Study Guide

Field 008: Business
Sample Multiple-Choice Questions

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Objective 0001
Business and Human Resources Management (Standard 1)

1. Which of the following is an example of strategic planning for expansion of a travel agency that specializes in arranging hiking and bird-watching tours in Costa Rica?

  1. analyzing customer demand for current tours to determine which ones should be replaced with tours to more popular areas
  2. comparing the advantages and disadvantages of switching to a different transportation company than the one currently used for the tours
  3. identifying new target markets for existing tours and strategies to better promote the agency's tour offerings to these markets
  4. researching the pros and cons of expanding the agency's tour offerings to nearby Central American countries such as Nicaragua
Answer
Correct Response: D.
This question requires the examinee to demonstrate knowledge of management theories, methods, and skills and management functions. There are basically two different kinds of planning. Operational planning concerns the decisions that must be made to keep the business running and profitable and is usually short-term. Strategic planning involves long-term changes in the business's core mission or methods. In this case, expanding the agency's tour offerings would be the best example of long-term strategic planning.
Objective 0001
Business and Human Resources Management (Standard 1)

2. A business is planning to expand its operations beyond its current area of expertise. The expansion will require opening a new facility in a different state. Which of the following should be the first step that human resource managers should take in forecasting human resource needs for the new facility?

  1. conducting a thorough human resources audit that inventories the strengths and weaknesses of existing personnel at the business
  2. performing a thorough job analysis that can be used to write job descriptions for the positions that will need to be filled at the new facility
  3. creating a list of job specifications that identify the education, experience, and skill requirements of potential applicants for the new positions
  4. surveying the skills and qualifications of individuals whose applications for employment are already on file with the business's human resources department
Answer
Correct Response: B.
This question requires the examinee to demonstrate knowledge of procedures relating to recruitment, selection, training, evaluation, and termination of employees and principles and practices of collective bargaining and labor contract implementation. In order to forecast human resource needs, such as how many individuals to hire or how they should be trained, a job analysis describing the tasks that must be performed at the new facility must be clearly defined. Once this has been done, job descriptions for the personnel to accomplish these tasks can be formulated.
Objective 0002
Entrepreneurship and Business Ownership (Standard 2)

3. Which of the following is an important difference between a C corporation and a sole proprietorship or general partnership?

  1. Profits from a C corporation's business are not distributed to the owners of the corporation.
  2. Owners of a C corporation may also participate in the ownership of other corporations.
  3. Participation in the ownership of a C corporation does not confer the right to participate directly in its management.
  4. Owners of a C corporation have no legal right to records of major decisions or financial reports of the corporation.
Answer
Correct Response: C.
This question requires the examinee to demonstrate knowledge of types and characteristics of business ownership, including sole proprietorships, partnerships, corporations, franchises, and cooperatives. The owners in a sole proprietorship or general partnership are responsible for running the business. The owners of a C corporation are the stockholders in the corporation. These stockholders elect a board of directors who are then responsible for selecting the CEO and other officers, who will run the business.
Objective 0003
Business Communication (Standard 3)

4. The use of e-mail in business environments can lead to increased difficulty in interpreting certain aspects of the message primarily because of:

  1. a limit to the amount of information that can be conveyed in a short message.
  2. the separation in time of the sending of the message and its interpretation by the recipient.
  3. the loss of nonverbal cues and other signals that give important context to messages.
  4. a reduction in the sender's ability to organize the message in a coherent and easily interpreted manner.
Answer
Correct Response: C.
This question requires the examinee to demonstrate knowledge of types and characteristics of workplace communication and etiquette in business communication. Effective communication requires that the message sent by the sender is received and accurately interpreted by the receiver. Written communication, such as an e-mail, is effective for conveying straightforward messages without emotional content. However, nonverbal communication is important when a message contains emotional content or other nuances that must be interpreted, and this nonverbal communication is not present in a written message such as an e-mail.
Objective 0004
Financial Management, Accounting, and Business Math (Standard 4)

5. When creating a master budget, a manufacturing company must first prepare which of the following budgets?

  1. financial budget
  2. cash budget
  3. capital expenditures budget
  4. operating budget
Answer
Correct Response: D.
This question requires the examinee to demonstrate knowledge of principles and methods of financial management and budgeting, the time value of money, and ethical issues in financial management. A master budget must contain the expected revenues and expenditures for the period of time covered by the budget. Determining projected operating expenses is an essential part of determining overall expenditures in the master budget. For this reason, an operating budget must be prepared before the master budget can be considered.
Objective 0005
Personal Financial Literacy (Standard 6)

6. Which of the following would be the most important advantage of using a third-party payment intermediary service when purchasing items on the Internet?

