Major Field Test - Study Questions #2
Which of the following organizations is most likely to use project financing? - ANS-A large public
utility involved in
infrastructure development
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? - ANS-The training process to prepare the new hires
for their assigned tasks was inadequate.
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? - ANS-It would increase by $3.00 per unit sold.
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? - ANS-They have good cash flows.
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? - ANS-Management is sending a signal that the
company has good projected future earnings.
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? - ANS-What are the company's core
competencies?
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 - ANS-$24
Increased globalization and technological change, particularly in telecommunications, enable
more organizations to adopt which of the following organizational structures? - ANS-Network
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 - ANS-actual service delivery and how
service quality was communicated
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? - ANS-The full absorption
cost of producing a unit of product
You are considering investing in one of the four securities below, characterized only as follows.
Security W X Y Z
Expected return 15% 15% 17% 17%
Standard deviation of return 25% 30% 25% 30%
Which security makes the most prudent investment? - ANS-Z
All of the following can be considered in the evaluation of a business unit EXCEPT -
ANS-projected annual revenues of competitors
Using manufacturing-based criteria to measure product quality, which of the following should
you monitor on a regular basis? - ANS-The conformance of the finished product to agreed-to
product specifications
The common stock of ABC, Inc. has a current market price of $52 per share. Dividends have
been $5 a share for several years and are not expected to change. The dividend yield of the
stock of comparable companies is 10%. Which recommendation would you make regarding
ABC, Inc. stock? - ANS-Don't purchase for more than $50 per share.
Increasing a regular quarterly dividend payment may indicate which of the following about a
corporation?
I. Improved earnings prospects for the firm
II. A reduction in agency problems of free
cash flow
III. A reduction in tax payments for shareholders - ANS-I and II only
Littleton, Inc., has fixed costs of $75,000 per month, variable costs of $5 per unit, and a sales
price per unit of $30. What is the break-even quantity per month? - ANS-3,000
Which of the following should be reported net of tax on a corporation's income statement? -
ANS-Discontinued operations
If a multinational company cannot change the level of political risk in foreign markets, which of
the following tactics would most likely offset possible losses? - ANS-Finance debt locally
Which of the following organizations is most likely to use project financing? - ANS-A large public
utility involved in
infrastructure development
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? - ANS-The training process to prepare the new hires
for their assigned tasks was inadequate.
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? - ANS-It would increase by $3.00 per unit sold.
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? - ANS-They have good cash flows.
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? - ANS-Management is sending a signal that the
company has good projected future earnings.
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? - ANS-What are the company's core
competencies?
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 - ANS-$24
Increased globalization and technological change, particularly in telecommunications, enable
more organizations to adopt which of the following organizational structures? - ANS-Network
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 - ANS-actual service delivery and how
service quality was communicated
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? - ANS-The full absorption
cost of producing a unit of product
You are considering investing in one of the four securities below, characterized only as follows.
Security W X Y Z
Expected return 15% 15% 17% 17%
Standard deviation of return 25% 30% 25% 30%
Which security makes the most prudent investment? - ANS-Z
All of the following can be considered in the evaluation of a business unit EXCEPT -
ANS-projected annual revenues of competitors
Using manufacturing-based criteria to measure product quality, which of the following should
you monitor on a regular basis? - ANS-The conformance of the finished product to agreed-to
product specifications
The common stock of ABC, Inc. has a current market price of $52 per share. Dividends have
been $5 a share for several years and are not expected to change. The dividend yield of the
stock of comparable companies is 10%. Which recommendation would you make regarding
ABC, Inc. stock? - ANS-Don't purchase for more than $50 per share.
Increasing a regular quarterly dividend payment may indicate which of the following about a
corporation?
I. Improved earnings prospects for the firm
II. A reduction in agency problems of free
cash flow
III. A reduction in tax payments for shareholders - ANS-I and II only
Littleton, Inc., has fixed costs of $75,000 per month, variable costs of $5 per unit, and a sales
price per unit of $30. What is the break-even quantity per month? - ANS-3,000
Which of the following should be reported net of tax on a corporation's income statement? -
ANS-Discontinued operations
If a multinational company cannot change the level of political risk in foreign markets, which of
the following tactics would most likely offset possible losses? - ANS-Finance debt locally
