2012 Midterm MCQs

Question 1

Which of the following is the most common reason for increases in labour productivity?

a) the dollar value of output is increased by raising prices
b) inflation increases the value of the output
c) the number of workers is increased
d) non-labour resources are added so that fewer workers can accomplish more
e) wages for workers are reduced

Answer 1

d) non-labour resources are added so that fewer workers can accomplish more

Question 2

Under which condition is owners’ equity positive?

a) assets and liabilities are equal
b) debits exceed credits
c) liabilities are greater than assets
d) assets are greater than liabilities
e) credits exceed debits

Answer 2

d) assets are greater than liabilities

Question 3

Which of the following statements best summarizes the purpose behind the marketing process?
The purpose of marketing is to:
a) attain the largest possible share of the overall market
b) convince customers to buy whatever a firm is trying to sell
c) ensure a profit for the firm so that the organization can satisfy its stakeholders
d) do whatever it takes to satisfy the customer, even if the welfare of other stakeholders is
adversely affected

Answer 3

c) ensure a profit for the firm so that the organization can satisfy its stakeholders

Question 4

Which of the following is a key distinction between a good and a service?
a) Goods last at least one year, while services are used up in less than one year
b) A good is a product produced by a firm seeking a profit, while a service is a product
produced by a nonprofit organization
c) Goods are tangible products, while services are intangible products
d) Goods are sold in the marketplace, while services are provided through the government
sector

Answer 4

c) Goods are tangible products, while services are intangible products

Question 5

When GM offers compact cars, vans, trucks, luxury cars, and sports cars with various features at
various price levels it is trying to provide a vehicle for every:
a) segment
b) prospect
c) customer
d) market

Answer 5

a) segment

Question 6

Low quality hurts Canadian business productivity because

a) products that don’t work as they should need to be repaired or replaced
b) our comparative advantage lies in high value, high technology items
c) products that don’t have elaborate features do not generate high sales values
d) low quality products tend to be imported from emerging economies

Answer 6

a) products that don’t work as they should need to be repaired or replaced

Question 7

Supply chain management is
a) the principle that all employees are valuable contributors to a firm’s business, and should
be entrusted with decisions regarding their work
b) the redesigning of business processes to improve performance, quality, and
productivity
c) the principle of a business communicating with all of its customers and suppliers as an
integrated unit, in order to improve the overall flow of resources through the system
d) a program certifying that a factory, laboratory, or office has met the quality Evaluation of
alternatives

Answer 7

c) the principle of a business communicating with all of its customers and suppliers as an
integrated unit, in order to improve the overall flow of resources through the system

Question 8

Which of the following is an advantage to a firm with increasing productivity?

a) the firm can afford to pay workers higher wages without raising prices
b) workers will not want to unionize
c) raw materials will decline in price
d) machine breakdowns will be less likely
e) the standard of living of its employees will fall

Answer 8

a) the firm can afford to pay workers higher wages without raising prices

Question 9

Which of the following is an effective method for improving success in quality efforts?

a) distribute quality inspectors who will inspect every component of the product
b) establish a separate quality control department
c) train quality inspectors in inspection techniques
d) use statistical process control methods throughout the production process
e) hire better trained and qualified employees

Answer 9

d) use statistical process control methods throughout the production process

Question 10

Agents at Plutocrat Realtors decided that they do not want to service any homes that are valued at
less than $500,000. They realize this will limit their business, but they feel ______________ will
work for them.
a) inverted targeting
b) regressive positioning
c) economic segmentation
d) demographic segmentation

Answer 10

d) demographic segmentation

Question 11

What purpose does the balance sheet serve?
a) it shows investors how much profit the firm made during the last year
b) it shows a firm’s financial condition on a particular date in terms of its assets, liabilities,
and owners’ equity
c) it shows short- and long-term liquidity ratios, profitability ratios, and activity ratios
d) it shows the stock price of the firm during the last year and how much fluctuations there have been in the stock price
e) it shows a firm’s sources and uses of cash

