Free BUSINESS-ENVIRONMENT-AND-CONCEPTS Exam Dumps Preview

Choice "c" is correct. Price elasticity of supply is calculated the same way as demand except that quantity supplied is measured:

Perfectly inelastic supply curves are also vertical representing that supply is insensitive to changes in price;
i.e., the quantity supplied will not change as price changes. Perfectly inelastic supply curves would exist if firms cannot vary input usage. Regardless of price, the firm has to use all inputs if it produces at all.
Choices "a", "b", and "d" are incorrect, as they are far-out distractors.

Choice "d" is correct. Accept all investment alternatives that have a positive net present value (NPV). A positive NPV means the return on the investment exceeds the hurdle rate (the minimum acceptable rate of return).
Choice "a" is incorrect. The cost of debt financing is a factor in determining the hurdle rate.
Choice "b" is incorrect. The cash flow may be positive but the return on investment may be unacceptable.
Choice "c" is incorrect. The cost of debt financing is a factor in determining the hurdle rate.

Choice "d" is correct. A derivative action is an action by a stockholder in the name of the corporation to recover damages or to seek some other remedy on behalf of the corporation when the corporation does not enforce its own rights. Such actions are often brought when the directors or officers have breached their duty to the corporation and have refused to sue themselves. An ultra vires act is an act outside of a director's or an officer's scope of authority and thus is a breach of duty to the corporation.
Choices "a", "b", and "c" are incorrect, because these would all be causes of action against the corporate directors or officers on behalf of the stockholder to recover damages or seek some other remedy against the corporate directors or officers on behalf of the stockholder, not on behalf of the corporation.

Choice "a" is correct. Only I.
Choices "b", "c", and "d" are incorrect, since II is a disadvantage - not a benefit.

Choice "d" is correct. Where an agent enters into a contract on behalf of a principal and discloses the existence and identity of the principal and acts with authority, the principal is liable and the agent is not liable. Here, Jones signed the contract with an indication that he was signing for the corporation. The president of a corporation is an agent of the corporation and has apparent authority to enter contracts that appear to be within the ordinary scope of the corporation's business. The restaurant repairs here appear to be with the scope of Food Corp.'s business. Therefore, Food Corp. will be bound because Jones had at least apparent authority.
Choice "a" is incorrect, per the rule stated above.
Choice "b" is incorrect. The president signed as acting on behalf of the corporation, thus disclosing the principal.
Choice "c" is incorrect, per the rule stated above.

Choice "a" is correct. Matching the maturities of current assets with liabilities as they come due is designed to ensure liquidity and reduce risk of cash shortages. Temporary assets (such as inventories, generally, and seasonal inventories, specifically) might be financed with short term debt such that the earnings from the sales of those temporary assets could be used to liquidate the related obligations as they come due and ensure that cash is available to meet cash flow requirements.
Choice "b" is incorrect. Interest rate risks would likely motivate a firm to use longer term financing than short-term financing. Choice "c" is incorrect. Matching cash inflows with cash outflows are more influential in determining a firm's ability to repay debt rather than the length of the obligation. Choice "d" is incorrect.
Long-term rather than short-term debt promotes consistent finance charges. The requirements for financing itself are driven by business practice, not by the maturity of financial instruments used.

Choice "b" is correct. In the integrated enterprise stage of supply chain management, the firm's management will move away from simple consolidation of its operations to an internally-integrated supply chain, which all work together towards the main business issue of the cost of customer service.
Choice "a" is incorrect. In the cross-functional teams stage of supply chain management, the firm's management will turn its attention to consolidation of the various departments that make up operations in order to solve the firm's problems, and the focus will be on customer service.
Choice "c" is incorrect. In the extended supply chain stage of supply chain management, integration moves external to the firm to involve those outside the firm who are able to work as a unified team in an attempt to
obtain slow, profitable growth.

Choice "d" is incorrect. In the supply chain communities stage of supply chain management, the extended supply chain forms a single competitive entity with a synchronized supply chain and a complex system of networks.

Choice "b" is correct.
Rule: The death of a general partner will by operation of law, dissolve the limited partnership. Because the dissolution is by operation of law, there is no requirement to attain a judicial decree. Remaining limited partners do not automatically become general partners as a result of the death of the general partner.
Choices "a", "c", and "d" are incorrect, per the above rule.

Choice "c" is correct. Just-in-time has the goal to minimize the level of inventory carried. Typical characteristics include lot sizes equal to one, insignificant set-up times and costs, and balanced and level workloads. In a just-in-time environment, the flow of goods is controlled by a "pull" approach, where an item is produced only when it is needed down the line, and not a "push-through" system.
Choices "a", "b", and "d" are incorrect based on the above Explanation.

