BAR (CPA Exam) questions and answers
elasticity of demand formula - Answer% change in quantity demanded / % change in price
What is strategic planning?
A. It establishes the budget for the organization.
B. It establishes the general direction of the organization.
C. It consists of decisions to use parts of the organization's resources in specified ways.
D. It establishes the resources that the plan will require. - AnswerB. It establishes the general
direction of the organization.
Company management completes event identification and analyzes the associated risks. The
company wishes to assess its risk in the absence of any actions management might take to alter
either the risk's likelihood or impact. According to COSO, which of the following types of risk does
this situation represent?
A. Inherent risk
B. Residual risk
C. Event risk
D. Economic risk - AnswerA. Inherent risk
Inherent Risk - AnswerInherent risk is the risk to an entity in the absence of any direct or focused
actions by management to alter its severity. Although most companies will take some actions to
reduce risk, inherent risk is the starting point from a risk assessment standpoint.
An entity's risk appetite:
A. Serves to balance risk willingness with return and growth goals.
B. Is established by the board of directors.
C. Is a key element of the monitoring process.
D. Represents the accepted level of variation relative to the achievement of objectives. - AnswerA.
Serves to balance risk willingness with return and growth goals.
risk tolerance - AnswerThe accepted level of variation relative to the achievement of objectives
risk appetite - Answerthe theoretical balance between an entity's willingness to accept risk and the
return/growth goals that the entity wishes to achieve.
, The successful and profitable launch of a new product line by an entity represents:
A. Value creation.
B. Value preservation.
C. Value erosion.
D. Value realization. - AnswerA. Value creation.
Equity carv-out (of a segment) - AnswerAn equity carve-out is a corporate reorganization strategy
where a parent company sells a portion of its interest in a subsidiary to the public. The process
creates a new legal entity with its own board of directors, financial statements, and management
team. The parent company usually retains a majority stake in the new company.
Spin-off (of a segment) - Answer(of a parent company) turn a subsidiary into a new and separate
company.
"the corporation announced plans to spin off its computer systems arm"
When does competition not become an even stronger force impacting the profitability of a firm?
A. Customers do not have strong brand preferences.
B. The market is fast-growing.
C. The market consists of several equal-sized firms.
D. The costs of exiting the market exceed the costs of continuing to operate. - AnswerB. The market
is fast-growing.
re-order point formula - Answersales during lead time + safety stock
Which of the following phrases defines the internal rate of return on a project?
A. The number of years it takes to recover the investment.
B. The discount rate at which the net present value of the project equals zero.
C. The discount rate at which the net present value of the project equals one.
D. The weighted-average cost of capital used to finance the project. - AnswerB. The discount rate at
which the net present value of the project equals zero.
A working capital technique, which delays the outflow of cash, is:
elasticity of demand formula - Answer% change in quantity demanded / % change in price
What is strategic planning?
A. It establishes the budget for the organization.
B. It establishes the general direction of the organization.
C. It consists of decisions to use parts of the organization's resources in specified ways.
D. It establishes the resources that the plan will require. - AnswerB. It establishes the general
direction of the organization.
Company management completes event identification and analyzes the associated risks. The
company wishes to assess its risk in the absence of any actions management might take to alter
either the risk's likelihood or impact. According to COSO, which of the following types of risk does
this situation represent?
A. Inherent risk
B. Residual risk
C. Event risk
D. Economic risk - AnswerA. Inherent risk
Inherent Risk - AnswerInherent risk is the risk to an entity in the absence of any direct or focused
actions by management to alter its severity. Although most companies will take some actions to
reduce risk, inherent risk is the starting point from a risk assessment standpoint.
An entity's risk appetite:
A. Serves to balance risk willingness with return and growth goals.
B. Is established by the board of directors.
C. Is a key element of the monitoring process.
D. Represents the accepted level of variation relative to the achievement of objectives. - AnswerA.
Serves to balance risk willingness with return and growth goals.
risk tolerance - AnswerThe accepted level of variation relative to the achievement of objectives
risk appetite - Answerthe theoretical balance between an entity's willingness to accept risk and the
return/growth goals that the entity wishes to achieve.
, The successful and profitable launch of a new product line by an entity represents:
A. Value creation.
B. Value preservation.
C. Value erosion.
D. Value realization. - AnswerA. Value creation.
Equity carv-out (of a segment) - AnswerAn equity carve-out is a corporate reorganization strategy
where a parent company sells a portion of its interest in a subsidiary to the public. The process
creates a new legal entity with its own board of directors, financial statements, and management
team. The parent company usually retains a majority stake in the new company.
Spin-off (of a segment) - Answer(of a parent company) turn a subsidiary into a new and separate
company.
"the corporation announced plans to spin off its computer systems arm"
When does competition not become an even stronger force impacting the profitability of a firm?
A. Customers do not have strong brand preferences.
B. The market is fast-growing.
C. The market consists of several equal-sized firms.
D. The costs of exiting the market exceed the costs of continuing to operate. - AnswerB. The market
is fast-growing.
re-order point formula - Answersales during lead time + safety stock
Which of the following phrases defines the internal rate of return on a project?
A. The number of years it takes to recover the investment.
B. The discount rate at which the net present value of the project equals zero.
C. The discount rate at which the net present value of the project equals one.
D. The weighted-average cost of capital used to finance the project. - AnswerB. The discount rate at
which the net present value of the project equals zero.
A working capital technique, which delays the outflow of cash, is:
