TEXAS BUSINESS & FINANCE 6-12 PRACTICE TEST
QUESTIONS
Which of the four functions of management consists of monitoring and evaluating
employees?
a.Organizing
b.Leading
c.Planning
d.Controlling - Answers :d.
Which of the following inventory systems is designed to record the actual costs
associated with the inventory using a physical count?
a.The periodic inventory system
b.The perpetual inventory system
c.The temporary inventory system
d.The just-in-time inventory system - Answers :Option B is correct because the
perpetual inventory system is designed to record the actual costs affiliated with
inventory using a physical count.
Which of the following valuations is used to calculate the straight-line depreciation of an
asset?
a.Market value
b.Salvage value
c.Enterprise value
d.Replacement value - Answers :Option B is correct because salvage value is used as a
component of the depreciation calculation.
In which of the following sections of the balance sheet is prepaid insurance recorded?
a.Expenses
b.Assets
c.Liabilities
d.Equity - Answers :Option B is correct because prepaid insurance is paid in advance
and holds value.
Which of the following statements is generally true about the purchasing function today?
a.A wide supplier base is desired because purchasing prices are lowered.
b.The focus of purchasing today has changed from a relational to a transactional one.
c.Purchasing is evolving into strategic supply management.
d.Relationships with suppliers typically lead to supplier opportunism. - Answers :Option
C is correct because the traditional purchasing department has evolved into a position
of greater importance and esteem within a company, becoming known as "supply
management."
,10. The owner of a small boat rental company opened the business as a sole
proprietorship but has since decided to bring a friend into the business. It is best for the
owner, who is concerned about the cost of changing the form of the company's
organization, to change the business structure to a
a.corporation.
b.partnership.
c.joint venture.
d.cooperative. - Answers :Option B is correct because the cost to form a partnership is
less expensive than the cost to form a corporation, joint venture, or cooperative
Kim, a young college student, has decided to start a business. She does not have much
capital but believes the business can generate capital through an initial public offering
(IPO). An IPO is categorized as
a.debt.
b.an asset.
c.equity.
d.income. - Answers :Option C is correct because IPO stock is considered equity for the
buyer.
The marketing department of a small business wants to obtain information about how
and why a product continues to be successful after many years. Which of the following
research techniques will be most effective?
a.Obtaining expert reviews
b.Organizing focus groups
c.Conducting one-on-one interviews
d.Requesting user surveys - Answers :Option D is correct because user surveys are a
relatively quick and inexpensive way of gathering and quantifying public opinion and
monitoring change over time, which is most appropriate for answering the desired
question.
When a company is trying to regulate its spending and track incoming funds, the
accountant should prepare an income statement once
a.every month.
b.every two months.
c.every six months.
d.every year. - Answers :Option A is correct because income statements are usually
produced once a month to ensure expense review and control.
Which of the following best identifies the use of debt financing to raise capital?
a.Convertible securities
b.Direct stock offerings
c.Promissory notes
d.Initial public offerings - Answers :Option C is correct because a promissory note would
indicate a loan and debt financing to raise capital.
,Which of the following occurs after a customer withdraws money from an automated
teller machine?
a.The customer's access privileges are checked.
b.The debit is posted to the account.
c.The connection to the server is established.
d.The system verifies that the customer has an account. - Answers :Option B is correct
because after the customer has withdrawn money from the account via the ATM, the
amount is deducted from the customer's account balance.
A lending company will review a borrower's accounting documentation to evaluate
a. creditworthiness.
b.current assets to past liabilities.
c.the expenses in terms of employee risk management.
d.the aggregate statistics relating to the likelihood that a competitor will enter the
market. - Answers :Option A is correct because credit-worthiness is the key determinant
of how likely it is that the loan will be repaid
Which of the following doctrines prevents a person from insuring a neighbor's house?
a.Doctrine of contribution
b.Doctrine of subrogation
c.Doctrine of indemnification
d.Doctrine of insurable interest - Answers :Option D is correct because doctrine of
insurable interest means that a person will suffer financial or other kinds of loss when
they lose or damage a particular property.
Which of the following best describes management practices that promote adaptability
in a global business environment?
a.Changing strategies to accommodate local conditions
b.Developing a set of fixed responses to anticipated problems
c.Establishing procedures to be used systematically in all regions
d.Launching sales initiatives to conform to the corporate calendar - Answers :Option A
is correct because changing strategies to accommodate local conditions indicates
management's willingness to adapt to local environments.
Which of the following types of compensation has the greatest positive effect on
employee motivation and productivity?
a.High pay level at beginning salary
b.Varied and attainable pay mix
c.Regularly scheduled pay raises
d.Uniform employee pay increases - Answers :Option B is correct because making a
varied pay mix available to workers has been shown to improve employee motivation
and therefore productivity.
, To have the greatest impact on long-term employee productivity, businesses must
a.conduct effective employee evaluations.
b.increase production quotas.
c.implement a pushing management style.
d.raise performance expectations. - Answers :Option A is correct because an effective
employee evaluation will allow the employee to adjust and improve his or her
performance, thus improving productivity.
Which of the following situations is legal but not ethical?
a.A business goes beyond the letter of the law to preserve the environment for future
generations.
b.A top company executive uses questionable accounting practices to manipulate the
company's stock price for financial gain.
c.A company imports and sells goods from a company that uses child labor in unsafe
conditions in its manufacturing plants.
d.A group of pharmacists agree to charge the same prices because of the rising costs of
prescription medicines. - Answers :Option C is correct because it is legal to import
goods from other countries, but clearly unethical to buy and sell goods produced by
child labor in unsafe conditions.
RXJW is a publicly traded company that is required by law to register its code of ethics
with the Securities and Exchange Commission and ensure that its senior financial
officers are aware of the policy. Which of the following mandates this requirement?
a.Single Audit Act
b.Sarbanes-Oxley Act
c.Code of Federal Regulations
d.National Labor Relations Act - Answers :Option B is correct because section 406 of
the Sarbanes-Oxley Act requires filing a code of ethics with the SEC and ensuring that
financial officers are aware of the policy.
Which of the following federal organizations regulates overall workplace safety?
a.Occupational Safety and Health Administration
b.Equal Employment Opportunity Commission
c.United States Department of Agriculture
d.Environmental Protection Agency - Answers :Option A is correct because the
Occupational Safety and Health Administration is the federal agency that regulates
workplace safety.
Which of the following best describes the responsibilities of the Equal Employment
Opportunity Commission?
QUESTIONS
Which of the four functions of management consists of monitoring and evaluating
employees?
a.Organizing
b.Leading
c.Planning
d.Controlling - Answers :d.
Which of the following inventory systems is designed to record the actual costs
associated with the inventory using a physical count?
a.The periodic inventory system
b.The perpetual inventory system
c.The temporary inventory system
d.The just-in-time inventory system - Answers :Option B is correct because the
perpetual inventory system is designed to record the actual costs affiliated with
inventory using a physical count.
Which of the following valuations is used to calculate the straight-line depreciation of an
asset?
a.Market value
b.Salvage value
c.Enterprise value
d.Replacement value - Answers :Option B is correct because salvage value is used as a
component of the depreciation calculation.
In which of the following sections of the balance sheet is prepaid insurance recorded?
a.Expenses
b.Assets
c.Liabilities
d.Equity - Answers :Option B is correct because prepaid insurance is paid in advance
and holds value.
Which of the following statements is generally true about the purchasing function today?
a.A wide supplier base is desired because purchasing prices are lowered.
b.The focus of purchasing today has changed from a relational to a transactional one.
c.Purchasing is evolving into strategic supply management.
d.Relationships with suppliers typically lead to supplier opportunism. - Answers :Option
C is correct because the traditional purchasing department has evolved into a position
of greater importance and esteem within a company, becoming known as "supply
management."
,10. The owner of a small boat rental company opened the business as a sole
proprietorship but has since decided to bring a friend into the business. It is best for the
owner, who is concerned about the cost of changing the form of the company's
organization, to change the business structure to a
a.corporation.
b.partnership.
c.joint venture.
d.cooperative. - Answers :Option B is correct because the cost to form a partnership is
less expensive than the cost to form a corporation, joint venture, or cooperative
Kim, a young college student, has decided to start a business. She does not have much
capital but believes the business can generate capital through an initial public offering
(IPO). An IPO is categorized as
a.debt.
b.an asset.
c.equity.
d.income. - Answers :Option C is correct because IPO stock is considered equity for the
buyer.
The marketing department of a small business wants to obtain information about how
and why a product continues to be successful after many years. Which of the following
research techniques will be most effective?
a.Obtaining expert reviews
b.Organizing focus groups
c.Conducting one-on-one interviews
d.Requesting user surveys - Answers :Option D is correct because user surveys are a
relatively quick and inexpensive way of gathering and quantifying public opinion and
monitoring change over time, which is most appropriate for answering the desired
question.
When a company is trying to regulate its spending and track incoming funds, the
accountant should prepare an income statement once
a.every month.
b.every two months.
c.every six months.
d.every year. - Answers :Option A is correct because income statements are usually
produced once a month to ensure expense review and control.
Which of the following best identifies the use of debt financing to raise capital?
a.Convertible securities
b.Direct stock offerings
c.Promissory notes
d.Initial public offerings - Answers :Option C is correct because a promissory note would
indicate a loan and debt financing to raise capital.
,Which of the following occurs after a customer withdraws money from an automated
teller machine?
a.The customer's access privileges are checked.
b.The debit is posted to the account.
c.The connection to the server is established.
d.The system verifies that the customer has an account. - Answers :Option B is correct
because after the customer has withdrawn money from the account via the ATM, the
amount is deducted from the customer's account balance.
A lending company will review a borrower's accounting documentation to evaluate
a. creditworthiness.
b.current assets to past liabilities.
c.the expenses in terms of employee risk management.
d.the aggregate statistics relating to the likelihood that a competitor will enter the
market. - Answers :Option A is correct because credit-worthiness is the key determinant
of how likely it is that the loan will be repaid
Which of the following doctrines prevents a person from insuring a neighbor's house?
a.Doctrine of contribution
b.Doctrine of subrogation
c.Doctrine of indemnification
d.Doctrine of insurable interest - Answers :Option D is correct because doctrine of
insurable interest means that a person will suffer financial or other kinds of loss when
they lose or damage a particular property.
Which of the following best describes management practices that promote adaptability
in a global business environment?
a.Changing strategies to accommodate local conditions
b.Developing a set of fixed responses to anticipated problems
c.Establishing procedures to be used systematically in all regions
d.Launching sales initiatives to conform to the corporate calendar - Answers :Option A
is correct because changing strategies to accommodate local conditions indicates
management's willingness to adapt to local environments.
Which of the following types of compensation has the greatest positive effect on
employee motivation and productivity?
a.High pay level at beginning salary
b.Varied and attainable pay mix
c.Regularly scheduled pay raises
d.Uniform employee pay increases - Answers :Option B is correct because making a
varied pay mix available to workers has been shown to improve employee motivation
and therefore productivity.
, To have the greatest impact on long-term employee productivity, businesses must
a.conduct effective employee evaluations.
b.increase production quotas.
c.implement a pushing management style.
d.raise performance expectations. - Answers :Option A is correct because an effective
employee evaluation will allow the employee to adjust and improve his or her
performance, thus improving productivity.
Which of the following situations is legal but not ethical?
a.A business goes beyond the letter of the law to preserve the environment for future
generations.
b.A top company executive uses questionable accounting practices to manipulate the
company's stock price for financial gain.
c.A company imports and sells goods from a company that uses child labor in unsafe
conditions in its manufacturing plants.
d.A group of pharmacists agree to charge the same prices because of the rising costs of
prescription medicines. - Answers :Option C is correct because it is legal to import
goods from other countries, but clearly unethical to buy and sell goods produced by
child labor in unsafe conditions.
RXJW is a publicly traded company that is required by law to register its code of ethics
with the Securities and Exchange Commission and ensure that its senior financial
officers are aware of the policy. Which of the following mandates this requirement?
a.Single Audit Act
b.Sarbanes-Oxley Act
c.Code of Federal Regulations
d.National Labor Relations Act - Answers :Option B is correct because section 406 of
the Sarbanes-Oxley Act requires filing a code of ethics with the SEC and ensuring that
financial officers are aware of the policy.
Which of the following federal organizations regulates overall workplace safety?
a.Occupational Safety and Health Administration
b.Equal Employment Opportunity Commission
c.United States Department of Agriculture
d.Environmental Protection Agency - Answers :Option A is correct because the
Occupational Safety and Health Administration is the federal agency that regulates
workplace safety.
Which of the following best describes the responsibilities of the Equal Employment
Opportunity Commission?
