ETS MFT BUSINESS EXAM 300 ACTUAL
QUESTIONS AND CORRECT ANSWERS
WITH RATIONALE LATEST UPDATE
ALREADY GRADED A+ ASSURED PASS
The ETS Major Field Test (MFT) in Business is a comprehensive standardized exit
exam used by colleges and universities to assess the cumulative knowledge of
graduating business students. It contains 120 multiple-choice questions to be
completed in two hours, and no calculator is permitted. The exam covers nine core
business disciplines: Accounting (15%), Economics (14%), Management (15%),
Quantitative Business Analysis (11%), Information Systems (10%), Finance
(13%), Marketing (13%), Legal and Social Environment (10%), and International
Issues. The test measures not only factual recall but also the ability to apply
concepts, analyze data, interpret charts and graphs, and solve real-world business
problems.
Section 1: Accounting (1–40)
1. The primary purpose of the statement of cash flows is to report:
A. A company's investing transactions
B. A company's financing transactions
C. Information about cash receipts and cash payments of a company
D. The net increase or decrease in cash
Answer: C
Rationale: The statement of cash flows reports information about cash receipts and
cash payments of a company, categorized into operating, investing, and financing
activities.
2. The common characteristic possessed by all assets is:
A. Long life
B. Great monetary value
,C. Tangible nature
D. Future economic benefit
Answer: D
Rationale: An asset is defined as a resource with future economic benefit
controlled by the entity as a result of past transactions or events.
3. Net working capital refers to:
A. Inventories, receivables, and current notes and investments
B. Assets divided by liabilities
C. Current assets less short-term liabilities
D. Net assets left over after subtracting cost of goods sold
Answer: C
Rationale: Net working capital is calculated as current assets minus current
liabilities, measuring short-term liquidity.
4. A firm that would like to know whether it has enough cash to meet its bills
would be most likely to use which category of financial ratio?
A. Liquidity
B. Leverage
C. Efficiency
D. Profitability
Answer: A
Rationale: Liquidity ratios measure a firm's ability to meet short-term obligations
with current assets.
5. On May 31, Company O's general ledger shows a cash balance of $5,123. The
bank statement shows $4,905. A May 31 deposit of $300 does not appear on the
bank statement. A $3 service charge appears. A customer's $40 NSF check has
been returned. What is the adjusted cash balance?
A. $5,162
B. $5,123
,C. $5,165
D. $4,905
Answer: B
Rationale: The adjusted bank balance is $4,905 + $300 − $40 − $3 = $5,162. The
adjusted book balance is $5,123 − $40 − $3 = $5,080. The correct adjusted balance
reconciles to $5,162. (Note: In bank reconciliation, the adjusted bank balance
equals the adjusted book balance. $4,905 + $300 = $5,205; $5,205 − $40 − $3 =
$5,162. Book side: $5,123 − $40 − $3 = $5,080. The correct answer reconciles
both sides to $5,162 by adding the deposit in transit and deducting outstanding
items.)
6. Which of the following statements about the tort of negligence is true?
A. It cannot be used as a basis for liability for defective products
B. It is a strict liability tort with no defenses
C. It requires proof of some intentional conduct
D. It requires proof of breach of a statutory or common-law duty
Answer: D
Rationale: Negligence requires proof of duty, breach of duty, causation, and
damages. It does not require intentional conduct.
7. A differentiation strategy enables a business to address the five competitive
forces by:
A. Lessening competitive rivalry by distinguishing itself
B. Having brand-loyal customers become more sensitive to prices
C. Increasing economies of scale
D. Serving a broader market segment
Answer: A
Rationale: Differentiation makes a product unique, reducing rivalry because
customers are less price-sensitive and more brand-loyal.
8. The financial statement that reports a company's financial position at a specific
point in time is the:
, A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Rationale: The balance sheet reports assets, liabilities, and equity at a specific date.
9. If a company's current ratio is 2.5 and its quick ratio is 0.8, what does this
suggest?
A. The company has excessive inventory
B. The company is highly liquid
C. The company has no current liabilities
D. The company has strong profitability
Answer: A
Rationale: A large gap between current ratio and quick ratio suggests inventory
constitutes a large portion of current assets.
10. The accounting equation is:
A. Assets = Liabilities + Equity
B. Assets + Liabilities = Equity
C. Assets = Liabilities − Equity
D. Equity = Assets + Liabilities
Answer: A
Rationale: The fundamental accounting equation is Assets = Liabilities + Owner's
Equity.
11. Which inventory costing method results in the highest ending inventory during
periods of rising prices?
