MULTIPLE CHOICE

QUESTIONS PACK
IB Business Management

Teacher: Hoang Ha Minh

Website: www.westminster.edu.vn
Email: [email protected]
[email protected]
Hotline: 089 8585 850
Address: No 24, Alley 4 Dang Van Ngu, Dong Da, Hanoi
 www.westminster.edu.vn

IB Business Management – Multiple Choice Questions Pack

Contents
1.1 Introduction to business management 3
1.2 Types of Organizations 9
1.3 Organizational Objectives 15
1.4 Stakeholders 19
1.5 External Environment 22
1.6 Growth and Evolution 28
1.7 Organizational Planning Tools (HL Only) 35
2.1 Functions and Evolution of HRM 39
2.2 Organizational Structure 51
2.3 Leadership and Management 59
2.4 Motivation 64
2.5 Organizational (Corporate) Culture (HL) 72
2.6 Industrial/Employee Relationships (HL) 77
3.1 Sources of Finance 81
3.2 Costs and Revenues 86
3.3 Breakeven Analysis 90
3.4 Final Accounts 94
3.5 Profitability and Liquidity Ratio Analysis 101
3.6 Efficiency Ratio Analysis (HL) 106
3.7 Cash Flow 111
3.8 Investment Appraisal 114
3.9 Budgets (HL) 119
4.1 The Role of Marketing 122
4.2 Introduction to the 4Ps 127
4.3 Sales Forecasting (HL) 136
4.4 Market Research 142
4.5 The 4 Ps 149
4.6 The Extended Marketing Mix 7Ps (HL) 157
4.7 International Marketing (HL) 160
4.8 Ecommerce 163
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5.1 The Role of Operations Management 167

5.2 Production Methods 170
5.3 Lean Production and Quality Management (HL) 174
5.4 Location 179
5.5 Production Planning 183
5.6 Research and Development 188
5.7 Crisis Management and Contingency Planning 191

Acknowledgement: Materials in this booklet are taken from IB Business Management – Multiple Choice
Questions Pack by Mohit Chainani.

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1.1 Introduction to business management

1 Which of the following is not one of the four factors of production?

A. Land

B. Machinery

C. Capital

D. Enterprise

2. Students of Westminster Academy, an iPhone selling for $649 costs $280 to

produce. What is the value added in the production process?

A. $280

B. $349

C. $369

D. $649

3. Money is an example of which of the following factors of production?

A. Enterprise

B. Labour

C. Capital

D. Land

4. Those who use a product or service are called ____________, and those who only buy it, but not
necessarily use it, are called ____________.

A. Buyers, sellers

B. Consumers, customers

C. Consumers, vendors

D. Customers, consumers

5. Goods are __________ items, generally produced by the __________ and/or _________ sectors of an
economy.

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A. Tangible, secondary, tertiary

B. Tangible, primary, secondary

C. Physical, primary, quaternary

D. Intangible, secondary, services

6. Which business function handles staffing duties such as recruitment, personnel training, performance
appraisals and dismissals?

A. Marketing

B. Finance and accounts

C. Operations management

D. Human resources

7. Which business function is involved with handling money/funds, making payments and preparing
income statements, balance sheets and cash flow statements?

A. Marketing

B. Finance and accounts

C. Operations

D. Human resources

8. Refer to the table below. Which product’s production process added the most value?

A. Product A

B. Product B

C. Product C

D. Product D

9. Which business function is in charge of identifying customer requirements and promoting a firm’s
products?

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A. Marketing

B. Finance and accounts

C. Operations

D. Human resources

10. Which business function is in charge of all aspects of the production process, quality management and
conducting research and development?

A. Marketing

B. Finance and accounts

C. Operations

D. Human resources

11. Which of the following activities is not a primary sector activity?

A. Farming

B. Vehicle assembly

C. Mining

D. Fishing

12. Which of the following activities is not a secondary sector activity?

A. Transportation

B. Bridge construction

C. Aircraft manufacturing

D. Brewing beers

13. Which of the following activities is not a tertiary sector activity?

A. Gold mining

B. Healthcare

C. Education

D. Retail

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14. Which of the following activities is not a quaternary sector activity?

A. Financial planning

B. Travel blogging

C. Consulting

D. Public transportation

15. Which of the following activities would most likely be considered a quaternary sector activity?

A. Data mining

B. Legal counselling

C. Tourism

D. Catering

16. As an economy develops, it will shift from being a predominantly ___________ economy, to a
predominantly _________ economy, and eventually into an economy that derives the majority of its
income from the _________ sector.