Answer 11

b) it shows a firm’s financial condition on a particular date in terms of its assets, liabilities,
and owners’ equity

Question 12

Which of the following is not one of the variables considered when segmenting a market?

a) geographic variables
b) demographic variables
c) product-use variables
d) psychographic variables
e) product differentiation

Answer 12

e) product differentiation

Question 13

One of the key differences between service and manufacturing operations is:

a) services focus on the outcome of the production process
b) manufacturing operations feature a unique link between process and outcome
c) services are performed, and goods are produced
d) manufacturing products are characterized by intangibility, and customization
e) manufacturing operations are less storable

Answer 13

c) services are performed, and goods are produced

Question 14

When a business sells a product that fails to satisfy customer needs, it incurs many extra costs.
Each of the following is a cost of correcting product failure, except:
a) refunds to customers
b) factory recalls
c) transportation costs to return bad boxes to the factory
d) possible lawsuits
e) higher wages

Answer 14

e) higher wages

Question 15

Which term is used to identify the assets that can be or will be converted into cash in the following
year?
a) intangible assets
b) quick ratio
c) current liabilities
d) depreciation
e) current assets

Answer 15

e) current assets

Question 16

A current liability is

a) additional money, above proceeds from a stock sale, paid directly to a firm by its owners
b) the amount paid for an existing business above the value of its other assets
c) a debt that is not due for at least one year
d) a debt that must be paid within the year
e) the process of distributing the cost of an asset over its useful life

Answer 16

d) a debt that must be paid within the year

Question 17

Owners’ Equity is __________

a) the profits earned by and reinvested in the company
b) any economic resource expected to benefit a firm or an individual who owns it
c) the amount of money originally invested in a business by its owners
d) a debt owed by a firm to an outside organization or individual

Answer 17

a) the profits earned by and reinvested in the company

Question 18

Location planning is best explained as
a) the managerial decision as to where best to locate one’s facilities in order to maximize profits
b) the managerial decision as to where best to locate one’s facilities in order to maximize
revenues
c) the managerial decision as to where best to locate one’s facilities in order to minimise costs
d) the managerial decision as to where best to locate one’s facilities in order to minimise
delivery times

Answer 18

a) the managerial decision as to where best to locate one’s facilities in order to maximize profits

Question 19

As the plane moves to its takeoff position, there are 20 empty seats. This illustrates the unique
service characteristic of \_\_\_\_\_\_\_\_\_.
a) customized
b) intangible
c) leveraged
d) flexible
e) unstorable

Answer 19

e) unstorable

Question 20

Which of the following best describes materials management?

a) A production schedule specifying the sequence and critical path for performing the steps in a project
b) planning organizing and controlling the flow of materials from design through distribution of finished goods
c) a production control activity for ensuring that production decisions are being implemented
d) the use of standard and uniform components in the production process
e) a production schedule diagramming the steps in a project and specifying the time required for each

Answer 20

b) planning organizing and controlling the flow of materials from design through distribution of finished goods

Question 21

An important aspect of operations is location planning. When location planning for a service, there
are different things to consider for high-contact versus low-contact services. A key difference would be:
a) high contact service must locate in a place that maximizes profits, but a low contact
service must locate in a place that minimizes costs
b) low contact service can be located anywhere that is close to inputs (labour, raw materials), but a high contact service must balance the need to be close to inputs with the need to be close to customers
c) a low contact service must locate in a place that maximizes profits, but a high contact service must locate in a place that minimizes costs
d) a high contact service must locate in a place that maximizes revenues, but a low contact service must locate in order to minimize costs

Answer 21

b) low contact service can be located anywhere that is close to inputs (labour, raw materials), but a high contact service must balance the need to be close to inputs with the need to be close to customers

Question 22

Groups of people with similar wants and needs that can be expected to show interest in the same
products are called:
a) customers
b) potential customers
c) target markets
d) homogeneous segments
e) prospects

