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

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

• Question 311:

  When does competition not become an even stronger force impacting the profitability of a firm?

  A. Various firms use various types of strategic plans.
  B. Customers do not have strong brand preferences.
  C. The market is not growing fast.
  D. The costs of exiting the market are less than the costs of continuing to operate.
  D. The costs of exiting the market are less than the costs of continuing to operate.

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  Choice "d" is the proper choice, as it is not a factor that would cause market competitiveness to be even stronger.

  Choices "a", "b", and "c" are incorrect because they are all reasons that competition becomes an even stronger force that impacts the firm's profitability. Following are situations that would cause competition to be an even stronger force

  impacting the profitability of a firm:

  ?The market is not growing fast.

  ?There are several equal-sized firms in the market.

  ?Customers do not have strong brand preferences.

  ?The costs of exiting the market exceed the costs of continuing to operate.

  ?Some firms profit from making certain moves to increase market share.

  ?The various firms in the market use different types of strategic plans.

• Question 312:

  Which of the following is most likely to cause an increase in the amount of frictional unemployment in an economy?

  A. An invention that renders an industry obsolete.
  B. A downturn in aggregate business activity.
  C. An increase in the average age of the work force.
  D. A reduction in the average age of the work force.
  D. A reduction in the average age of the work force.

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  Choice "d" is correct. Younger workers tend to move between jobs more frequently.

  Choice "a" is incorrect. This would lead to structural unemployment.

  Choice "b" is incorrect. This would lead to cyclical unemployment.

  Choice "c" is incorrect. Older workers tend to be voluntarily between jobs less frequently than younger workers.

• Question 313:

  In 1992, Anchor, Chain, and Hook created ACH Associates, a general partnership. The partners orally agreed that they would work full time for the partnership and would distribute profits based on their capital contributions. Anchor contributed $5,000; Chain $10,000; and Hook $15,000. For the year ended December 31, 1993, ACH Associates had profits of $60,000 that were distributed to the partners. During 1994, ACH Associates was operating at a loss. In September 1994, the partnership dissolved. In October 1994, Hook contracted in writing with Ace Automobile Co. to purchase a car for the partnership. Hook had previously purchased cars from Ace Automobile Co. for use by ACH Associates partners. ACH Associates did not honor the contract with Ace Automobile Co. and Ace Automobile Co. sued the partnership and the individual partners.

  A. Anchor's share of ACH Associates' 1993 profits was $20,000.
  B. Hook's share of ACH Associates' 1993 profits was $30,000.
  B. Hook's share of ACH Associates' 1993 profits was $30,000.

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  Choice "b" is correct. Unless otherwise agreed, partners share profits equally. Here, the partners agreed to share profits on the basis of their contributions, which were in a ratio of 1:2:3 respectively for Anchor, Chain, and Hook. Thus, Anchor's share of the 1993 profits was $10,000, Chain's share was $20,000, and Hook's share was $30,000.

• Question 314:

  Which of the following methods of measuring transaction exposure to exchange rate risk uses standard deviation, coefficient of correlation and other formal statistical techniques?

  I. Measurement of currency variability.

  II.

  Measurement of currency correlations.

  A. I only.
  B. II only.
  C. Both I and II.
  D. Neither I and II.
  I. Measurement of currency variability. II. Measurement of currency correlations.
  C. Both I and II.

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  Choice "c" is correct. The currency variability approach uses standard deviations as a means of predicting future exchange rates while the currency correlation approach is often applied to circumstances involving multiple currencies and

  evaluates exposure in relation to the statistically computed degree of correlation between the movements of different currencies.

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

• Question 315:

  Compared to firms in a perfectly competitive market, a monopolist tends to:

  A. Produce substantially less but charge a higher price.
  B. Produce substantially more and charge a higher price.
  C. Produce the same output and charge a higher price.
  D. Produce substantially less and charge a lower price.
  A. Produce substantially less but charge a higher price.

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  Choice "a" is correct. Compared to firms in a perfectly competitive market, a monopolist tends to produce substantially less but charge a higher price. Choices "b", "c", and "d" are incorrect, per above Explanation.

