ETS MBA Major Field Test (MFT) Exam 2026
Questions and Answers | Business
Assessment Study Guide PDF with Verified
Solutions
• This ETS MBA Major Field Test study guide contains 200 comprehensive multiple-
choice questions covering all major business domains tested on the 2026 MFT
exam, designed for thorough preparation and mastery assessment.
• Use this material by studying 20-25 questions daily, reviewing EXPERT
RATIONALE for missed answers, and retaking sections to ensure 85%+ accuracy
before test day.
QUESTION 1
Which of the following best describes the primary role of a Board of Directors
in corporate governance?
A) To manage day-to-day operations of the company
B) To provide oversight, set strategic direction, and ensure accountability to
shareholders
C) To directly compete with management for control of company resources
D) To exclusively focus on reducing executive compensation
E) To replace the CEO annually regardless of performance
CORRECT ANSWER: B) To provide oversight, set strategic direction, and ensure
accountability to shareholders
EXPERT RATIONALE: The Board of Directors functions as a fiduciary body
responsible for overseeing management, setting strategic direction, and ensuring
the company operates in the best interests of shareholders. They do not engage in
day-to-day operations but rather provide governance, establish policies, and hold
executives accountable.
QUESTION 2
,In Porter's Five Forces model, which force has the greatest impact on an
industry when suppliers are concentrated and products are undifferentiated?
A) Threat of new entrants
B) Bargaining power of suppliers
C) Threat of substitutes
D) Competitive rivalry
E) Bargaining power of buyers
CORRECT ANSWER: B) Bargaining power of suppliers
EXPERT RATIONALE: When suppliers are concentrated (few suppliers) and their
products are undifferentiated (not easily replaceable), suppliers have significant
bargaining power. They can raise prices, reduce quality, or limit supply, directly
affecting profitability and competitive positioning.
QUESTION 3
Which accounting principle requires that revenues be recognized when they
are earned, regardless of when cash is received?
A) Matching Principle
B) Historical Cost Principle
C) Revenue Recognition Principle
D) Consistency Principle
E) Full Disclosure Principle
CORRECT ANSWER: C) Revenue Recognition Principle
EXPERT RATIONALE: The Revenue Recognition Principle dictates that revenue
should be recognized when the business has earned it, not necessarily when
payment is received. This aligns with accrual accounting and ensures financial
statements accurately reflect business performance during a specific period.
,QUESTION 4
A company's current ratio is 2.5, and its quick ratio is 1.2. What does this
indicate about the company's liquidity position?
A) The company has poor liquidity and cannot meet short-term obligations
B) The company relies heavily on inventory to meet short-term obligations
C) The company has excellent liquidity from all sources
D) The company's accounts receivable are uncollectible
E) The company should immediately liquidate all inventory
CORRECT ANSWER: B) The company relies heavily on inventory to meet short-
term obligations
EXPERT RATIONALE: The difference between the current ratio (2.5) and quick ratio
(1.2) indicates that inventory represents a significant portion of current assets.
Quick ratio excludes inventory, so the gap suggests the company's ability to meet
short-term obligations is dependent on converting inventory to cash.
QUESTION 5
In the context of supply chain management, what is the primary benefit of
implementing just-in-time (JIT) inventory management?
A) To maximize inventory holding across all warehouses
B) To reduce carrying costs and improve cash flow by minimizing inventory levels
C) To eliminate the need for supplier relationships
D) To guarantee zero stockouts regardless of demand fluctuations
E) To increase product defect rates through rushed production
CORRECT ANSWER: B) To reduce carrying costs and improve cash flow by
minimizing inventory levels
, EXPERT RATIONALE: JIT inventory management minimizes inventory by ordering
materials only as needed for production. This reduces carrying costs, storage
expenses, and improves cash flow by freeing up capital previously tied up in excess
inventory, while maintaining production efficiency.
QUESTION 6
Which of the following best describes the concept of comparative advantage
in international trade?
A) A country can produce all goods more efficiently than other countries
B) A country should produce goods in which it has the lowest opportunity cost
C) International trade is always detrimental to domestic employment
D) Tariffs and quotas are necessary to protect comparative advantage
E) A country with higher wages cannot engage in international trade
CORRECT ANSWER: B) A country should produce goods in which it has the
lowest opportunity cost
EXPERT RATIONALE: Comparative advantage theory, developed by David Ricardo,
suggests that countries should specialize in producing goods where they have the
lowest opportunity cost relative to other goods they could produce, enabling
mutually beneficial trade regardless of absolute productivity differences.
QUESTION 7
What is the primary purpose of financial forecasting in corporate planning?