Choice "d" is correct. 17.5% annual cost of financing.

Choice "b" is correct. A tax cut shifts the aggregate demand curve to the right causing the price level and therefore the inflation rate to rise.
Choice "a" is incorrect. The unemployment rate would fall, not rise.
Choice "c" is incorrect. The price level would rise, not remain unchanged.
Choice "d" is incorrect. Consumption would rise as disposable income rises, not fall.

Choice "b" is correct. The capital asset pricing model (CAPM) is:

Choice "d" is correct. Every partner is an agent of the partnership and has apparent authority to bind the partnership to contracts that appear to carry on in the usual way the business of the partnership. It would be usual for a partner in a kitchen equipment business to have authority to purchase stoves. Thus, Gage will win because of Locke's apparent authority.
Choice "a" is incorrect. Every partner is an agent for his partnership and has apparent authority to bind the partnership to contracts that appear to carry on in the usual way the business of the partnership.
Choice "b" is incorrect. Every partner is an agent of the partnership.
Choice "c" is incorrect. Locke did not have express authority to purchase the stoves. The facts state that Locke was not authorized to purchase the stoves and thus lacked express authority.

Choice "c" is correct. One of the consequences of greater government regulation of certain products is the resulting higher cost to the consumer when the government imposes health and safety regulations on certain products it is likely that expenses will increase and that the added costs will be passed on to consumers in terms of higher prices. The total output for the product may decrease.
Choice "a" is incorrect. Since the price goes up, consumption will decrease.
Choice "b" is incorrect. The price can be expected to increase (see choice "c" Explanation above).
Choice "d" is incorrect. Since the price goes up, supply goes down.

Choice "c" is correct. When the supply of and demand for a good both increase, equilibrium quantity increases. However, the impact on price is indeterminate. If demand and supply increase by the same amount, price will remain unchanged (as illustrated above). However, if demand increases by more than supply, price will increase. Conversely, if supply increases by more than demand, price will decrease.
Choices "a" and "b" are incorrect, since the impact on price is indeterminate.
Choice "d" is incorrect, since equilibrium quantity will increase.

Choice "c" is correct. Trade credit generally provides the largest source of short-term credit for small firms.
Choices "a", "b", and "d" are incorrect, per the above Explanation.

Choice "b" is correct. Universal is subject to transaction risks associated with settlement of export transactions and is subject to economic risks associated with the satisfaction of domestic expenses denominated in domestic currencies with imported revenues denominated in a foreign currency. No translation exposure exists since there is no foreign investment or subsidiary.
Choices "a", "c", and "d" are incorrect, per the above Explanation.

Choice "c" is correct. Government price regulations in competitive markets that set maximum or ceiling prices below the equilibrium price will create shortages of that product in the short run because quantity supplied will be less than quantity demanded at that price.
Choice "a" is incorrect. Quantity demand will increase at the lower price.
Choice "b" is incorrect. Quantity supplied will decrease at the lower price.
Choice "d" is incorrect. A price set below the market's equilibrium price causes shortages, not surpluses, per the graph above.

Choice "b" is correct. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners. Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full rights to participate in management.
Choice "a" is incorrect. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners.
Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full partner rights.
Choice "c" is incorrect. An incoming partner is not liable for debts that the partnership incurred before admission beyond the incoming partner's contribution, but is fully liable for debts incurred after becoming a partner. Choice "d" is incorrect. A partnership is a consensual relationship; there is no requirement of a
contribution to become a partner.

Choice "d" is correct. Tactical goals are the means for attaining strategic goals and are short-term in nature. Strategic goals are overall objectives and relatively long-term.
Choice "a" is incorrect. Both strategic and tactical goals are usually attainable.
Choice "b" is incorrect. Development of all goals are best accomplished with the involvement of employees at all levels.
Choice "c" is incorrect. Tactical goals are the means for achieving strategic goals. Both are concerned with profit and other issues.

Choice "d" is correct. Unemployment only tallies workers actively seeking employment; it does not count retirees or stay-at-home parents.
Choice "a" is incorrect. Frictional unemployment describes workers who leave work voluntarily to seek a better position.
Choice "b" is incorrect. Structural unemployment describes workers whose skills are no longer needed.
Choice "c" is incorrect. Cyclical unemployment describes workers unemployed due to the business cycle.

