answer
(D) $24
Question 8
Increased globalization and technological change, particularly in telecommunications,
enable more organizations to adopt which of the following organizational structures?
(A) Functional
(B) Matrix
(C) Network
(D) Mechanistic
Correct Answer
(C) Network
Question 9
A new local Super Store publicly announced that when more than three people are
standing in line
at cash registers, additional checkout-lines will be opened. After the announcement,
customers quickly noticed that the additional lines were not opened until six or seven
people were standing in line. This indicates a gap between
(A) customer expectation and management perception of customer expectation
(B) management perception of customer expectation and service quality
specifications
(C) customer expectation and internal management communication
(D) actual service delivery and how service quality was communicated
Correct Answer
(D) actual service delivery and how service quality was communicated
Page 4 of 37
CORRECT ANSWERS
Question 1
Which of the following organizations is most likely
to use project financing?
(A) A small start-up
(B) A financial services firm with an extensive client list
(C) A large consumer goods company
(D) A large public utility involved in
infrastructure development
Correct Answer
(D) A large public utility involved in infrastructure development
Question 2
After an extensive recruitment process to select well-qualified individuals, a large
percent of a company's new hires resigned within the first month of the job. Which of
the following is the most likely explanation for this situation?
(A) The training process to prepare the new hires for their assigned tasks was
inadequate.
(B) The health benefits provided by the company were not competitive with those of
the rest of the industry.
(C) The starting salary for the new hires was not competitive with that of the rest of
the industry.
(D) The new hires lacked the basic skills required to learn the job.
Correct Answer
(A) The training process to prepare the new hires for their assigned tasks was
inadequate.
Page 1 of 37
,Question 3
Prosco Ltd. employs a process cost system. Inspection of units occurs at the 50
percent mark. Defective units are then removed from the process,
and their cost ($4.50) is absorbed by the good units. Prosco has recently been
approached by a firm wishing to buy the defective units for a special use. The firm
would require Prosco to modify the defective units at a unit cost of $2.00. If Prosco
sells the defective units to the firm for $5.00 each, how would Prosco's reported
income be affected?
(A) It would decrease by $4.50 per unit sold.
(B) It would decrease by $1.50 per unit sold.
(C) It would increase by $3.00 per unit sold.
(D) It would increase by $5.00 per unit sold.
Correct Answer
(C) It would increase by $3.00 per unit sold.
Question 4
Some companies have little, if any, net income or earnings, yet they seem to have all
the money they
need for capital expenditures. Which of the following best explains how such
companies operate?
(A) They have good cash flows.
(B) They lease capital equipment that does not show up on balance sheets.
(C) They have accounts with many different banks.
(D) They issue warrants to their officers.
Correct Answer
(A) They have good cash flows.
Page 2 of 37
,Question 5
The Sintar Corporation has just announced that it will pay $1.10 per share in dividends
to its stockholders in the current quarter. The prior quarter's dividend was $1.00 per
share. The announcement indicates which of the following?
(A) Management is sending a signal that it expects the economy to expand.
(B) Management is sending a signal that the company has good projected future
earnings.
(C) While the company was able to pay a higher dividend, management preferred a
more conservative figure.
(D) The company has overextended its cash position and may have liquidity problems
in the future.
Correct Answer
(B) Management is sending a signal that the company has good projected future
earnings.
Question 6
Wave Inc. is a telecommunications company that wants to become involved in e-
commerce. It has to
decide whether to develop a business-to-business or business-to-consumer strategy.
As Wave's strategic planner, you have been asked to develop a business plan for each
opportunity and present these to senior management. The answer to which of the
following questions is most important to know before starting your plan?
(A) What are the company's core competencies?
(B) What is the potential market size?
(C) What is the impact on the estimated revenue?
(D) Does the company have e-commerce
capabilities?
Correct Answer
(A) What are the company's core competencies?
Page 3 of 37
, Question 7
If you were the holder of a call option (having cost you $2) on some stock with an
exercise price of
$20, it would be best for you to exercise your option when the market price is at
(A) $18
(B) $20
(C) $22
(D) $24
Correct Answer
(D) $24
Question 8
Increased globalization and technological change, particularly in telecommunications,
enable more organizations to adopt which of the following organizational structures?
(A) Functional
(B) Matrix
(C) Network
(D) Mechanistic
Correct Answer
(C) Network
Question 9
A new local Super Store publicly announced that when more than three people are
standing in line
at cash registers, additional checkout-lines will be opened. After the announcement,
customers quickly noticed that the additional lines were not opened until six or seven
people were standing in line. This indicates a gap between
(A) customer expectation and management perception of customer expectation
(B) management perception of customer expectation and service quality
specifications
(C) customer expectation and internal management communication
(D) actual service delivery and how service quality was communicated
Correct Answer
(D) actual service delivery and how service quality was communicated
Page 4 of 37