A. Primary sector, secondary sector, tertiary

B. Primary sector, agricultural, secondary

C. Tertiary sector, secondary sector, primary

D. Secondary sector, tertiary sector, primary

17. Students of Westminster Academy, which of the sectors below is most likely to create the least value
added?

A. Primary sector

B. Secondary sector

C. Tertiary sector

D. Quaternary sector

18. An economy which derives the majority of its national income from the tertiary or quaternary sectors
is likely to be __________, while an economy that derives the majority of its income from the secondary
sector is likely to be _____________.

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A. Developing, developed

B. Developed, developing

C. Developed, less economically developed countries

D. Developing, less economically developed countries

19. The activity by which an individual takes financial risks in a business venture is called ____________.

A. Innovation

B. Intrapreneurship

C. Entrepreneurship

D. Chief executive

20. When an individual employee in a large multinational company is highly innovative, he/she is called
a(n) ____________.

A. Entrepreneur

B. Intrapreneur

C. Creative director

D. Platform developer

21. Which of the following is not likely to be an obstacle facing a business start-up?

A. Lack of funds

B. Lack of high-quality staff

C. Low production costs

D. Marketing issues

22. Which of the following would typically not be found in the business plan for a start-up?

A. Balance sheet

B. Product outline

C. Marketing

D. Finances

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23. Refer to the diagram below illustrating a typical process of setting up a new firm. Which of the
following Options best fits the blank label (2.)?

A. Formally register the business

B. Conduct market research

C. Hire key personnel

D. Borrow money from the bank

24. Which sector of the economy provides services to other businesses?

A. Primary sector

B. Secondary sector

C. Tertiary sector

D. Quaternary sector

25. Which business functions involves researching the wants and needs ofcustomers?

A. Operations management

B. Human resource management

C. Finance

D. Marketing

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1.2 Types of Organizations

1. The public sector is owned and controlled by _____________.

A. The government

B. Individuals and households

C. Shareholders

D. The general public

2. What does limited liability refer to?

A. Shareholders’ personal assets cannot be claimed by creditors for money

owed by the firm

B. The maximum a shareholder can lose is equal to their initial investment,

but nothing more

C. The directors are exempt from adhering to company law and legislation

D. Both (A) and (B)

3. Which of the following is not a for-profit organization?

A. Public-private partnerships

B. Sole traders

C. Limited liability companies

D. Non-governmental organizations

4. If an individual wants full and total control over a firm and wishes to minimize thelegal bureaucracy in
setting up, which of the following is most suitable?

A. Partnership

B. Sole proprietorship

C. Private limited company

D. Public limited company

5. Which of the following is not a valid advantage of a sole proprietorship?

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A. The proprietor has limited liability

B. The proprietor has total control and more flexibility

C. Fewer legal formalities are required

D. The proprietor does not have to share profits with others

6. Which of the following is not a disadvantage of being a sole trader?

A. Unlimited liability

B. Limited availability of, and access to, funds

C. Time consuming to set up

D. Continuity challenges

7. Who do the profits made by a sole trader belong to?

A. The government

B. The sole trader

C. Employees

D. Shareholders

8. Which of the following is not a characteristic of partnerships?

A. Limited liability for all members

B. A deed of partnership is drawn out

C. Shared control, ownership and profits

D. Greater continuity

9. Which of the following is not an advantage of a partnership?

A. Larger amounts of capital can be raised by selling shares to friends andfamily

B. There is greater continuity compared with sole traders

C. There is a greater wealth of knowledge and expertise than setting up assole traders

D. Corporate confidentiality is relatively high as financial statements do nothave to be released to the public

10. Which of the following is not a disadvantage of partnerships?

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A. Financial resources are pooled

B. Partners have unlimited liability

C. Profits are shared with all partners

D. Conflicts in decision-making are more likely to occu

11. Which of the following is not a characteristic of a company (corporation)?

A. There is a separation of ownership and control

B. Shareholders have limited liability

C. Profits are distributed amongst managers and directors

D. They can be either privately or publicly owned

12. Students of Westminster Academy, which of the following is not a feature of aprivate limited
company?

A. Shares cannot be traded on a stock exchange

B. Transfer of ownership has to be agreed upon by all shareholders

C. Shares are usually sold to friends and family

D. An initial public offering has to be made after formally registering thebusiness

13. Which of the following is not a feature of a public limited company?

A. They have undergone an initial public offering (IPO)

B. Shares are sold and traded through a stock exchange

C. It can have up to 20 shareholders

D. Financial statements must be released to the public

14. Which of the following is not an advantage of private limited companies?

A. Lenders will be more willing to lend them funds compared tounincorporated businesses

B. The separation of ownership and control provides limited liability toshareholders

C. It is easy to raise large amounts of additional share capital

D. Since the firm and the owners are separate legal entities, there is greatercontinuity

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15. Which of the following is not a disadvantage of private limited companies?