A) To guarantee accurate prediction of future market conditions
B) To provide a basis for strategic planning and resource allocation decisions
C) To eliminate all business risk and uncertainty
D) To replace historical financial analysis
Questions and Answers | Business
Assessment Study Guide PDF with Verified
Solutions
• This ETS MBA Major Field Test study guide contains 200 comprehensive multiple-
choice questions covering all major business domains tested on the 2026 MFT
exam, designed for thorough preparation and mastery assessment.
• Use this material by studying 20-25 questions daily, reviewing EXPERT
RATIONALE for missed answers, and retaking sections to ensure 85%+ accuracy
before test day.
QUESTION 1
Which of the following best describes the primary role of a Board of Directors
in corporate governance?
A) To manage day-to-day operations of the company
B) To provide oversight, set strategic direction, and ensure accountability to
shareholders
C) To directly compete with management for control of company resources
D) To exclusively focus on reducing executive compensation
E) To replace the CEO annually regardless of performance
CORRECT ANSWER: B) To provide oversight, set strategic direction, and ensure
accountability to shareholders
EXPERT RATIONALE: The Board of Directors functions as a fiduciary body
responsible for overseeing management, setting strategic direction, and ensuring
the company operates in the best interests of shareholders. They do not engage in
day-to-day operations but rather provide governance, establish policies, and hold
executives accountable.
QUESTION 2
,In Porter's Five Forces model, which force has the greatest impact on an
industry when suppliers are concentrated and products are undifferentiated?
A) Threat of new entrants
B) Bargaining power of suppliers
C) Threat of substitutes
D) Competitive rivalry
E) Bargaining power of buyers
CORRECT ANSWER: B) Bargaining power of suppliers
EXPERT RATIONALE: When suppliers are concentrated (few suppliers) and their
products are undifferentiated (not easily replaceable), suppliers have significant
bargaining power. They can raise prices, reduce quality, or limit supply, directly
affecting profitability and competitive positioning.
QUESTION 3
Which accounting principle requires that revenues be recognized when they
are earned, regardless of when cash is received?
A) Matching Principle
B) Historical Cost Principle
C) Revenue Recognition Principle
D) Consistency Principle
E) Full Disclosure Principle
CORRECT ANSWER: C) Revenue Recognition Principle
EXPERT RATIONALE: The Revenue Recognition Principle dictates that revenue
should be recognized when the business has earned it, not necessarily when
payment is received. This aligns with accrual accounting and ensures financial
statements accurately reflect business performance during a specific period.
,QUESTION 4
A company's current ratio is 2.5, and its quick ratio is 1.2. What does this
indicate about the company's liquidity position?
A) The company has poor liquidity and cannot meet short-term obligations
B) The company relies heavily on inventory to meet short-term obligations
C) The company has excellent liquidity from all sources
D) The company's accounts receivable are uncollectible
E) The company should immediately liquidate all inventory
CORRECT ANSWER: B) The company relies heavily on inventory to meet short-
term obligations
EXPERT RATIONALE: The difference between the current ratio (2.5) and quick ratio
(1.2) indicates that inventory represents a significant portion of current assets.
Quick ratio excludes inventory, so the gap suggests the company's ability to meet
short-term obligations is dependent on converting inventory to cash.
QUESTION 5
In the context of supply chain management, what is the primary benefit of
implementing just-in-time (JIT) inventory management?
A) To maximize inventory holding across all warehouses
B) To reduce carrying costs and improve cash flow by minimizing inventory levels
C) To eliminate the need for supplier relationships
D) To guarantee zero stockouts regardless of demand fluctuations
E) To increase product defect rates through rushed production
CORRECT ANSWER: B) To reduce carrying costs and improve cash flow by
minimizing inventory levels
, EXPERT RATIONALE: JIT inventory management minimizes inventory by ordering
materials only as needed for production. This reduces carrying costs, storage
expenses, and improves cash flow by freeing up capital previously tied up in excess
inventory, while maintaining production efficiency.
QUESTION 6
Which of the following best describes the concept of comparative advantage
in international trade?
A) A country can produce all goods more efficiently than other countries
B) A country should produce goods in which it has the lowest opportunity cost
C) International trade is always detrimental to domestic employment
D) Tariffs and quotas are necessary to protect comparative advantage
E) A country with higher wages cannot engage in international trade
CORRECT ANSWER: B) A country should produce goods in which it has the
lowest opportunity cost
EXPERT RATIONALE: Comparative advantage theory, developed by David Ricardo,
suggests that countries should specialize in producing goods where they have the
lowest opportunity cost relative to other goods they could produce, enabling
mutually beneficial trade regardless of absolute productivity differences.
QUESTION 7
What is the primary purpose of financial forecasting in corporate planning?
A) To guarantee accurate prediction of future market conditions
B) To provide a basis for strategic planning and resource allocation decisions
C) To eliminate all business risk and uncertainty
D) To replace historical financial analysis