• Question 316:

  Which one of the following statements is most correct if a seller extends credit to a purchaser for a period of time longer than the purchaser's operating cycle? The seller:

  A. Will have a lower level of accounts receivable than those companies whose credit period is shorter than the purchaser's operating cycle.
  B. Is, in effect, financing more than just the purchaser's inventory needs.
  C. Is, in effect, financing the purchaser's long-term assets.
  D. Has no need for a stated discount rate or credit period.
  B. Is, in effect, financing more than just the purchaser's inventory needs.

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  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.

• Question 317:

  A limited liability partnership must:

  A. File registration documents with the state in which it is formed.
  B. Hold all partners personally liable for all debts and liabilities of the partnership and partners.
  C. Carry no less than one hundred thousand dollars of property insurance.
  D. Not have partners with professional licenses.
  A. File registration documents with the state in which it is formed.

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  Choice "a" is correct.

  Rule: To have limited liability, an LLP must file with the state a registration statement usually referred to as Articles of LLP. It is generally designed for professionals who desire to be partners with other like professionals and yet not have

  liability for the malpractice of their partners. Some states require that personal liability insurance (not property insurance) be carried to protect those harmed by the professionals' malpractice.

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

• Question 318:

  Lisa is a limited partner in a limited partnership. Jen, one of the other limited partners, is seeking to sell her interest in the partnership to Karen and allow Karen to become a new limited partner. Which of the following statements is true?

  A. Lisa may engage in the management of the limited partnership without losing her limited liability.
  B. Jen may transfer her interest and make Karen a new limited partner without the approval of the other partners.
  C. Jen may withdraw from the limited partnership without giving notice to the partnership.
  D. Lisa has a right to vote on the transferring of interest to and admission of Karen as a limited partner.
  D. Lisa has a right to vote on the transferring of interest to and admission of Karen as a limited partner.

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  Choice "d" is correct. Limited partners have the right to vote on the transfer of interest and admission of a new partner. Admission of a new partner requires unanimous consent. Choice "a" is incorrect. A limited partner who acts as a general

  partner loses her limited liability status to those she acted as a general partner towards. Choice "b" is incorrect. Partners can freely transfer their interests in profits and losses to third parties, but the third party cannot become a limited partner

  without the unanimous consent of the other partners.

  Choice "c" is incorrect. Limited partners must give 6 months notice of withdrawal in absence of an agreement to the contrary.

• Question 319:

  The limited liability of the shareholders of a closely-held corporation will most likely be disregarded if the shareholders:

  A. Lend money to the corporation.
  B. Are also corporate officers, directors, or employees.
  C. Undercapitalized the corporation when it was formed.
  D. Formed the corporation solely to limit their personal liability.
  C. Undercapitalized the corporation when it was formed.

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  Choice "c" is correct. The "corporate veil" can be pierced in situations in which the corporation was undercapitalized at formation, where it is the alter ego of the shareholders, or when it used to perpetrate a fraud. Choice "a" is incorrect. Shareholders may lend money to their corporation. This does not make such shareholders personally liable for the corporation's debt. Choice "b" is incorrect. Officers, directors, and employees are not personally liable for the corporation's debt, and there is no reason to change this role merely because such persons also own shares. Choice "d" is incorrect. The desire to limit liability is a valid reason to adopt the corporate form and will not, by itself, allow the "corporate veil" to be pierced.

• Question 320:

  Which of the following is correct regarding the consumer price index (CPI) for measuring the estimated decrease in a company's buying power?

  A. The CPI is measured only once every 10 years.
  B. The products a company buys should differ from what a consumer buys.
  C. The CPI measures what consumers will pay for items.
  D. The CPI is skewed by foreign currency translations.
  B. The products a company buys should differ from what a consumer buys.

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  Choice "b" is correct. The consumer price index measures the costs of a market basket of specific goods commonly purchased by consumers. It measures consumer buying power and is not distorted by items generally bought by industry.

  Choice "a" is incorrect. The Consumer Price Index (CPI) represents monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

  Choice "c" is incorrect. The Consumer Price Index measures what has been paid for items, not what consumers will pay for items.

  Choice "d" is incorrect. The Consumer Price Index measures what has been paid by consumers in over eighty urban areas in the United States. The amounts paid are denominated in US dollars and would not be skewed by foreign currency

  translations.