Test Prep BUSINESS-ENVIRONMENT-AND-CONCEPTS Online Practice Questions and Exam Preparation

Test Prep BUSINESS-ENVIRONMENT-AND-CONCEPTS Online Questions & Answers

• Question 301:

  In which stage of supply chain management will management 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?

  A. Cross-functional teams.
  B. Integrated enterprise.
  C. Extended supply chain.
  D. Supply chain communities.
  B. Integrated enterprise.

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  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.

• Question 302:

  Demand for a product tends to be price inelastic if: A. The product is considered a luxury item.

  B. Few good complements for the product are available.
  C. People spend a large share of their income on the product.
  D. Few good substitutes are available for the product.
  D. Few good substitutes are available for the product.

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  Choice "d" is correct. Demand for a product tends to be price inelastic if few good substitutes are available for the product. Even if price increases, consumers are then unable to switch to substitute goods, because there aren't any.

  Choice "a" is incorrect. Luxury items may have good substitutes available.

  Choice "b" is incorrect. Complementary goods are those whose demand fluctuates in unison; substitute goods are more relevant here. Choice "c" is incorrect. If consumers spend a large share of their income on the product, they will be very

  sensitive to any price changes and hence product demand would be more "elastic".

• Question 303:

  Juan is a limited partner in Pet Food and Fun, Limited Partnership. Juan visited Chow, Inc., a local supplier of dog food claiming to be a "partner" in the partnership and negotiated a distribution contract between the supplier and limited

  partnership on behalf of the partnership.

  As a result of these actions, Juan:

  A. Has limited liability as a limited partner in reference to all creditors.
  B. Has limited liability as a limited partner to all creditors except Chow, Inc.
  C. Has full personal liability to all creditors.
  D. None of the above.
  B. Has limited liability as a limited partner to all creditors except Chow, Inc.

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  Choice "b" is correct.

  Rule: A limited partner will be considered a general partner with full personal liability only to those that the limited partner transacts with as if he were a general partner. Limited partners have no right to participate in management, such as

  negotiating contracts on behalf of the limited partnership. The limited partner will retain his status and limited liability to all others that the limited partner has not transacted with on behalf of the partnership.

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

• Question 304:

  Super Sets, Inc. manufactures and sells television sets. All sales are finalized on credit with terms of 2/10, n/30. Seventy percent of Super Set customers take discounts and pay on day 10, while the remaining 30% pay on day 30. What is the average collection period in days?

  A. 10
  B. 16
  C. 24
  D. 40
  B. 16

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  Choice "b" is correct. The average collection period represents the weighted average of the periods that accounts receivable are outstanding and is computed as follows:

  

  Choice "a" is incorrect, per the above computation.

  Choice "c" is incorrect. This proposed solution mismatches the percentages and the days and represents the sum of the products of 30 x 70 % and 10 x 30%.

  Choice "d" is incorrect. This proposed solution is purely the sum of the two customer payment patterns presented, 10 and 30.

• Question 305:

  In a general partnership, the authorization of all partners is required for an individual partner to bind the partnership in a business transaction to:

  A. Purchase inventory.
  B. Hire employees.
  C. Sell goodwill.
  D. Sign advertising contracts.
  C. Sell goodwill.

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  Choice "c" is correct. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. No such authority exists, however, for transactions outside the regular scope of business. The sale of a business's goodwill is extraordinary and is outside the ordinary scope of business. Thus, a partner must get authorization from all other partners to make the sale. Choice "a" is incorrect. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. Purchasing inventory is within the regular scope of business, so a partner need not get permission from the other partners to bind the partnership. Choice "b" is incorrect. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. Hiring employees is within the regular scope of a business, so a partner need not get permission from the other partners to bind the partnership. Choice "d" is incorrect. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. Entering into advertising contracts is within the regular course of business, and so a partner need not get permission from the other partners to bind the partnership.

• Question 306:

  CyberAge outlet, a relatively new store, is a cafe that offers customers the opportunity to browse the Internet or play computer games at their tables while they drink coffee. The customer pays a fee based on the amount of time spent signed on to the computer. The store also sells books, tee shirts, and computer accessories. CyberAge has been paying all of its bills on the last day of the payment period, thus forfeiting all supplier discounts. Shown below are data on CyberAge's two major vendors, including average monthly purchases and credit terms.

