Introduction to Business Final Exam Questions

Course Introduction

This course provides an overview of the fundamentals of business in todays global environment. Students will explore core concepts such as management, marketing, finance, accounting, entrepreneurship, and business ethics. Through real-world examples and case studies, the course examines how businesses operate, make decisions, and adapt to dynamic marketplaces. Emphasis is placed on developing critical thinking and problem-solving skills essential for future business professionals while fostering an understanding of the economic, legal, and social contexts in which businesses function.

Recommended Textbook

Accounting Business Reporting for Decision Making 4th Edition by Jacqueline Birt

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Page 2

Chapter 1: Introduction to Accounting

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Q1) The fundamental purpose of accounting standards is to improve

A)Accountants ethics.

B)Social accountability.

C)Company profits.

D)Resource allocation.

Answer: D

Q2) Legally enforceable accounting standards that apply to Australian companies are issued by

A)the Financial Reporting Council.

B)the Australian Stock Exchange.

C)the Australian Securities and Investments Commission.

D)the Australian Accounting Standards Board.

Answer: D

Q3) Which of the following is an example of a liability?

A)allowance for doubtful debts

B)accumulated depreciation

C)revenue received in advance

D)GST paid

Answer: C

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Page 3

Chapter 2: Business Sustainability

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Q1) Acting morally is generally,but not always prudent.Which of the following is an example of acting prudently but not morally?

A)keeping staff employed during the global financial crisis despite a downturn in turnover

B)hiring disabled staff despite the fact that productivity might be lower in some cases.

C)delaying the payment of accounts payable

D)disclosing information

Answer: C

Q2) An employee publicly exposing unethical practices in a company is known as a ____________________.

Answer: whistleblower

Q3) According to Carroll (1979)the four key responsibilities of business are economic,legal,ethical and ____________________.

Answer: discretionary

Q4) Not disclosing information acquired in the course of your work,to third parties without specific authority is known as maintaining ______________.

Answer: confidentiality

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Chapter 3: Business Structures

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Q1) Which of the following is not an advantage of the company form of business?

A)It has a unlimited life.

B)It has limited liability.

C)It has the ability to raise large amounts of capital.

D)It must comply with the Corporations Act 2001 and other legislation.

Answer: D

Q2) An advantage of a trust is

A)ease of set up and administration.

B)tax minimisation.

C)a simple legal structure.

D)unlimited liability

Answer: B

Q3) Which of the following is not a type of business structure?

A)trust.

B)sole trader.

C)partnership

D)accounting entity

Answer: D

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Chapter 4: Business Transactions

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Q1) A transposition of figures is easy to find as the error on the worksheet will be divisible by ____________________.

Q2) If the total of the credits is $72 dollars greater than the total of the debits in the trial balance,the error is most likely to be:

A)an incorrect entry where $72 has been credited to the wrong account

B)an incorrect entry where $72 has been credited twice

C)a single error where only one part of a transaction is entered

D)a transposition entry

Q3) Cheque butts,invoices,purchase orders,credit card slips and cash register tapes are examples of _____________ _____________ which provide written evidence to verify a business transaction.

Q4) When a customer eventually pays for items that have been purchased on credit,the transaction will affect:

A)an asset and a liability

B)an asset and an expense

C)two assets

D)an asset and income

Q5) Income - Expenses = ___________________

Q6) Income has a (positive/negative)____________________ effect on Equity.

Page 6

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Chapter 5: Balance Sheet

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Q1) Under the Corporations Act a company's assets are to be classified according to their nature or function.Which of the following classifications would not be used for assets?

A)liquidity

B)marketability

C)physical characteristics

D)source

Q2) The account accumulated depreciation is reported on the A)income statement as an expense.

B)balance sheet as a contra asset account

C)balance sheet as a liability

D)balance sheet as an expense

Q3) The elements of the balance sheet i.e.assets,liabilities and equity are defined in the _________________ ___________________.

Q4) External claims on the assets of an entity are known as ___________________.

Q5) The statement regarding equity that is true is:

A)It is decreased by profit

B)It is fixed at the amount initially contributed by the owners

C)It is the owners' claim on the net assets of the entity

D)It arises solely from the retained earnings of the entity

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Chapter 6: Income Statement and Statement of Changes in Equity

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Q1) A machine is purchased for $120 000.It is estimated that it has a useful life of 4 years and will then be sold for $8000.Using the straight-line method the carrying value of the machine at the end of the third year of the machine's useful life is:

A)$28 000

B)$42 000

C)$36 000

D)$60 000

Q2) If equity at the beginning of the accounting period was $120 000 and at the end of the period was $175 000,and drawings by the owner during the period were $30 000,how much profit was earned during the period?

A)$85 000

B)$55 000

C)$25 000

D)$30 000

Q3) The balance of retained earnings at the end of the period is included in the equity section of the __________ sheet.

Q4) Income accrued is income recognised _________ the cash has been received.

Q5) The ___________ statement is prepared to calculate an entity's profit.

Page 8

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Chapter 7: Statement of Cash Flows

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Q1) The correct statement in relation to converting accrual information to the cash basis is:

A)An increase in current assets means less cash

B)A decrease in current assets means less cash

C)An increase in current liabilities means less expense

D)A decrease in current liabilities means more cash

Q2) The common business expense that does not appear in the statement of cash flows is ____________________ expense.

Q3) On a statement of cash flows borrowing money and raising share capital are examples of ________________ activities.

Q4) Which of these would not be classified as an operating item in a statement of cash flows?

A)decrease in bank overdraft

B)interest expense paid

C)payment of instalment for lease of shop

D)cash dividends received

Q5) During the accounting period,if income tax expense amounted to $10 000,and tax payable rose by $2000 over the period,tax paid must be equal to

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Chapter 8: Analysis and Interpretation of Financial Statements

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Q1) It is only necessary to calculate ________ version of the many variations of the gearing ratios.