Choice "c" is correct. The following are methods of converting accounts receivable (AR) into cash:

1. Collection agencies - used to collect overdue AR.
2. Factoring AR - selling AR to a factor for cash.
3. Cash discounts - offering cash discounts to customers for paying AR quickly (or paying at all).
For example: 2/10, net 30.
4. Electronic fund transfers - a method of payment, which electronically transfers funds between banks.

Therefore, only choice "c" matches the above list.
Choice "a" is incorrect. Trade discounts offer discounts on future merchandise purchases offered to trade customers. These discounts do not turn AR into cash.
Choice "b" is incorrect. Pledging AR as collateral on a loan does not convert AR into cash.
Choice "d" is incorrect, per choice for "a" above.

Choice "b" is correct. The change in demand for a product, based upon a given change in that product's price, is dependent on whether or not other (presumably cheaper) goods can be substituted for the product. Choice "a" is incorrect. The elasticity of supply (not demand) would take into account the response time producers might have to market changes.
Choice "c" is incorrect. The number of sellers is irrelevant when calculating the elasticity of demand.
Choice "d" is incorrect. A complement good's demand is the same as the primary good. For example, an increase in the demand for a given food would cause the demand for its complement to also increase.
The increased demand of the complement is irrelevant when calculating the elasticity of demand.

Choice "a" is correct. Accounts payable provide a spontaneous source of financing for a firm.
Choice "b" is incorrect. Accounts receivable take time to factor.
Choices "c" and "d" are incorrect.
Each of the following take time to issue:
C. Debentures.

D. Preferred stock.

Choice "c" is correct. Residual income is the difference between net income and the required return. The required return is net book value (total assets) times the hurdle rate (required rate of return). The calculations are as follows:

Choice "a" is incorrect. Residual income would certainly not be $0 in this question because the operating income is greater than the required return for both Division A and Division B.
Choice "b" is incorrect. The $260 is the total required return, not the total residual income.
Choice "d" is incorrect. The $900 is the total operating income, not the total residual income.

Choice "d" is correct. Both a limited partnership and a corporation:
1. Can only be created by statute, and 2. Each must file a copy of its certificate with the proper state agency.
Choice "a" is incorrect. There are instances in which limited partners do vote on certain partnership matters (e.g., approve new general or limited partners).
Choice "b" is incorrect. Limited partnership interests are not automatically exempt from the federal securities laws.
Choice "c" is incorrect. Limited partners do not owe a fiduciary duty to the limited partnership.

Choice "a" is correct. The method of funding the project has no effect on the net present value model. NPV uses a hurdle rate to discount cash flows. If the NPV is positive, the project is acceptable. The method of financing the project, and the cost, are independent of the process of screening the project for acceptability.
Choice "b" is incorrect. The initial cost is one of the most important items in the calculation of NPV.
Choice "c" is incorrect. Added working capital requirements and salvage value affect cash flow. All cash flows are used in the NPV model. Choice "d" is incorrect. The tax depreciation allowance will provide a "tax shield" or tax savings that impacts cash flow and must be considered in NPV analysis.

Choice "c" is correct. As shown above, an increase in aggregate demand causes the equilibrium price level to rise and equilibrium output (real GDP) to increase.
Choice "a" is incorrect. As shown above, equilibrium output increases, not decreases.
Choice "b" is incorrect. As shown above, the equilibrium price level increases, not decreases.
Choice "d" is incorrect. As shown above, the equilibrium price level increases, not decreases.

RULE: Working capital policy is deemed to be more conservative as an increasing portion of an organization's long-term assets, permanent current assets, and temporary current assets are funded by long-term financing.

Choice "d" is correct. An increase in the ratio of current assets to non-current assets would be indicative of an increasingly conservative working capital policy. With no other information, an increase in current assets would indicate that a growing percentage of current assets are financed by non current liabilities and that, nominally, the absolute amount of working capital and the current ratio is improving.

Choice "a" is incorrect. An increase in the ratio of current liabilities to noncurrent liabilities would indicate that an increasing portion of our assets are funded by current liabilities, a more aggressive approach to working capital management.

Choice "b" is incorrect. A decrease in the operating cycle implies that the time to convert inventory into sales (receivables) and receivables into cash has decreased. Assuming no change in liabilities or sales, a decreased operating cycle infers declining current asset balances, greater funding of assets by current liabilities and a more aggressive rather than conservative working capital policy.

Choice "c" is incorrect. A decrease in the quick ratio would indicate that either temporary current assets are decreasing (and are therefore increasingly funded by current liabilities, indicating a more aggressive working capital policy) or that current liabilities are increasing, signaling a decrease in the amount of noncurrent liabilities used to fund temporary current assets, a sign of an increasingly aggressive working capital policy.