Answer 22

c) target markets

Question 23

Wedding gowns, Rolex watches, Godiva chocolates, and Rolls Royces are examples of
\_\_\_\_\_\_\_\_\_\_\_ goods.
a) convenience
b) shopping
c) impulse
d) coincidental
e) specialty

Answer 23

e) specialty

Question 24

Demographics can include:

a) education, life cycle, and gender
b) race, education, life cycle, and gender
c) gender
d) life cycle and gender
e) None of the above

Answer 24

c) gender

Question 25

Financial accounting is

a) a bookkeeping system that balances the accounting equation by recording the dual effects of every financial transaction
b) the rules and procedures governing the content and form of financial reports
c) a field of accounting that serves internal users of a company’s financial information
d) the field of accounting concerned with external users of a company’s financial information
e) a systematic examination of a company’s accounting system to determine whether its financial reports fairly represent its operations

Answer 25

d) the field of accounting concerned with external users of a company’s financial information

Question 26

As the operations mamger for XYZ company your job includes helping to decide the capacity of
the company’s new manufacturing facilty in Calgary, Alberta. You must make the factory large enough
to satisfy forcast demand in Western Canada, but you want to be careful not to build too large a factory,
What is one reason why it is a bad idea for a company to have excess capacity?
a) wastes raw materials
b) decreases form utility
c) ties up money in extra machines
d) increases customer dissatisfaction
e) slows delivery of product

Answer 26

c) ties up money in extra machines

Question 27

Which financial statement shows the cost of obtaining materials to make products that were sold
during the year?
a) statement of retained earnings
b) balance sheet
c) operating expenses statement
d) income statement
e) statement of cash flows

Answer 27

d) income statement

Question 28

What does return on equity measure?

a) the amount of profit earned relative to the owners’ investment in the business
b) the amount of profit earned for each dollar of previous profit retained in the business
c) the amount of profit earned for each share of stock
d) the amount of pre-tax profit earned for each share of stock
e) the amount of pre-tax profit earned for the aggregate invested

Answer 28

a) the amount of profit earned relative to the owners’ investment in the business

Question 29

As a market analyst consultant for Loblaw’s, Ravi Singh often views and monitors consumers to
determine the frequency and value of their grocery purchases. This research method is known as:
a) observation
b) consumer behaviour analysis
c) focus group research
d) surveying
e) experimentation

Answer 29

a) observation

Question 30

From 1984 to 1991, Pepsi Cola’s marketing slogan was “The choice of a new generation”. This
is an example of:
a) social segmentation
b) demographic segmentation
c) socio-economic segmentation
d) semiotic segmentation
e) product use segmentation

Answer 30

b) demographic segmentation

Question 31

Needing some new clothes you ask one of your co-workers where he shops. That evening you
check the newspapers for sales. You are in the ______________ stage.
a) Purchase decision
b) Problem recognition
c) Post-purchase evaluation
d) Information seeking
e) Evaluation of alternatives

Answer 31

d) Information seeking

Question 32

Generally Accepted Accounting Principles are formulated by the

a) Canadian Institute of Chartered Accountants (CICA)
b) Federal Trade Commission
c) Securities and Exchange Commission
d) Internal Revenue Service

Answer 32

a) Canadian Institute of Chartered Accountants (CICA)

Question 33

What is the purpose of computing the current ratio?

a) to measure the returns that investors can expect from their investments
b) to measure how much cash the firm has
c) to measure the firm’s ability to meet its current obligations out of its current assets
d) to measure the extent to which a firm is financed through borrowed money

Answer 33

c) to measure the firm’s ability to meet its current obligations out of its current assets

Question 34

Tuff gang clothing makes leather jackets for men and women. Their advertising campaign shows
people wearing Tuff Gang leather jackets, with various quantities of studs and chains on each jacket. In one add three people are shown standing in a dark, dirty alley. A black man, in his mid-30s is holding a chain. A white woman, who appears to be in her late teens is holding a knife. An Asian man, in his 20s isholding a broken bottle. Beneath the photograph is Tuff gang’s slogan “Break the rules”. What kind of
segmentation would best help you define this group of individuals?
a) demographic segmentation
b) psychographic segmentation
c) product-use variables segmentation
d) geographic segmentation
e) intrinsic segmentation

