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

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

• Question 401:

  Absent a specific provision in its articles of incorporation, a corporation's board of directors has the unilateral power to do all of the following, except:

  A. Repeal the bylaws.
  B. Declare dividends.
  C. Fix compensation of directors.
  D. Amend the articles of incorporation.
  D. Amend the articles of incorporation.

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  Choice "d" is correct. Amendment of the articles of incorporation, albeit proposed by the directors, cannot usually be effected without the affirmative vote of the shareholders. Choice "a" is incorrect. The directors ordinarily have the power to repeal bylaws unless the articles or the specific bylaw to be repealed provides otherwise. Choice "b" is incorrect. The directors have the power to declare dividends at their discretion as long as the dividends do not violate any statute, article provision, bylaw, or contract with a creditor. Choice "c" is incorrect. Although it seems like there would be a conflict of interest, directors do have the power to set their own compensation, limited only by the fiduciary duties owed to the corporation (e.g., the directors cannot set salaries so high as to constitute waste).

• Question 402:

  If a group of consumers decide to boycott a particular product, the expected result would be:

  A. An increase in the product price to make up lost revenue.
  B. A decrease in the demand for the product.
  C. An increase in product supply because of increased availability.
  D. That companies in the industry would experience higher economic profits.
  B. A decrease in the demand for the product.

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  Choice "b" is correct. A consumer boycott will decrease demand for the product being boycotted.

  Choice "a" is incorrect. Increasing price will further reduce the quantity demanded. The effect on revenue is uncertain.

  Choice "c" is incorrect. Supply will be unaffected by a boycott.

  Choice "d" is incorrect. A boycott of a particular product will reduce the overall profits of the industry.

• Question 403:

  If no provisions are made in an agreement, a general partnership allocates profits and losses based on the: A. Value of actual contributions made by each partner.

  B. Number of partners.
  C. Number of hours each partner worked in the partnership during the year.
  D. Number of years each partner belonged to the partnership.
  B. Number of partners.

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  Choice "b" is correct. Absent an agreement to the contrary, all partners have equal rights to share in the profits of the partnership. Choices "a", "c", and "d" are incorrect, per the above Explanation.

• Question 404:

  Which of the following statements is correct concerning liability when a partner in a general partnership commits a tort while engaged in partnership business?

  A. The partner committing the tort is the only party liable.
  B. The partnership is the only party liable.
  C. Each partner is jointly and severally liable.
  D. Each partner is liable to pay an equal share of any judgment.
  C. Each partner is jointly and severally liable.

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  Choice "c" is correct. Each partner is jointly and severally liable for torts committed by any partner while in the course of partnership business. Choice "a" is incorrect. All partners may be held liable for a tort committed by a partner in the course of partnership business. Choice "b" is incorrect. Each partner is liable for torts committed by any partner while in the course of partnership business. Choice "d" is incorrect. Each partner is liable for the full amount of damages incurred as a result of a partner's tort; the partners are not liable only for their pro rata share.

• Question 405:

  In general, which of the following statements is correct with respect to a limited partnership?

  A. A limited partner has the right to obtain from the general partner(s) financial information and tax returns of the limited partnership.
  B. A limited partnership can be formed with limited liability for all partners.
  C. A limited partner may not also be a general partner at the same time.
  D. A limited partner may hire employees on behalf of the partnership.
  A. A limited partner has the right to obtain from the general partner(s) financial information and tax returns of the limited partnership.

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  Choice "a" is correct. A limited partner has rights similar to those of a corporate shareholder; he must be allowed to review financial and tax information of the limited partnership.

  Choice "b" is incorrect. A limited partnership must have one or more general partners, whose liability is unlimited.

  Choice "c" is incorrect. One may be both a general and a limited partner simultaneously. Such a person has all of the rights and liabilities of both a limited partner and a general partner. Choice "d" is incorrect. A limited partner has no

  management authority, rather he is a passive investor, like a corporate shareholder.