Choice "c" is correct. 5.1 percent current net cost of debt.
The fact pattern states that debt can be currently secured at 150 basis points above the Treasury bond rate. A basis point is equal to 1/100 of 1% (1% of 1%).
Applying the decimals, it's: 150 basis points x 1/100 of 1% (or .0001) this yields .015 or 1.5%

Add the additional basis points converted to percentage (1.5%) to the Treasury bond rate of 7% to arrive at the pre-tax debt cost of 8.5%. Apply 1 - tax rate to arrive at the current net cost of debt as follows:

Choice "a" is correct. To decrease the money supply, the Fed can: (1) sell government securities in the open market, (2) increase the discount rate, and (3) increase the required reserve ratio.
Choice "b" is incorrect. The Fed should sell (not buy) securities on the open market.
Choice "c" is incorrect. The Fed should increase (not decrease) the required reserve ratio.
Choice "d" is incorrect. The Fed should increase (not decrease) the discount rate.

Choice "a" is correct. This does not change the current ratio because the reduction of cash is offset by an increase in accounts receivable. Choice "b" is incorrect. A cash dividend increases current liabilities without increasing current assets. Although current assets remain unchanged (until the payment happens), the current ratio will change. Choice "c" is incorrect. Cash is reduced and current liabilities are reduced.
Total current assets will change (they will be reduced). Choice "d" is incorrect. The payment of cash reduces current assets. Long-term assets are increased, as well as long-term and short-term liabilities.
The current ratio is reduced.

Choice "b" is correct. ROI is no more and no less capable of being independently verified or manipulated than other performance measure. Choice "a" is incorrect. Old fixed assets may be undervalued and make comparison with a segment with newer assets inappropriate.
Choice "c" is incorrect. Investment projects with positive present value may be rejected because ROI is too low.
Choice "d" is incorrect. Turning around an unprofitable division would be good for the company but would probably lower a manager's ROI.

Choice "b" is correct. A minimum wage that is set above the equilibrium wage will result in an excess supply (or surplus) of labor.

Choice "a" is incorrect, since the quantity demanded of labor at $7 is less than the quantity supplied, implying an excess supply not an excess demand. Choice "c" is incorrect. An increase in the minimum wage causes a decrease in quantity demanded of labor, not a decrease in the demand (shift in demand) for labor.
Choice "d" is incorrect, per the above Explanation.

Choice "c" is correct. The general (or aggregate) demand for labor will remain unchanged; however, the quantity demanded will decrease.
Choice "a" is incorrect, per Explanation for choice "c" above.
Choices "b" and "d" are incorrect. The general (or aggregate) supply of labor will remain unchanged;
however, the quantity supplied will increase.

Choice "d" is correct. 20.0 percent cost of equity capital by using the discounted cash flow model.

Choice "b" is correct. When using the net present value method of capital budgeting, different hurdle rates can be used for each year of the project.
Choice "a" is incorrect. The desired rate of return for capital projects is established by management.
Choice "c" is incorrect. The internal rate of return determines the discount rate that will equate the discounted cash inflows with the outflows, thus resulting in no gain or loss (breakeven). Choice "d" is incorrect. Both the net present value method and the internal rate of return model are discounted cash flow methods.

Choice "c" is correct. The formula for computing the cost/benefit for trade discounts is:

Choice is 24% ("c").
Choices "a", "b", and "d" are incorrect, per the above calculations.

Choice "c" is correct. The optimal proposal is that which has the lowest cost for Newman.

Thus, the lowest cost is "c" at $122,500.
Choices "a", "b", and "d" are incorrect, per the above calculations/Explanation.

Choice "a" is correct. A partnership agreement does not have to be in writing to be valid. If the partners want to enforce an agreement to be partners for more than one year, that agreement must be in writing, but merely having the partnership last for more than one year does not make an oral partnership agreement invalid.

Choice "b" is correct. Internal costs analysis includes analyzing the internal value-creating ability of a firm, so the sources of profit and costs of the internal activities of the firm must be analyzed.
Choices "a", "c", and "d" are incorrect, per the above Explanation.

Choice "a" is correct. Margarine and butter are substitute goods. If the price of one goes up, demand for the substitute increases. Choices "b", "c", and "d" are incorrect. They are complements. Two goods are complements if they are used together or their demand curves move together (breakfast cereal and milk, e.g., or tennis balls and tennis racquets). Thus, if the price of one complement goes up, demand for the
other good goes down.

Choice "c" is correct. Under monopolistic competition, strategic plans include maintaining the market share (as with pure competition), but they also likely include plans for enhanced product differentiation and allocation of resources to advertising, product research, etc.