Answer 34

b) psychographic segmentation

Question 35

One way you could start a small business is to purchase an existing company. If you do that, you will:

a) owe the liabilities
b) own the assets
c) have some equity
d) All of the above
e) None of the above

Answer 35

d) All of the above

Question 36

In south Florida, an area hard hit by the US property bust of 2008, a man owns a home for which he paid $400,000 in 2006. When he bought the house, he put up $50,000 in equity, and took a $350,000
mortgage from his bank. Today, his house has a market value of $320,000. It is true to say:
a) his assets are greater than his liabilities
b) his debts exceed his credits
c) his owner’s equity is positive
d) his owner’s equity is negative
e) his owner’s equity is zero

Answer 36

d) his owner’s equity is negative

Question 37

A banker is most likely to review the balance sheet of a potential customer for the following reason:

a) to determine whether the business has been profitable
b) to determine whether the business’ sales have been growing
c) to determine how much money the business has already borrowed, and what it has spent its money buying
d) all of the above

Answer 37

c) to determine how much money the business has already borrowed, and what it has spent its money buying

Question 38

On March 1st 2010 Mario, a pizza maker, invested his life savings (he had recently sold a valuable
painting) into a new business venture he intended to run. His first act was to invest $250,000 into the
corporation called “Mario’s Pizzas Inc”. In return, he took 400,000 common shares of the corporation.
As the owner-manager of the business he then, purchased a small building which contained an industrial
kitchen, and all of the major appliances (a walk-in fridge, a pizza oven, a warming oven, etc.) necessary to
run a take-away pizza shop. The building cost him $200,000.
Over the next 2 months, Mario proceeded to purchase $30,000 worth of kitchen equipment and supplies
(various pots and pans, and drawers full of knives, cutting boards and utensils).
On April 29th, two nights before his grand opening, he purchased $4,000 worth of groceries and produce:
several 20 kg. bags of flour, two dozen 10 kgs. bags of sugar, yeast, crates full of tinned tomato paste, 100
kgs. of mozzarella cheese, and a van load of fresh and frozen tomatoes, mushrooms, green peppers, etc.
Late that night, he sat down to open all his mail. It contained letters and cards from friends and old
business acquaintances from all over the world wishing him good luck in his new business. Also in the mail was a bill, from the graphic designer who had helped Mario design the sign outside the store, the instore
signage and the menus. The bill was for $3,000. This was the amount that Mario had negotiated with the designer, and it seemed to be fair since the graphic designer had spent many hours on the project and produced some eye-catching designs. The bill from the graphic designer indicated that it was to be paid immediately. “I’ll send him a check, this week” Mario thought to himself. The only other thing in the mail was an invoice from Mario’s insurance company. Mario had insured the building and its contents, and he now owed $3,000 to the Safe-T First Insurance Company. “hmmm…” Mario sighed “I suppose I should pay this soon, too.” Fortunately, the money that Mario had not spent was in the business’ bank account.

38) Calculate the value of Mario’s Pizzas Inc.’s total assets on April 29th:
a) $200,000
b) $230,000
c) $234,000
d) $250,000

39) Calculate the value of Mario’s Pizzas Inc.’s current assets on April 29th:
a) $4,000
b) $16,000
c) $20,000
d) $30,000

40) Calculate Mario’s Pizzas Inc.’s current liabilities on April 29th
a) $3,000
b) $6,000
c) $24,000
d) $30,000

Answer 38

38. d) $250,000
39. c) $20,000
40. b) $6,000

Question 39

Psychographics can include:

a) age and gender
b) income and address
c) motivations and attitudes
d) life cycle and gender
e) None of the above