Q2) Which statement is not correct?

A)Low liquidity ratios are not desirable

B)High liquidity ratios are not necessarily desirable

C)Low liquidity ratios can indicate liquidity problems

D)A current ratio of greater than 2:1 means that an entity must have sufficient liquidity to pay its debts as they fall due

Q3) The gross profit margin ratio is calculated by dividing

A)profit by sales revenue

B)profit by shareholder's equity.

C)gross profit by sales revenue.

D)sales revenue by cost of sales.

Q4) _________________ analysis is an analytical tool that involves expressing the reported financial numbers in relative terms

Q5) Earnings before interest and ________ divided by net interest equals the interest coverage ratio.

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Q6) The ratio that converts the absolute dollar amount of profit made to a per share basis is ____________________ share.

Chapter 9: Budgeting

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Q1) The budget that is most helpful in identifying and preparing for any liquidity issues is the _____________ budget.

Q2) The _________________ budget which is based on data from the sales budget sets the required level of inventory or direct materials for merchandising or manufacturing entities.

Q3) Which of the following statements regarding the authoritarian style of budgeting is true?

A)Unit managers have little say in the budget targets set.

B)Senior manager set the targets and the budgets for the unit managers.

C)Budgets targets set under the authoritarian style of budgeting may be too high.

D)All the statements are true.

Q4) Which budget is $\bold{unlikely}$ to be prepared by the government's Department of Foreign Affairs?

A)sales budget

B)expenses budget

C)cash budget

D)program budget

Q5) The control aspect of budgeting is achieved by calculating ______________.

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Chapter 10: Cost-Volume-Profit Analysis

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Q1) If calculations show that the break-even point is too high for the period which of these is not a possible course of action?

A)consider reducing prices

B)consider changing the cost mix between fixed and variable costs

C)consider changing the sales mix

D)recheck the assumptions on which the analysis is based

Q2) Unit contribution margin is:

A)the amount that each unit sold contributes to profit and to the recovery of variable costs

B)revenue per unit plus the variable costs per unit

C)the amount that each unit sold contributes to profit with any excess contributing to the recovery of fixed costs

D)the amount that each unit sold contributes to fixed costs with any excess contributing to profit

Q3) The horizontal axis of a CVP graph represents ____________________.

Q4) An important assumption in CVP analysis is that all cost functions are assumed to be _______________.

Q5) __________________ leverage is the mix between fixed and variable costs in the cost structure of an entity.

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Chapter 11: Costing and Pricing in an Entity

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Q1) Setting low prices when new products are introduced to increase market share is known as:

A)peak-load pricing

B)price skimming

C)penetration pricing

D)price discrimination

Q2) One criteria that can be used in the selection of cost drivers is _______________ received.

Q3) All the linked activities undertaken within an entity from the inception of the product or service to the final delivery to customers is known as the ____________________ value chain

Q4) Which of these is $\bold{not}$ a pricing method?

A)Peak load pricing

B)Price skimming

C)Price discrimination

D)Greedy pricing

Q5) Indirect costs are incurred for the benefit of (one/multiple)_________________ cost object(s).

Q6) The practice of setting different prices for different customers is known as price

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Chapter 12: Capital Investment

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Q1) Projects with a higher risk will have a (higher/lower)__________ discount rate.

Q2) With the internal rate of return method,the required rate of return of an entity is normally

A)cost of capital.

B)government bond rate.

C)20%.

D)borrowing rate.

Q3) A disadvantage of the internal rate of return method is that it can conflict with the _________ _______________ value method rankings.

Q4) Which of the following is the way entities set their required rate of return (RRR)for investments?

A)the RRR is based on their own past performance

B)the RRR is based on industry averages

C)the RRR is determined by comparing the estimated ARR with currently available yields or returns from other investments outside their industries

D)all of the options are methods used by entities to set their RRR

Q5) The investor community is placing increasing importance on care of the natural environment and ____________ responsibility in investment decision making.

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Chapter 13: Financing the Business

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Q1) A change in the average inventory turnover period from 83 to 59 days means that inventory is:

A)being sold more slowly

B)being sold more quickly

C)being purchased for cash

D)none of the options is true

Q2) Managers are able to plan for the most advantageous arrangements for investing cash surpluses or providing for cash deficits by using cash ____________ which will highlight any cash surpluses or deficits.

Q3) The number of parties involved in a novated lease is:

A)one.

B)two.

C)three.

D)four.

Q4) An increase in the price of shares listed on the securities exchange means:

A)an increase in the shareholder's equity of that company

B)an increase in the market capitalisation of that company

C)an increase in the shareholders' voting rights

D)none of the options is true

Q5) There are two types of floor-plan lenders: captives and _________________.

Page 15

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Chapter 14: Performance Measurement

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Q1) Divisional managers can increase the Return on Investment by (increasing/decreasing)____________ the investment base relative to segment profit.

Q2) If the profit margin is 12.5% and investment turnover is 1.1 times,return on investment is:

A)13.8%

B)11.4%

C)13.6%

D)11.6%

Q3) A responsibility centre that is responsible for generating a target level of revenue (e.g.a sales division)is known as a _____________ centre.

Q4) A valid criticism of the balanced scorecard's overall value is:

A)senior management are seldom committed to its success.

B)it must be introduced without a trial.

C)the approach is too complicated for most managers to understand.

D)it does not give proper attention to employees and suppliers.

Q5) Life cycle carbon cost accounting helps assess ___________ emissions of products from production to consumption.

Q6) The methods used to inventory and audit greenhouse gas emissions are

Page 16

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