Choices "a", "b", and "d" are incorrect because they are characteristics of other types of market structures.

Choice "a" is correct. Average collection period has decreased due to a change in credit policy that has caused:

1. Increase in sales,
2. Increase in discounts taken,
3. Decrease in the amount of bad debt; and 4. Decrease in the investment in accounts receivable

Choice "b" is incorrect. Percentage discount offered has probably increased, as discounts taken has increased.
Choice "c" is incorrect. Accounts receivable turnover has increased, as sales are up and accounts receivable are down.
Choice "d" is incorrect. Change in gross profit and working capital is not determinable from these facts.

Choice "a" is correct. The payback method determines the number of years that it will take for a company to recoup or be paid back for its investment. The payback method does not consider the time value of money. Choice "b" is incorrect. The payback method determines the number of years that it will take for a company to recoup or be paid back for its investment. Although the payback method focuses on liquidity and measures risk, project cash flows after the initial investment are not considered; thus, profitability is
ignored.
Choice "c" is incorrect. The payback method determines the number of years that it will take for a company to recoup or be paid back for its investment. Although the payback method focuses on liquidity and measures risk, project cash flows after the initial investment are not considered; thus, profitability is
ignored.
Choice "d" is incorrect. Salvage value is specifically considered as part of payback computations because it contributes to the incoming cash flow when the asset is sold.

Rule of economic reasoning: "Draw the graph!"

Choice "d" is correct. When demand increases and supply has not increased (as implied by the question), suppliers will raise the price of the product and more product will be bought (but the supply curve does not change). Because consumers are demanding more product than is available, they are "willing" to pay a higher price.
Choice "a" is incorrect. Although buyers would pay higher prices and purchase more products, the supply
"curve" has not changed. Therefore, the quantity supplied remains the same.
Choice "b" is incorrect. Because consumer demand has increased (not decreased).
Choice "c" is incorrect. An increase in demand has an indeterminate (and irrelevant) impact on the number of buyers. For example, there could be the same number of buyers in the market, but that each demands a higher quality.

Choice "b" is correct. $(6,000). A company's decision to commit to a lockbox plan is an example of marginal analysis. In other words, do the marginal benefits exceed the marginal costs of the plan?

Choices "a", "c", and "d" are incorrect, per the above calculation.

Choice "c" is correct. Investment bankers are paid their fees partly by being allowed to purchase the new securities they are underwriting for a discount and then reselling those securities on the market. This is known as the underwriting spread.
Choices "a" and "d" are incorrect, as both of these describe either fees or commissions and not an underwriting spread.
Choice "b" is incorrect. The underwriting spread is the difference between the discount price paid and the resale price.

Choice "a" is correct.
Rule: On dissolution of a general partnership the "order of distribution" would be as follows:

III. General partner loans.
I. Partners' capital accounts.
II. General partners' profits.
Choices "b", "c", and "d" are incorrect, per the above rule.

Choice "a" is correct. The transfer of a member interest requires the consent of the other members.
Members may not assign their interest without the other members' consent. Choice "b" is incorrect. Unless the members have agreed to operate as a manager managed limited liability company, all members have the power to participate in management. Choice "c" is incorrect. Members in a limited liability company all have limited personal liability. Choice "d" is incorrect. Unless otherwise agreed, members have the right to manage the every day operations of a limited liability company. This can include the ordering of office supplies.

Choice "c" is correct. This is really an agency question on apparent authority. Apparent authority is authority that a third party reasonably believes an agent has. If the third party is aware of a restriction on the agent's authority, the third party cannot reasonably believe that the agent has the restricted authority.
Choice "a" is incorrect. Submitting a claim to arbitration is an extraordinary act and so is not within a member's apparent authority. Choice "b" is incorrect. Apparent authority is derived from what the reasonable person believes is the authority of a member, not the express powers and purposes contained in the operating agreement. Choice "d" is incorrect. A formal resolution of the members will not be effective to destroy apparent authority if third parties are unaware of the resolution.

Choice "c" is correct. A stock dividend means that the corporation issues its existing shareholders more stock. In essence, the corporation is merely diluting the proportional ownership interest of existing shares.
This has no effect on the corporation's earnings and profits for federal income tax purposes.
Choice "a" is incorrect. There is no requirement that stock dividends be registered with the SEC because no "sale" is involved. Choice "b" is incorrect. The receipt of a stock dividend is not the recognition of income. It merely divides the stockholders' current ownership interests into more pieces; it does not
increase proportional ownership interest in the corporation. Choice "d" is incorrect. The issuance of dividends, including stock dividends, is at the directors' discretion; shareholders do not vote on dividends.