A. FIFO
B. LIFO
QUESTIONS AND CORRECT ANSWERS
WITH RATIONALE LATEST UPDATE
ALREADY GRADED A+ ASSURED PASS
The ETS Major Field Test (MFT) in Business is a comprehensive standardized exit
exam used by colleges and universities to assess the cumulative knowledge of
graduating business students. It contains 120 multiple-choice questions to be
completed in two hours, and no calculator is permitted. The exam covers nine core
business disciplines: Accounting (15%), Economics (14%), Management (15%),
Quantitative Business Analysis (11%), Information Systems (10%), Finance
(13%), Marketing (13%), Legal and Social Environment (10%), and International
Issues. The test measures not only factual recall but also the ability to apply
concepts, analyze data, interpret charts and graphs, and solve real-world business
problems.
Section 1: Accounting (1–40)
1. The primary purpose of the statement of cash flows is to report:
A. A company's investing transactions
B. A company's financing transactions
C. Information about cash receipts and cash payments of a company
D. The net increase or decrease in cash
Answer: C
Rationale: The statement of cash flows reports information about cash receipts and
cash payments of a company, categorized into operating, investing, and financing
activities.
2. The common characteristic possessed by all assets is:
A. Long life
B. Great monetary value
,C. Tangible nature
D. Future economic benefit
Answer: D
Rationale: An asset is defined as a resource with future economic benefit
controlled by the entity as a result of past transactions or events.
3. Net working capital refers to:
A. Inventories, receivables, and current notes and investments
B. Assets divided by liabilities
C. Current assets less short-term liabilities
D. Net assets left over after subtracting cost of goods sold
Answer: C
Rationale: Net working capital is calculated as current assets minus current
liabilities, measuring short-term liquidity.
4. A firm that would like to know whether it has enough cash to meet its bills
would be most likely to use which category of financial ratio?
A. Liquidity
B. Leverage
C. Efficiency
D. Profitability
Answer: A
Rationale: Liquidity ratios measure a firm's ability to meet short-term obligations
with current assets.
5. On May 31, Company O's general ledger shows a cash balance of $5,123. The
bank statement shows $4,905. A May 31 deposit of $300 does not appear on the
bank statement. A $3 service charge appears. A customer's $40 NSF check has
been returned. What is the adjusted cash balance?
A. $5,162
B. $5,123
,C. $5,165
D. $4,905
Answer: B
Rationale: The adjusted bank balance is $4,905 + $300 − $40 − $3 = $5,162. The
adjusted book balance is $5,123 − $40 − $3 = $5,080. The correct adjusted balance
reconciles to $5,162. (Note: In bank reconciliation, the adjusted bank balance
equals the adjusted book balance. $4,905 + $300 = $5,205; $5,205 − $40 − $3 =
$5,162. Book side: $5,123 − $40 − $3 = $5,080. The correct answer reconciles
both sides to $5,162 by adding the deposit in transit and deducting outstanding
items.)
6. Which of the following statements about the tort of negligence is true?
A. It cannot be used as a basis for liability for defective products
B. It is a strict liability tort with no defenses
C. It requires proof of some intentional conduct
D. It requires proof of breach of a statutory or common-law duty
Answer: D
Rationale: Negligence requires proof of duty, breach of duty, causation, and
damages. It does not require intentional conduct.
7. A differentiation strategy enables a business to address the five competitive
forces by:
A. Lessening competitive rivalry by distinguishing itself
B. Having brand-loyal customers become more sensitive to prices
C. Increasing economies of scale
D. Serving a broader market segment
Answer: A
Rationale: Differentiation makes a product unique, reducing rivalry because
customers are less price-sensitive and more brand-loyal.
8. The financial statement that reports a company's financial position at a specific
point in time is the:
, A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Rationale: The balance sheet reports assets, liabilities, and equity at a specific date.
9. If a company's current ratio is 2.5 and its quick ratio is 0.8, what does this
suggest?
A. The company has excessive inventory
B. The company is highly liquid
C. The company has no current liabilities
D. The company has strong profitability
Answer: A
Rationale: A large gap between current ratio and quick ratio suggests inventory
constitutes a large portion of current assets.
10. The accounting equation is:
A. Assets = Liabilities + Equity
B. Assets + Liabilities = Equity
C. Assets = Liabilities − Equity
D. Equity = Assets + Liabilities
Answer: A
Rationale: The fundamental accounting equation is Assets = Liabilities + Owner's
Equity.
11. Which inventory costing method results in the highest ending inventory during
periods of rising prices?
A. FIFO
B. LIFO
