MGRADES
MBA Exit Exam Full UPDATED ACTUAL
Exam Questions and CORRECT Answers
Acid-Test Ratio - CORRECT ANSWER - The ratio of current assets And current
liabilities also called quick ratio. The ratio equals the sum of a company's cash, short term
investments, and accounts receivable divided by its current liabilities. This ratio shows how well
of business is able to cover it short term obligations.
A quick ratio of one means - CORRECT ANSWER - The most liquid assets of a business
or equal to its total deaths in the business will just manage to repay all his debts by using its cash,
marketable securities, and accounts receivable.
A quick ratio of more than one means - CORRECT ANSWER - Indicates that the most
liquid assets of a business exceed its total debts.
A quick ratio of less than one means - CORRECT ANSWER - Indicates that a business
would not be able to repay all its debts by using its most liquid assets
net income from operations - CORRECT ANSWER - gross profit - operating expenses
change in equity equation - CORRECT ANSWER - Beginning Balance + Additional
Investments=Ending Balance
Retained Earnings Equation - CORRECT ANSWER - Beginning Retained Earnings + Net
Income - Dividends = Ending Retained Earnings
permanent accounts - CORRECT ANSWER - balance sheet accounts whose balances are
carried forward to the next accounting period
temporary accounts - CORRECT ANSWER - Revenue, expense, and dividend accounts
whose balances a company transfers to Retained Earnings at the end of an accounting period.
,MGRADES
The book value of an asset is equal to the - CORRECT ANSWER - d. asset's cost less
accumulated depreciation.
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 ininfrastructure development - CORRECT ANSWER -
(D) A large public utility involved in infrastructure development
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.
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
, MGRADES
The sales division of a corporation is considering an internal product transfer because of excess
demand. What is the lowest acceptable transfer price for the product?
(A) The amount that the company would have to pay to acquire a similar product
(B) The variable cost of producing a unit of product
(C) The full absorption cost of producing a unit of product
(D) The difference between the market price and the costs recaptured by transferring internally -
CORRECT ANSWER - (D) The difference between the market price and the costs
recaptured by transferring internally
The Mart, a large retail chain, is considering whether or not to close down a division. The
division's projected income statement for the next year follows.
-Sales $20,000,000
-Cost of goods sold 17,000,000
-Gross profit 3,000,000
-Operating costs:
-Building rents $2,500,000
-Store clerk salaries 3,000,000
-Store utilities 1,200,000
-Allocated home office cost 700,000
-Total operating costs 7,400,000
-Anticipated loss ($4,400,000)
The building rents arise from long-term leases that cannot be cancelled. If The Mart closed down
this division, what would be the increase in company profits?
(A) $700,000
(B) $1,200,000
(C) $3,000,000
(D) $4,400,000 - CORRECT ANSWER - (B) $1,200,000
Which of the following should be reported net of tax on a corporation's income statement?
MBA Exit Exam Full UPDATED ACTUAL
Exam Questions and CORRECT Answers
Acid-Test Ratio - CORRECT ANSWER - The ratio of current assets And current
liabilities also called quick ratio. The ratio equals the sum of a company's cash, short term
investments, and accounts receivable divided by its current liabilities. This ratio shows how well
of business is able to cover it short term obligations.
A quick ratio of one means - CORRECT ANSWER - The most liquid assets of a business
or equal to its total deaths in the business will just manage to repay all his debts by using its cash,
marketable securities, and accounts receivable.
A quick ratio of more than one means - CORRECT ANSWER - Indicates that the most
liquid assets of a business exceed its total debts.
A quick ratio of less than one means - CORRECT ANSWER - Indicates that a business
would not be able to repay all its debts by using its most liquid assets
net income from operations - CORRECT ANSWER - gross profit - operating expenses
change in equity equation - CORRECT ANSWER - Beginning Balance + Additional
Investments=Ending Balance
Retained Earnings Equation - CORRECT ANSWER - Beginning Retained Earnings + Net
Income - Dividends = Ending Retained Earnings
permanent accounts - CORRECT ANSWER - balance sheet accounts whose balances are
carried forward to the next accounting period
temporary accounts - CORRECT ANSWER - Revenue, expense, and dividend accounts
whose balances a company transfers to Retained Earnings at the end of an accounting period.
,MGRADES
The book value of an asset is equal to the - CORRECT ANSWER - d. asset's cost less
accumulated depreciation.
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 ininfrastructure development - CORRECT ANSWER -
(D) A large public utility involved in infrastructure development
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.
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
, MGRADES
The sales division of a corporation is considering an internal product transfer because of excess
demand. What is the lowest acceptable transfer price for the product?
(A) The amount that the company would have to pay to acquire a similar product
(B) The variable cost of producing a unit of product
(C) The full absorption cost of producing a unit of product
(D) The difference between the market price and the costs recaptured by transferring internally -
CORRECT ANSWER - (D) The difference between the market price and the costs
recaptured by transferring internally
The Mart, a large retail chain, is considering whether or not to close down a division. The
division's projected income statement for the next year follows.
-Sales $20,000,000
-Cost of goods sold 17,000,000
-Gross profit 3,000,000
-Operating costs:
-Building rents $2,500,000
-Store clerk salaries 3,000,000
-Store utilities 1,200,000
-Allocated home office cost 700,000
-Total operating costs 7,400,000
-Anticipated loss ($4,400,000)
The building rents arise from long-term leases that cannot be cancelled. If The Mart closed down
this division, what would be the increase in company profits?
(A) $700,000
(B) $1,200,000
(C) $3,000,000
(D) $4,400,000 - CORRECT ANSWER - (B) $1,200,000
Which of the following should be reported net of tax on a corporation's income statement?