Choice "d" is correct. In evaluating the adequacy of the budgeted annual operating income, you would not use the internal rate of return calculation. The internal rate of return is used for capital budgeting. Choices
"a", "b", and "c" are incorrect. Return on assets, long range profit objectives, industry average for earnings on sales, and earnings per share [not mentioned as an option] are all measures for evaluating the adequacy of the budgeted annual operating income.

Choice "a" is correct. Hedgehog will exercise its option and liquidate the payables associated with the proceeds. The exercise of the option represents a less costly alternative than acquisition of proceeds at the spot rate at the time the payables are due. The net impact of exercise of the option is computed as follows:

The premium is a sunk cost and is irrelevant to the decision. Note that the premium is a factor in determining the net gain (loss) but not in deciding whether to exercise the option.
Choices "b", "c", and "d" are incorrect, per computation above.

Choice "b" is correct. 6.6%. Williams' after tax cost of debt is 4.8% and cost of preferred stock is 8.4% ($105/share less issue costs of $5/share). The cost of equity (as calculated in a prior question) is 7.0%.
This question pertains to the manner in which changes in the required amount of capital will impact the weighted average cost of capital governed by the target capital structure. The rates are given, and you must derive the weights. The company needs a total of $200,000. The question gives you the amount of Retained Earnings at $100,000, the source of 7% dividend payments on common shares. If all that is needed is $200,000, then, by definition, the target capital structure is "priced out" as shown with 7% common equity of $100,000 being equal to 50% of the target capital structure totaling $200,000 without any modification:

Choices "a", "c", and "d" are incorrect, per the above Explanation.

Choice "a" is correct. $10,000. Float is the difference between the balance of checks outstanding, which have not cleared the bank and deposits made but which have not yet cleared the bank here.

Choices "b", "c", and "d" are incorrect, per the above calculation.

Choice "b" is correct. In general, a shareholder has a right to inspect the books and records of a corporation for purposes related to the stockholder's interest in the corporation. This right will be denied where the purpose is not reasonably related to their status as a shareholder. Obtaining stockholder names to create a retail mailing list is a personal purpose.
Choices "a", "c", and "d" are incorrect. The following reasons for shareholders to inspect the books of the corporation are reasonably related to their status as shareholders:

A. To commence a stockholder's derivative suit.
C. To solicit stockholders to vote for a change in the board of directors.
D. To investigate possible management misconduct.

Choice "c" is correct. Political issues are external factors that affect the overall industry, not simply the competitive environment of the firm.
Choices "a", "b", and "d" are incorrect, as all of these factors directly affect the competitive environment of the firm.

Choice "c" is correct. Directors are elected by the stockholders.

Choice "a" is correct. If a nation has a strong set of factors of production (such as low cost, high quality raw material inputs), that are required in a given industry, it will fare better with regard to competitive advantage. Choice "b" is incorrect. Conditions of domestic demand relate to the nation's domestic demand for the product, which is directly related to the ability of the nation to fare better with regard to competitive advantage. Choice "c" is incorrect. The factor of related and supporting industries deals with whether there are suppliers of material inputs that exist within a nation or whether there are rival firms who are competitive in the international environment, both of which would increase the nation's competitive advantage.
Choice "d" is incorrect. The factor of firm strategy, structure, and rivalry relates to the practices of a nation with respect to how the companies are managed and organized, long with the laws of the nation that regulate the formation of the companies, and how intense the rivalry is with respect to competing firms in the nation.

Choice "b" is correct. Capital budgeting decisions do not include the financing of short-term working capital needs, which are more operational in nature.
Choices "a", "c", and "d" are incorrect, as these are all types of capital budgeting decisions.

Choice "a" is correct. As the cost of carrying inventory decreases, safety stock would tend to increase to reduce the risk of stock outs. Choice "b" is incorrect. As sales become more predictable (sales variability decreases), less (not more) safety stock would be needed because the risk of stock outs would have decreased.
Choice "c" is incorrect. If the cost of stock outs decrease, safety stock would decrease.
Choice "d" is incorrect. If lead-time decreases, safety stock would decrease.

Rule: Overall strategies are divided into two different types that are defined as follows: Cost leadership: Organization seeks to capture market share through maintaining the lowest cost.
Differentiation: Organization seeks to capture market share by demonstrating product value.
Choice "b" is correct. Organizations that sell economically inferior goods (necessities such as cotton swabs, light bulbs, etc.) are more likely to posture themselves as cost leaders than organizations that sell economically superior goods (luxuries such as cruise packages, fine china, jewelry, etc.) who will likely seek to differentiate the value of their product as part of their strategy. Choice "a" is incorrect. Economically inferior products would likely be associated with cost leadership, not differentiation while economically superior products would likely be associated with differentiation. Choice "c" is incorrect. Economically inferior products would likely be associated with cost leadership, not differentiation while economically superior products would likely be associated with differentiation. Choice "d" is incorrect. Economically inferior products would likely be associated with cost leadership, not differentiation while economically superior products would likely be associated with differentiation.