Answer 39

c) motivations and attitudes

Question 40

Why would it be considered especially risky for a corporation (“ACo”) to have a high debt/equity
ratio?
a) the owners of Aco have invested some of their own money in Aco
b) Aco may not generate profits sufficient to pay the interest on the debt when due
c) Aco might become the subject of a leveraged buyout
d) The creditors of Aco will be able to outvote the shareholders

Answer 40

b) Aco may not generate profits sufficient to pay the interest on the debt when due

Question 41

An artist over the period of a day converts 8 lbs. of steel bought at $10/lb. and 2 lbs. of plastic bought at $5/lb. into 4 lamps that he sells for $50 per lamp. What is the productivity for that artist over the period of one day?

a) 4
b) 120
c) 90
d) 200
e) 2.22

Answer 41

e) 2.22

Question 42

Business process reengineering is

a) a program certifying that a factory, laboratory, or office has met the quality management standards of the International Organization for Standardization.
b) the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.
c) the concept that all employees are responsible for improving quality through active participation in quality control.
d) the redesigning of business processes to improve performance, quality, and productivity.

Answer 42

d) the redesigning of business processes to improve performance, quality, and productivity.

Question 43

Consolidated Metal Bashers, Balance Sheet as at 30 September, 2010 (in $’000)
Assets Liabilities

Current Assets Current Liabilities
Cash 5 Accounts Payable 30
Inventory 20
Accounts Receivable 20

Fixed Assets Long Term Liabilities
Furniture 10 Bank Loan 40
Machinery 45
Equity
Common Shares 20
Retained Earnings 10

Total Assets 100 Total Liabs. + Equity 100

Between 30 September, 2010 and 7 October, 2010 the Corporation completed a number of financial transactions. Specifically, Consolidated Metal bashers:

1. Raised $20,000 by selling shares to new common shareholders.
2. Used 1/2 of the proceeds of the share sale to purchase a delivery van.
3. Used $5,000 to buy more raw materials
4. Put the rest of the proceeds into the bank.

45) On 30 September (i.e. before these transactions took place), Consolidated Metal Bashers’ working capital was:
a) $25,000
b) $15,000
c) $10,000
d) $5,000
e) we don’t have enough information to calculate the working capital

46) On 8 October (i.e. the day after these transactions took place), Consolidated Metal Bashers’ working capital was:
a) $25,000
b) $15,000
c) $10,000
d) $5,000
e) we don’t have enough information to calculate the working capital

47) As a result of these transactions, does Consolidated Metal Bashers have greater or less liquidity?
a) greater liquidity
b) less liquidity
c) the liquidity is unchanged
d) we don’t have enough information to calculate the organisation’s liquidity

48) As a result of these transactions does Consolidiated Metal bashers have great or less leverage?
a) greater leverage
b) less leverage
c) the leverage is unchanged
d) we don’t have enough information to calculate the organisation’s leverage

Answer 43

45. b) $15,000
46. a) $25,000
47. a) greater liquidity
48. b) less leverage

Question 44

Four friends decide to make some investments. They don’t all have the same amount of equity, and each has a different idea as to what type of asset would generate the best return.
Ann has $100,000 in equity. She borrows $300,000 from her bank and pays $400,000 to buy a house. One year later, she sells her house for $500,000.
Bob has $150,000 in equity. He buys a painting by a famous modern artist. Two years later he sells the
painting for $300,000.
Chuck as $50,000 in equity. He buys a piece of antique furniture and one year later sells it for $150,000.
Dave has $200,000 in equity. Borrows $200,000 from his bank, and invests all of the money in shares in
a small Australian gold mining company. Two years later he sells his shares for $600,000.
Which investor has made the best return on investment?
a) Ann
b) Bob
c) Chuck
d) Dave

Answer 44

c) Chuck

Question 45

Which of the following is the best description of quality?

a) a measurement of how much is produced
b) the additional output in the current year compared to the output for the previous year
c) a measurement of how much is produced relative to the resources used to produce the product or service
d) how closely a product adheres to quality standards
e) how well a product or service adheres to the customer’s expectations

Answer 45

e) how well a product or service adheres to the customer’s expectations