  

  Assuming a 360-day year and that CyberAge continues paying on the last day of the credit period, the company's weighted annual interest rate for trade credit (ignoring the effects of compounding) for these two vendors is:

  A. 27.0 percent.
  B. 28.0 percent.
  C. 29.3 percent.
  D. 30.2 percent.
  B. 28.0 percent.

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  Choice "b" is correct. 28% weighted annual interest rate.

  This question pertains to a complex computation of effective rates on lost discounts for multiple terms and multiple balances. The computation of the annual percentage cost of the lost discount is equal to the effective rate of interest for the

  period (for example 2/10, net 30 is 2% interest charge/ 98% proceeds) times the number of times this period occurs in a year (for example 2/10, net 20 is 360 days per year divided by 20 day period during which the lost discount is used or 18

  times). Extension of this logic to the referenced question involves allocating the computed annual rates to the relative balances of the outstanding payables as follows:

  

• Question 307:

  If a firm borrows $500,000 at 10 percent and is required to maintain $50,000 as a minimum compensating balance at the bank, what is the effective interest rate on the loan?

  A. 11.1 percent.
  B. 9.1 percent.
  C. 12.2 percent.
  D. 11.0 percent.
  A. 11.1 percent.

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  Choice "a" is correct. 11.1% effective interest rate on loan.

  

  This question pertains to the computation of the effective rate of interest on a $500,000 note with a 10% stated rate that requires a $50,000 compensating balance. The answer computes the effective rate at 11.1% by taking the ratio of the

  amount paid $50,000 to the funds available $450,000 ($500,000 -$50,000). Why would the $50,000 in interest payments not also be deducted in arriving at the effective rate? The simple answer is that the note is not discounted by the interest.

  It is only subject to the compensating balance.

  The borrower receives $500,000 in proceeds but must hold out $50,000 and pay back $550,000, principal + interest, to the lender. At the conclusion of the loan, the compensating balance requirement is removed.

• Question 308:

  Davis, a director of Active Corp., is entitled to:

  A. Serve on the board of a competing business.
  B. Take sole advantage of a business opportunity that would benefit Active.
  C. Rely on information provided by a corporate officer.
  D. Unilaterally grant a corporate loan to one of Active's shareholders.
  C. Rely on information provided by a corporate officer.

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  Choice "c" is correct. As a director of the corporation Davis may rely on information provided to him/her by a corporate officer. A corporate director is under no obligation to verify information given to him by management (corporate officers). Choice "a" is incorrect. A director is not entitled to serve on the board of a competing business. Doing so would be a breach of fiduciary duty. Choice "b" is incorrect. A director may not take sole advantage of a business opportunity that would benefit the corporation. Doing so would be a breach of fiduciary duty. Choice "d" is incorrect. A director may not unilaterally grant a corporate loan to one of the corporation's shareholders. Directors generally must act through a majority vote at a directors' meeting.

• Question 309:

  The following selected data pertain to the Darwin Division of Beagle Co. for 1994:

  

  What was Darwin's 1994 residual income?

  A. $0
  B. $4,000
  C. $10,000
  D. $30,000
  D. $30,000

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  Choice "d" is correct. Residual income is income less the imputed interest rate times average invested capital. Capital turnover is equal to sales / average invested capital.

  

  Choice "a" is incorrect. Residual income is greater than zero. The imputed interest rate times average invested capital needs to be compared with operating income.

  Choice "b" is incorrect. Residual income is not simply the imputed interest rate times operating income.

  The imputed interest rate times average invested capital needs to be compared with operating income.

  Choice "c" is incorrect. Residual income is not simply imputed interest rate times average invested capital. The operating income must be considered.

• Question 310:

  Factors internal to the organization that impact strategy and are sources of strengths and weaknesses include all of the following, except:

  A. Marketing effectiveness.
  B. Competence of management.
  C. Innovation of product lines.
  D. Regulations and laws.
  D. Regulations and laws.

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  Choice "d" is correct. Regulations and laws are external factors of opportunities and threats that affect the overall industry. Choices "a", "b", and "c" are incorrect, as all of these factors are examples of internal factors of an organization.