Choice "c" is correct. The trough of a business cycle is an economic low point with no positive indicators for the future. It is characterized by unused productive capacity and an unwillingness to risk new investments.
Choice "a" is incorrect. Shortages may occur during a peak.
Choice "b" is incorrect. Increasing purchasing power and increasing capital investments come with recovery.
Choice "d" is incorrect. Declining purchasing power comes with inflation; unlikely in a trough.

Choice "d" is correct. Inspections. Inspections are part of order costs, not carrying costs.
Choices "a" and "c" are incorrect. Inventory carrying costs include all costs associated with warehousing (storing) inventory (e.g., storage, insurance, obsolescence, and spoilage associated with holding inventory). Choice "b" is incorrect. The economic cost of holding inventory includes the implicit (opportunity) cost of foregoing a return on the money invested in inventory.

Choice "b" is correct. If there is an increase in the resources available in an economy, the economy will be capable of producing more goods and services. This increase is really an increase in the long-run aggregate supply (potential GDP). On the aggregate supply and demand chart, the long-run aggregate supply line (LRAS) is the vertical line that represents the potential or equilibrium level of output. If that line shifts to the right, then the economy is capable of expanding, but it will not automatically expand just because the line shifts to the right.
Choice "a" is incorrect. Just because there is an increase in the resources available in an economy, it does not mean that more goods and services will automatically be produced. There would have to be increased demand (a shift upward in the aggregate demand line) for more goods and services to actually be produced.
Choice "c" is incorrect. If there is an increase in the resources available in an economy, the standard of living in the economy will not necessarily rise. It could rise, but it will not necessarily do that. Choice "d" is incorrect. If there is an increase in the resources available in an economy, the technological efficiency of the economy will not automatically improve. This statement is backwards. An increase in technological efficiency of an economy will normally increase the resources available in the economy by increasing productivity.

Choice "b" is correct. Establishing a strategic vision is not normally included as part of the logical steps to reach a decision. Although decision-making techniques are incorporated as part of establishing a strategic vision and consideration of strategic issues is important, the process of deriving the vision is not considered part of the decision-making process.
Choice "a" is incorrect. Obtaining information as a basis for selecting between alternatives is generally viewed as a critical part of decision-making. Choice "c" is incorrect. Selecting alternatives is a specific decision-making action that is generally included as one of the steps identified in decision-making. Choice
"d" is incorrect. Identifying alternative courses of action from which to choose is a decision-making process that is generally included as one of the steps identified in decision-making.

Choice "c" is correct. Absent an agreement to the contrary, if a member in the LLC sells his interest in an LLC without obtaining the other members' consent, the assignee is only entitled to receive the assignor's share of profits. Choices "a", "b", and "d" are incorrect, because, absent an agreement to the contrary, although a member of an LLC is allowed to assign his interest in profits and losses, an assignee of a membership interest may not participate in the management of the LLC.

Choice "c" is correct. $810,000 accounts receivable.

Choices "a", "b", and "d" are incorrect, per the above calculation.

Choice "d" is correct. A parent corporation owning 90% or more of a subsidiary may merge the subsidiary (short form merger) into the parent without the approval of the shareholders of either corporation or the approval of the subsidiary's board.
Choices "a", "b", and "c" all require at least one of the corporations to follow the general procedure for fundamental corporate changes (i.e., board resolution notice, approval by majority shares, and filing).

Choice "d" is correct. A corporation's articles of incorporation need not contain any information regarding quorum requirements. Choices "a", "b", and "c" are incorrect because under the Revised Model Business Corporations Act a corporation's articles of incorporation must include:

(1) The name of the corporation, (2) The name and address of the corporation's registered agent, (3) The names and addresses of each of the incorporators, and (4) The number of shares authorized to be issued.

Choice "b" is correct. Crude oil is an input to the production of gasoline. When the price of an input increases, supply shifts left, causing equilibrium price to rise and equilibrium quantity to fall.

Choice "a" is incorrect, since price will rise and quantity will fall.
Choice "c" is incorrect, since price will rise.
Choice "d" is incorrect, since quantity will fall.

