ETS MFT BUSINESS EXAM VERSION 3
2025/2026 WITH ACTUAL CORRECT
QUESTIONS AND VERIFIED DETAILED
ANSWERS |FREQUENTLY TESTED
QUESTIONS AND SOLUTIONS |ALREADY
GRADED A+|NEWEST|BRAND NEW
VERSION!!|GUARANTEED PASS
The excess of current assets of a business over its current liabilities is called
a) quick ratio
b) inventory turnover
c) stockholder's equity
d) working capital
d) working capital
What two categories are considered under Period Costs?
a) materials inventory and product costs
b) selling expenses and administrative expenses
c) work in process inventory and direct labor costs
d) direct labor costs and factory overhead
b) selling expenses and administrative expenses
The effect of a difference in the number of units sold, assuming no change in unit sales price or
unit cost is
a) quantity factor
b) unit cost factor
c) contribution margin analysis
d) product pricing
a) quantity factor
A cost that will not be affected by later decisions is termed a(n)
a) differential cost
1|Page
,b) replacement cost
c) sunk cost
d) historical cost
c) sunk cost
The unfavorable volume variance may be due to all but the following factors;
a) unexpected increases in the cost of utilities
b) failure to maintain an even flow of work
c) failure to obtain enough sales orders
d) machine breakdowns
a) unexpected increases in the cost of utilities
Which of the following budgets allow for adjustments in activity levels?
a) static budget
b) flexible budget
c) continuous budget
d) zero based budget
b) flexible budget
A budget that summarizes future plans for the acquisition of fixed assets is the
a) production budget
b) sales budget
c) direct materials purchases budget
d) capital expenditures budget
d) capital expenditures budget
What are the standard framework of guidelines for financial accounting used in any given
jurisdiction, also known as accounting standards?
a) GPAA
b) GAAP
c) SFG
d) GAPP
b) GAAP
The more frequent the compounding, the higher the future value, other things being equal.
True or False
True
2|Page
,For a given amount, the lower the discount rate, the less the present value.
True or False
False
Under which of the following conditions will a future value calculated with simple interest
exceed a future value calculated with compound interest at the same rate?
a) this is not possible with positive interest rates
b) the investment period is very long
c) the compounding is annually
d) the interest rate is very high
a) this is not possible with positive interest rates
Which of the following statements regarding present and future values of streams of cash
payments are incorrect?
a) a level stream of cash payments that continues indefinitely is known as a perpetuity; one that
continues for a limited number of years is called an annuity
b) the present value of a stream of cash flows is simply the sum of the present value of each
individual cash flow
c) shortcut formulas make the calculations for perpetuities and annuities easy
d) the future value of an annuity is the sum of the future value of each individual cash flow
a) a level stream of cash payments that continues indefinitely is known as a perpetuity; one that
continues for a limited number of years is called an annuity
The decision rule for the net present value is to
a) accept all projects with positive net present values
b) accept all projects with cash inflows exceeding initial cost
c) reject all projects lasting longer than ten years
d) reject all projects with rates of return exceeding the opportunity cost of capital
a) accept all projects with positive net present values
One common reason for issuing two distinct classes of common stock is to
a) conserve cash by offering dividends to only one class of stockholders
b) sell different classes to increase profits
c) restrict voting privileges from some shareholders
d) allow one stock to increase in price while the other class declines
c) restrict voting privileges from some shareholders
3|Page
, Treasury bills have a beta of zero
True or False
True
Which of the following presents the correct relationship? As the coupon rate of a bond
increases, the bond's
a) face value increases
b) maturity date is extended
c) current price decreases
d) interest payments increase
d) interest payments increase
If a stock's P/E ratio is 13.5 at a time when earnings are $3 per year, what is the stock's current
price?
a) $22.22
b) $4.50
c) $18.00
d) $40.50
$40.50
Price = 13.5*$3 = $40.50
Which of the following is NOT a service/product provided to corporations by financial markets
and institutions?
a) financing
b) real assets
c) contracts to manage risk
d) valuation of the company
b) real assets
Cost of Capital is the return investors could expect.