  1. obtaining more sophisticated delivery tracking on shipped merchandise
  2. guarding against possible identity theft
  3. facilitating quick refunds if the merchandise is not acceptable
  4. avoiding interest charges on payments
Answer
Correct Response: B.
This question requires the examinee to demonstrate knowledge of strategies for assessing, analyzing, and managing risk and for controlling personal information and characteristics, advantages, and disadvantages of various types of insurance through the life cycle. Identity theft is a major concern for those individuals who shop online. Personal information, such as a credit card number, is encrypted when creating an account with a third-party payment intermediary service. Businesses can then bill the third party account directly without exposing your personal information. This adds another layer of security when purchasing from Internet sites that may not take sufficient precautions to ensure against identity theft.
Objective 0005
Personal Financial Literacy (Standard 6)

7. Which of the following best describes a disadvantage of depositing $10,000 in a certificate of deposit (CD) rather than a savings account at a bank?

  1. Unlike regular savings accounts, CDs are not insured by the federal government.
  2. CDs generally pay lower interest rates than regular savings accounts.
  3. Unlike regular savings accounts, early withdrawal of money from a CD incurs a penalty.
  4. CDs carry a higher risk than regular savings accounts because the money is invested in stocks or bonds.
Answer
Correct Response: C.
This question requires the examinee to demonstrate knowledge of strategies for estate planning, saving, and investing and characteristics, advantages, and disadvantages of various investment and retirement options. Certificates of deposit (CDs) usually pay a higher interest rate than do standard savings accounts. However, CDs require that the depositor leave the money in the certificate for a specified term. Early withdrawal of the money requires the depositor to pay a penalty that generally would more than cancel out any advantage in interest rates between the CD and a savings account.
Objective 0006
Business and Personal Law and Ethics (Standard 5)

8. Amanda hires Jiang to paint her house and specifies the color and a specific brand of paint that is to be used. Jiang paints the house and does an excellent job, matching the color exactly, and apparently fulfilling all other terms of the contract. However, Amanda finds an empty paint can and confronts Jiang. Jiang admits that he used a different brand of paint that he got for a special price. Jiang states, and several independent suppliers confirm, that the paint that was used is of higher quality and usually sells for a higher price than the brand that Amanda requested. Which of the following best states why Jiang can or cannot be charged with fraud in this situation?

  1. Jiang can be charged with fraud because he knowingly violated the terms of the contract with Amanda.
  2. Jiang cannot be charged with fraud because Amanda was not harmed by the use of a different brand of paint.
  3. Jiang can be charged with fraud because he did not pass his savings on the paint to Amanda.
  4. Jiang cannot be charged with fraud because he did not intentionally deceive Amanda about the brand of paint.
Answer
Correct Response: B.
This question requires the examinee to demonstrate knowledge of contract law, agency law, the Uniform Commercial Code (UCC), environmental protection laws, and other laws and regulations pertaining to the operation of a business. In contract law, for an action to be considered fraudulent, it must meet specific criteria. For example, the party accused of fraud must be aware that his or her actions are fraudulent. Another criterion is that the party who is charging fraud must be harmed by the action of the accused, which in the case described above is not true.
Objective 0006
Business and Personal Law and Ethics (Standard 5)

9. Which of the following situations provides the best example of a potential conflict of interest?

  1. The pay of the CEO of a company includes incentives for increasing the company's market share of its products.
  2. An accounting firm that keeps the books for a company also keeps the books for several other companies in the same industry.
  3. A travel agency tells agents to include stops at a hotel owned by the agency's managers when drawing up itineraries for their clients.
  4. Employees at a large publishing company can buy stock in the company twice a year at a discounted price.
Answer
Correct Response: C.
This question requires the examinee to demonstrate knowledge of ethics and social responsibility for businesses and individuals. Conflict of interest is often defined as a set of circumstances that creates a risk that the judgment or actions of an individual regarding one interest will be unduly influenced by a second interest. In this case, the travel agency's responsibility to act honestly in recommending stops at hotels for its clients is unduly influenced by the agency's managers’ financial interests in the hotels.
Objective 0007
Economics (Standard 7)

10. Which of the following was one important factor leading to sluggish economic growth and slow recovery after the 2008 financial collapse and subsequent recession?

  1. increase in the cost of labor due to persistent high unemployment
  2. reduction in gross aggregate demand due to increased government taxation
  3. reduction in the availability of capital due to decreased lending by financial institutions
  4. lack of raw materials and energy resources due to a slowdown in world trade
Answer
Correct Response: C.
This question requires the examinee to demonstrate knowledge of characteristics and operation of the U.S. national economy and the use of economic indicators to assess the state of the economy. Part of the reason for the 2008 financial collapse was irresponsible lending in the granting of mortgages to unqualified homebuyers and the use of those mortgages as securities for further lending by large financial institutions. After the collapse, in reaction, lenders became extremely cautious in making loans, which restricted the private capital needed to start and operate businesses.
Objective 0008
Marketing and International Business (Standard 8)

11. A worker in country A can produce, on average, 6 shirts or 6 pairs of shoes per hour. A worker in country B can produce either 2 pairs of shoes or 4 shirts per hour. Both countries can gain from trade, with country A trading shoes for shirts and country B trading shirts for shoes. This scenario best illustrates which of the following economic concepts?