• Question 406:

  At the peak of a business cycle:

  A. Output (real GDP) tends to be below the potential level of output.
  B. There is likely to be an excess supply of labor and business inventories are likely to be high.
  C. The overall price level is likely to be falling.
  D. Capacity constraints and labor shortages are likely to put upward pressure on the overall price level.
  D. Capacity constraints and labor shortages are likely to put upward pressure on the overall price level.

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  Choice "d" is correct. The peak of a business cycle marks the highest point of economic activity. At that point, firms are likely to face capacity constraints and labor shortages, which will put upward pressure on the overall price level.

  Choice "a" is incorrect. Real GDP is likely to be above, not below, its potential level.

  Choice "b" is incorrect. Business inventories are likely to be low, not high, and there is likely to be excess demand for labor not an excess supply of labor.

  Choice "c" is incorrect. The overall price level is likely to be rising not falling.

• Question 407:

  Using a 360-day year, what is the opportunity cost to a buyer of not accepting terms 3/10, net 45?

  A. 55.67 percent.
  B. 31.81 percent.
  C. 15.43 percent.
  D. 24.00 percent.
  B. 31.81 percent.

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  Choice "b" is correct. 31.81% Formula:

  

• Question 408:

  Which one of the following statements about trade credit is correct? Trade credit is:

  A. Not an important source of financing for small firms.
  B. A source of long-term financing to the seller.
  C. Subject to risk of buyer default.
  D. Usually an inexpensive source of external financing.
  C. Subject to risk of buyer default.

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  Choice "c" is correct. Trade credit is subject to risk of buyer default.

  Choice "a" is incorrect. Trade credit is an important source of financing for small firms.

  Choice "b" is incorrect. Trade credit is not a source of long-term financing to the seller.

  Choice "d" is incorrect. Trade credit is usually an expensive source of external financing.

• Question 409:

  The measure most often used to compare standards of living across countries or across time is:

  A. Government spending.
  B. Real GDP.
  C. Real consumption expenditures.
  D. Real GDP per capita.
  D. Real GDP per capita.

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  Choice "d" is correct. Real GDP per capita is real GDP divided by population. Real GDP per capita is typically used to compare standards of living across countries or across time. By dividing real GDP by population, this measure adjusts for

  differences in the size of countries and for differences in population over time.

  Choice "a" is incorrect. Government spending is not a measure of the standard of living of a country.

  Choice "b" is incorrect. Countries with larger populations tend to have higher levels of real GDP. This however does not mean they have a higher standard of living. To adjust for differences in population, real GDP per capita is typically used to

  compare standards of living, not real GDP.

  Choice "c" is incorrect. Real consumption expenditures are only a part of real GDP and thus do not measure all economic activity. Furthermore, real consumption expenditures do not adjust for differences in population. It is therefore not used

  as a measure of the standard of living.

• Question 410:

  Management accountants are frequently asked to analyze various decision situations including the following.

  I. The cost of a special device that is necessary if a special order is accepted.

  II. The cost proposed annually for the plant service for the grounds at corporate headquarters.

  III. Joint production costs incurred, to be considered in a sell-at-split versus a process-further decision.

  IV.

  The costs associated with alternative uses of plant space, to be considered in a make/buy decision.

  V.

  The cost of obsolete inventory acquired several years ago, to be considered in a keep-versus disposal decision.

  The cost described in situation II above is a:

  A. Prime cost.
  B. Sunk cost.
  C. Discretionary cost.
  D. Relevant cost.
  I. The cost of a special device that is necessary if a special order is accepted. II. The cost proposed annually for the plant service for the grounds at corporate headquarters. III. Joint production costs incurred, to be considered in a sell-at-split versus a process-further decision. IV. The costs associated with alternative uses of plant space, to be considered in a make/buy decision.
  C. Discretionary cost.

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  Choice "c" is correct. Discretionary cost. The proposed cost for plant service for the grounds at corporate headquarters is an example of an avoidable cost that is discretionary.

  Choice "a" is incorrect. Prime costs are direct materials and direct labor.

  Choice "b" is incorrect. Sunk costs are costs previously incurred and not relevant.

  Choice "d" is incorrect. Relevant costs are expected future costs that vary with the action taken.