True or False
True
A firm's mixture of long term financing and equity financing is called ______.
a) financing activities
b) capital structure
c) capital financing
d) cost of capital
4|Page
2025/2026 WITH ACTUAL CORRECT
QUESTIONS AND VERIFIED DETAILED
ANSWERS |FREQUENTLY TESTED
QUESTIONS AND SOLUTIONS |ALREADY
GRADED A+|NEWEST|BRAND NEW
VERSION!!|GUARANTEED PASS
The excess of current assets of a business over its current liabilities is called
a) quick ratio
b) inventory turnover
c) stockholder's equity
d) working capital
d) working capital
What two categories are considered under Period Costs?
a) materials inventory and product costs
b) selling expenses and administrative expenses
c) work in process inventory and direct labor costs
d) direct labor costs and factory overhead
b) selling expenses and administrative expenses
The effect of a difference in the number of units sold, assuming no change in unit sales price or
unit cost is
a) quantity factor
b) unit cost factor
c) contribution margin analysis
d) product pricing
a) quantity factor
A cost that will not be affected by later decisions is termed a(n)
a) differential cost
1|Page
,b) replacement cost
c) sunk cost
d) historical cost
c) sunk cost
The unfavorable volume variance may be due to all but the following factors;
a) unexpected increases in the cost of utilities
b) failure to maintain an even flow of work
c) failure to obtain enough sales orders
d) machine breakdowns
a) unexpected increases in the cost of utilities
Which of the following budgets allow for adjustments in activity levels?
a) static budget
b) flexible budget
c) continuous budget
d) zero based budget
b) flexible budget
A budget that summarizes future plans for the acquisition of fixed assets is the
a) production budget
b) sales budget
c) direct materials purchases budget
d) capital expenditures budget
d) capital expenditures budget
What are the standard framework of guidelines for financial accounting used in any given
jurisdiction, also known as accounting standards?
a) GPAA
b) GAAP
c) SFG
d) GAPP
b) GAAP
The more frequent the compounding, the higher the future value, other things being equal.
True or False
True
2|Page
,For a given amount, the lower the discount rate, the less the present value.
True or False
False
Under which of the following conditions will a future value calculated with simple interest
exceed a future value calculated with compound interest at the same rate?
a) this is not possible with positive interest rates
b) the investment period is very long
c) the compounding is annually
d) the interest rate is very high
a) this is not possible with positive interest rates
Which of the following statements regarding present and future values of streams of cash
payments are incorrect?
a) a level stream of cash payments that continues indefinitely is known as a perpetuity; one that
continues for a limited number of years is called an annuity
b) the present value of a stream of cash flows is simply the sum of the present value of each
individual cash flow
c) shortcut formulas make the calculations for perpetuities and annuities easy
d) the future value of an annuity is the sum of the future value of each individual cash flow
a) a level stream of cash payments that continues indefinitely is known as a perpetuity; one that
continues for a limited number of years is called an annuity
The decision rule for the net present value is to
a) accept all projects with positive net present values
b) accept all projects with cash inflows exceeding initial cost
c) reject all projects lasting longer than ten years
d) reject all projects with rates of return exceeding the opportunity cost of capital
a) accept all projects with positive net present values
One common reason for issuing two distinct classes of common stock is to
a) conserve cash by offering dividends to only one class of stockholders
b) sell different classes to increase profits
c) restrict voting privileges from some shareholders
d) allow one stock to increase in price while the other class declines
c) restrict voting privileges from some shareholders
3|Page
, Treasury bills have a beta of zero
True or False
True
Which of the following presents the correct relationship? As the coupon rate of a bond
increases, the bond's
a) face value increases
b) maturity date is extended
c) current price decreases
d) interest payments increase
d) interest payments increase
If a stock's P/E ratio is 13.5 at a time when earnings are $3 per year, what is the stock's current
price?
a) $22.22
b) $4.50
c) $18.00
d) $40.50
$40.50
Price = 13.5*$3 = $40.50
Which of the following is NOT a service/product provided to corporations by financial markets
and institutions?
a) financing
b) real assets
c) contracts to manage risk
d) valuation of the company
b) real assets
Cost of Capital is the return investors could expect.
True or False
True
A firm's mixture of long term financing and equity financing is called ______.
a) financing activities
b) capital structure
c) capital financing
d) cost of capital
4|Page