  1. diminishing returns
  2. supply and demand
  3. comparative advantage
  4. economies of scale
Answer
Correct Response: C.
This question requires the examinee to demonstrate knowledge of economic factors, including absolute and comparative advantage, opportunity costs, resource availability, and competition, that shape and affect international business, marketing, and trade. In economics, comparative advantage refers to the ability of one party to produce a particular good or service at a lower marginal and opportunity cost than another party. Although one country may have a greater absolute advantage, it may still have a lower comparative advantage than another. In this example, it costs country A one shirt in opportunity costs to produce each pair of shoes, while in country B, it costs two shirts to produce each pair of shoes. It makes good economic sense, therefore, for country A to trade shoes for shirts with country B and vice versa.
Objective 0009
Information Technology and Computer Applications (Standard 9)

12. When designing an e-commerce Web site, it is most important to ensure that customers can:

  1. bookmark the home page and return to it again in the future.
  2. access the site at any time of day using a variety of browsers.
  3. browse through the site as if they were in a brick-and-mortar store.
  4. check out as quickly and easily as possible when they are done shopping.
Answer
Correct Response: D.
This question requires the examinee to demonstrate knowledge of types of e-commerce; strategies for establishing an Internet business; and procedures for planning, developing, designing, maintaining, and managing a Web site. One of the primary reasons that customers shop online is the quickness and convenience of the experience. Web site designers should take great pains to enhance these aspects of the online shopping experience. Web sites that are difficult to navigate or that take a long time to proceed through checkout frustrate customers and may motivate them to seek a competitor that can provide faster and easier service.
Objective 0009
Information Technology and Computer Applications (Standard 9)

13. Many companies maintain an identity on one or more popular social networking Web sites for which of the following reasons?

  1. Promotional messages posted to these sites can be spread from user to user rather than from the company to the user.
  2. Multimedia advertisements can be streamed from social networking Web sites to users' Web browsers.
  3. Companies do not have to pay for the bandwidth needed to host their content on a social networking Web site.
  4. Social networking sites often have built-in e-commerce tools that consumers are comfortable using for retail purchases.
Answer
Correct Response: A.
This question requires the examinee to demonstrate knowledge of strategies for pricing, promoting, and selling products and services on the Internet and for using emerging Internet technologies and procedures, including social networking, for Internet marketing. Social networking Web sites have become more important in a company's promotional mix. In a sense, these sites provide word-of-mouth advertising through the Internet, more effectively spreading the company's message at no additional promotional costs.
Objective 0010
Business Careers and Career Development (Standard 10)

14. Which of the following is one drawback to seeking and applying for employment over the Internet?

  1. Only large companies generally accept job applications over the Internet.
  2. Applicants are not able to display personal traits that may make them good candidates for a job.
  3. Job postings are only seen by those who type an applicable search term into the computer.
  4. The applicant must pay a fee to a job search Web site if its service leads to employment.
Answer
Correct Response: B.
This question requires the examinee to demonstrate knowledge of strategies and techniques for locating open business-related career positions, creating an effective résumé, and completing successful interviews. More and more frequently, job positions are advertised and applied for over the Internet. While this greatly simplifies the job search for the potential applicant and allows the hiring firm to reach a large number of job seekers, it does have the disadvantage of not allowing the applicant to present aspects of his or her personality that do not translate well to a written application. The trend toward standardized Internet applications penalizes candidates that may possess highly desirable traits that just do not translate well to this format.
Objective 0011
Business Education Instruction and Assessment (Standard 11)

15. A business teacher asks each student in a high school class to select a major U.S. business that has subsidiaries or franchises in another country. The teacher then assigns the students to investigate how the activities of their selected business have affected the host country's economy, environment, and culture. This activity is most likely to help students better understand which of the following concepts from the Indiana Academic Standards for Business?

  1. the consequences of globalization
  2. the reasons for trade imbalances
  3. the advantages of free trade
  4. the concepts of comparative and absolute advantage
Answer
Correct Response: A.
This question requires the examinee to demonstrate knowledge of the Indiana Academic Standards for Business. The assignment given by the teacher asks students to describe how foreign investments affect other countries. This assignment best illustrates how globalization of trade and culture affects the cultures and traditions in countries that take part in global trade. A classic example is the establishment of U.S. fast food franchises in other countries and their effects on local eating habits and cuisine.