Business growth and decline

Question 1

Acquisition

Answer 1

When one business takes control of another business by purchasing a controlling interest in it

Question 2

Bankruptcy

Answer 2

A declaration that a business or person is unable to pay his or her debts

Question 3

Business life cycle

Answer 3

Refers to the stages of growth and development a business can experience

Question 4

Cash flow

Answer 4

The money coming into the business in the form of cash receipts, and the money leaving the business as cash payments

Question 5

Creditors

Answer 5

Those people or business who are owed money

Question 6

Diversification(or conglomerate integration)

Answer 6

When a business acquires or merges with a business in a completely unrelated industry

Question 7

Horizontal integration

Answer 7

When a business aquires or merges with anther business that makes and sells similar products

Question 8

Insolvent

Answer 8

When a company is not able to pay its debts as and when they fall due

Question 9

Involuntary cessation

Answer 9

When the owner is forced to cease trading by the creditors of the business

Question 10

Liquidation

Answer 10

When an independent and suitably qualified person - the liquidator- is appointed to take control of the business with the intention of selling all the company’s assets in an orderly and fair way in order to pay the creditors

Question 11

Merger

Answer 11

When the owners of two separate businesses agree to combine their resources and form a new organisation

Question 12

Realisation

Answer 12

The process of converting the assets of a business into cash

Question 13

Receivership

Answer 13

When a business has a receiver take charge of the affairs of the business. Unlike liquidation, the business may not nessarily be wound up

Question 14

Vertical integration

Answer 14

When a business expands at different but related levels in the production and marketing of a product

Question 15

Voluntary administration

Answer 15

When an independent administrator is appointed to operate the business in the hope of trading out of present financial problems

Question 16

Voluntary cessation

Answer 16

When the owner ceases to operate the business of their own accord

Question 17

What is the correct order of the business life cycle phases?
A.Establishment, growth, prematurity, maturity
B.Establishment, growth, maturity, post-maturity
C.Establishment, growth, prematurity, post-maturity
D.Establishment, pregrowth, growth, prematurity, maturity

Answer 17

B.Establishment, growth, maturity, post-maturity

Question 18

Patrick Ng has started a new Korean restaurant. It is a partnership with his brother. What would be the financial management issues most likely to be faced by this business in its establishment phase?
A.Constantly increasing profits and cash-flow
B.High fixed costs and low cash-flow
C.Increasing profitability and variable costs
D.Limited liability and increasing profitability

Answer 18

Could be B

Question 19

To what type of business does the term ‘bankruptcy’ apply?
A.Private company
B.Government business enterprise
C.Partnership
D.Public company

Answer 19

C. Partnership

Question 20

What does the term ‘insolvency’ mean?
A.Lack of profitability
B.Too much debt owed by the business
C.Inability to repay debts
D.Poor sales revenue

Answer 20

C. Inability to repay debts

Question 21

Which of the following characteristics best describes the establishment stage of a business.
A.Low costs, low sales, little, profit
B.High costs, little profits, low sales
C.Low sales, large market share, high profit levels
D.High sales, small market, large scale production

Answer 21

c or d obviously

Question 22

Complacency among management usually occurs in which stage of the business life cycle?
A.Establishment
B.Growth
C.Maturity
D.Post-maturity

Answer 22

D.Post-maturity

Question 23

In response to an increase on competition, management of the restaurant has decided to expand the business. They have opted for a horizontal integration strategy. What is meant by this strategy?
A.The business merges with a totally unrelated business
B.The business creates a supply chain with a supplier
C.The business merges marketing and operations functions.
D.The business merges with another business making a similar product

Answer 23

D.The business merges with another business making a similar product

Question 24

In a sole trader or partnership, what is the process of converting the assets of a business into cash known as?
A. Realisation
B.Bankruptcy
C.Liquidation
D.Voluntary admininistration

Answer 24

C.Liquidation

Question 24

Which of the following best describes a takeover?
A.When one business buys a controlling interest in another
B.When a business takes over the accounting function of another
C.When overseas business invests heavily in a local operation
D.When two or more businesses agree to combine to form a single business

Answer 24

A.When one business buys a controlling interest in another

Question 25

An independent administrator is appoiinted to operate a company in the hope of trading them out of their present financial problems. What is this know as?
A.Bankruptcy
B.Liquidation
C.Realisation
D.Voluntary administration

Answer 25

D.Voluntary administration