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BUSINESS-ENVIRONMENT-AND-CONCEPTS Online Practice Questions and Answers

Questions 4

In 1992, Anchor, Chain, and Hook created ACH Associates, a general partnership. The partners orally agreed that they would work full time for the partnership and would distribute profits based on their capital contributions. Anchor contributed $5,000; Chain $10,000; and Hook $15,000. For the year ended December 31, 1993, ACH Associates had profits of $60,000 that were distributed to the partners. During 1994, ACH Associates was operating at a loss. In September 1994, the partnership dissolved. In October 1994, Hook contracted in writing with Ace Automobile Co. to purchase a car for the partnership. Hook had previously purchased cars from Ace Automobile Co. for use by ACH Associates partners. ACH Associates did not honor the contract with Ace Automobile Co. and Ace Automobile Co. sued the partnership and the individual partners.

A. Anchor's capital account would be reduced by 1/3 of any 1994 losses.

B. Hook's capital account would be reduced by 1/2 of any 1994 losses.

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Questions 5

In 1990, Amber Corp., a closely held corporation, was formed by Adams, Frank, and Berg as incorporators and stockholders. Adams, Frank, and Berg executed a written voting agreement which provided that they would vote for each other as directors and officers. In 1994, stock in the corporation was offered to the public. This resulted in an additional 300 stockholders. After the offering, Adams holds 25%, Frank holds 15%, and Berg holds 15% of all issued and outstanding stock. Adams, Frank, and Berg have been directors and officers of the corporation since the corporation was formed. Regular meetings of the board of directors and annual stockholders meetings have been held. For this question refer to the formation of Amber Corp. and the rights and duties of its stockholders, directors, and officers.

A. Adams, Frank, and Berg must be elected as directors because they own 55% of the issued and outstanding stock.

B. Adams, Frank, and Berg must always be elected as officers because they own 55% of the issued and outstanding stock.

C. Adams, Frank, and Berg must always vote for each other as directors because they have a voting agreement.

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Questions 6

Which one of the following is most likely to accompany a reduction in aggregate demand?

A. An increase in the price level.

B. A decrease in employment.

C. An increase in real GDP.

D. A decrease in the unemployment rate.

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Questions 7

The discount rate set by the Federal Reserve is the:

A. Rate that commercial banks charge for loans to each other.

B. Rate that commercial banks charge for loans to the general public.

C. Rate that the central bank charges for loans to commercial banks.

D. Ratio of a bank's reserves to its demand deposits.

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Questions 8

Inflation can be caused by:

A. Increases in aggregate demand only.

B. Increases in aggregate supply only.

C. Decreases in aggregate demand and increases in aggregate supply.

D. Increases in aggregate demand and decreases in aggregate supply.

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Questions 9

Which of the following is not correct regarding best cost provider strategies?

A. The overall lowest cost in the industry is not a viable option in best cost strategies because the firm could not compete profit-wise with its differentiation strategy component.

B. When generic products are not acceptable to buyers, yet they still remain price sensitive to the value they are receiving for their money, the best cost strategy may work well.

C. The best cost strategy is a combination of the benefits of the cost leadership and differentiation strategies.

D. The best cost strategy strives to have the firm evaluate and change its value chain such that it can achieve the highest cost among its closest competitors with a quality differentiated product in an effort to obtain the highest profits.

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Questions 10

The amount of inventory that a company would tend to hold in stock would increase as the:

A. Cost of carrying inventory decreases.

B. Variability of sales decreases.

C. Cost of running out of stock decreases.

D. Length of time that goods are in transit decreases.

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Questions 11

In inventory management, the safety stock will tend to increase if the:

A. Carrying cost increases.

B. Cost of running out of stock decreases.

C. Variability of lead-time increases.

D. Fixed order cost decreases.

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Questions 12

As a company becomes more conservative in its working capital policy, it would tend to have a (n):

A. Decrease in its acid-test ratio.

B. Increase in the ratio of current assets to units of output.

C. Increase in funds invested in common stock and a decrease in funds invested in marketable securities.

D. Decrease in its level of permanent working capital.

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Questions 13

Commercial paper:

A. Has a maturity date greater than one year.

B. Is generally sold only through investment banking dealers.

C. Generally does not have an active secondary market.

D. Has an interest rate lower than treasury bills.

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Exam Name: Certified Public Accountant (Business Environment & Concept)
Last Update: Mar 18, 2024
Questions: 530
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