Choice "a" is correct. Monopolistic competition is characterized by a relatively large number of sellers who produce differentiated products. There are few barriers to entry and firms exert some influence over the price and the market. Best examples are brand name consumer products.
Choice "b" is incorrect. Relatively few sellers with differentiated products would indicate an oligopoly.
Choice "c" is incorrect. One company would be a monopoly, two an oligopoly.
Choice "d" is incorrect. A relatively large number of sellers and a standardized product indicates perfect competition.

Choice "a" is correct. Upon termination of the partnership creditors are paid first. After payment of creditors, each partner is deemed to have an account that is charged or credited an amount equal to the partner's contribution plus or minus the partner's share of any profits or losses.
The agreement between Smith and James was that profits and losses would be allocated 60% to Smith and 40% to James. The partnership had $82,000 in assets ($40,000 in cash, $10,000 from accounts receivable, and $32,000 from property and equipment). The partnership had $90,000 in liabilities and capital. Of the $82,000 in assets, $24,000 is paid first to creditors. This leaves a balance of $58,000. Smith contributed $30,000 in capital and James contributed $36,000 in capital. With $66,000 owed in capital and only $58,000 available, there is a deficit of $8,000. By agreement, Smith is responsible for 60% of the $8,000 deficit or $4,800. Smith would be credited an amount equal to his capital ($30,000) minus his share of the loss ($4,800) or $25,200. Only choice "a" reflects this amount.
Choices "b", "c", and "d" are incorrect, per the above calculation.

Choice "a" is correct. As a foreign competitor's currency becomes weaker compared to the U.S. dollar, the product becomes less expensive in U.S. dollars. The less expensive product will have the advantage in the U.S. market. Choice "b" is incorrect. As a foreign competitor's currency becomes weaker compared to the U.S. dollar, the product becomes less expensive in U.S. dollars. The less expensive product will have the advantage in the U.S. market, not a disadvantage.
Choice "c" is incorrect. Foreign currency exchange rates impact both sales and possibly cost of goods sold of a competing domestic company. Sales within U.S. markets will deteriorate as the currency of foreign competitors deteriorates and makes the domestic company's goods more expensive. As a foreign competitor's currency appreciates, sales within U.S. markets by a domestic company should also increase as goods manufactured in the U.S. become less expensive. Cost of goods sold may fluctuate if foreign suppliers are used.
Choice "d" is incorrect. It is better for a U.S. company when the value of the U.S. dollar weakens, not strengthens. A weak U.S. dollar makes domestic goods relatively less expensive that imported goods.

Choice "d" is correct. The "deliver" process encompasses all the activities of getting the finished product into the hands of the ultimate consumers to meet their planned demand. Managing accounts receivable and collections from customers falls into the "deliver" process.
Choices "a", "b", and "c" are incorrect, per the above Explanation.

Choice "c" is correct. The working capital financing policy that finances permanent current assets with short-term debt subjects the firm to the greatest risk of being unable to meet the firm's maturing obligations. Choices "a" and "b" are incorrect because the use of long-term debt financing produces the smallest risk of being unable to meet maturing obligations. Choice "d" is incorrect because, although financing fluctuating current assets with short-term debt exposes the firm to some risk, it is not the greatest or the smallest.

Choice "c" is correct. Every partner in a partnership - whether active or inactive - has the right to inspect the partnership's books and records. Choice "a" is incorrect. Only a partner has a right to inspect the partnership's books and records; an employee of the partnership has no such right. Choice "b" is incorrect.
Only current partners have a right to inspect the partnership's books and records; former partners do not have such a right. Choice "d" is incorrect. Only partners have a right to inspect a partnership's books and records. A transferee of a partner's interest has only the partner's right to distributions.

Choice "b" is correct. If a seller extends credit to a purchaser for a period of time longer than the purchaser's operating cycle, the seller is, in effect, financing more than just the purchaser's inventory needs. Choice "a" is incorrect. Accounts receivable would be higher than those companies whose credit period is shorter than the purchaser's operating cycle.
Choice "c" is incorrect. Seller is financing the purchaser, but not necessarily long-term assets.
Choice "d" is incorrect. It is appropriate for the seller to have stated policies for discount rate and credit periods.

Choice "c" is correct. Either entity's shareholders may contribute property to the corporations without being taxed and may contribute such property as an exchange for stock as appraised by the directors. Choice "a" is incorrect. An S corporation may not have more than 100 shareholders, although a C corporation may have as many shareholders as desired.
Choice "b" is incorrect. Only the C corporation is subject to the double taxation disadvantage.

Choice "d" is incorrect. Only an S corporation is prohibited from having foreign country shareholders.