A. Disclosure of financial statements may be required

B. Shares cannot be sold publicly on a stock exchange

C. There are more legal formalities compared to an unincorporated business

D. Certain shareholders have unlimited liability

16. Which of the following are advantages of a public limited company?

i. Large amounts of share capital can be raised to fund expansion

ii. Raising external finance is easier as being a listed company attracts investors

iii. There is greater continuity than in unincorporated firms

iv. They have a high degree of privacy

A. i + ii

B. ii + iii

C. i + ii + iii

D. ii + iii + iv

17. Which of the following is/are disadvantage(s) of public limited companies?

A. Disclosure of financial statements to the general public

B. High costs of compliance to stock exchange requirements

C. Heightened threat of a takeover

D. All of the abov

18. Which of the following is not an example of a for-profit social enterprise?

A. Micro-financiers

B. Non-governmental organizations

C. Cooperatives

D. Public-private partnerships

19. Which of the following is not a characteristic of a cooperative?

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A. They are non-profit social enterprises

B. They can be consumer, worker or producer cooperatives

C. They aim to create value for their members in a sustainable manner

D. They are democratically controlle

20. Which of the following are advantages of a cooperative?

i. They are socially desirable

ii. The democratic system incentivises employees

iii. Members have limited liability

iv. It is easy to attract new members because financial returns aresubstantial

A. ii + iii

B. i + iii

C. i + ii + iii

D. ii + iii + iv

21. Small, low-interest loans may be provided to low-income individuals who wouldnot otherwise have
access to funds from traditional lenders like banks to improvtheir standards of living. What is this
called?

A. Grants

B. Microfinance

C. Cooperative financing

D. Subsidies

22. What is it called when an organization is owned and controlled by both thegovernment and a private
sector firm simultaneously?

A. Cooperative

B. Non-profit social enterprise

C. Limited liability company

D. Public-private partnership
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23. Which of the following are advantages of public-private partnerships (PPPs)?

i. PPPs are typically more efficient than government operated organizations

ii. Combining private and public funds helps eliminate funding shortfalls

iii. There is a large opportunity cost involved in using government funds

iv. There are conflicting interests between the profit-driven private sector entity and the service-motivated
government entity

A. i + ii

B. i + ii + iii

C. ii + iv

D. iii + iv

24. Which of the following is not an example of a non-profit social enterprise?

A. Charities

B. Non-governmental organizations (NGOs)

C. Public-private partnerships (PPPs)

D. All of the above

25. Which of the following is not a disadvantage of a non-profit social enterprise?

A. They may be relatively inefficient

B. They receive tax exemptions and incentives

C. There is a risk of fraud

D. There is significant bureaucracy involved

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1.3 Organizational Objectives

1. Which of the following statements best defines a vision statement?

A. A statement of a firm’s aims, values and the fundamental purpose of the business

B. An illustration of a company’s aspirations for the future

C. An outline of how an organization is to achieve its aims and objectives in the long term

D. A short, captivating phrase used in branding and advertising

2. Which of the following statements best defines what a mission statement is?

A. An explanation of a firm’s aims, values and fundamental purposes of existence

B. Short-term plans to achieve an organization’s tactical objectives

C. An outline of how an organization is to achieve its aims and objectives in the long term

D. A short, captivating phrase used in branding and advertising

3. Which of the following statements best defines an ‘aim’?

A. Broad, unquantifiable long term goals providing direction to internal stakeholders as implied in the mission
statement

B. SMART goals that a firm wishes to achieve, thus providing motivation to employees

C. Short-term plans to achieve an organization’s tactical objectives

D. How an organization is to achieve its aims and objectives in the long term

4. Which of the following statements best defines what an ‘objective’ is?

A. A broadly defined long term goal found in the mission statement

B. How an organization is to achieve its aims and objectives in the long term

C. Short term targets for sales staff

D. Clearly-defined, measurable targets a firm wishes to achieve

5. Which document relates to a firm’s concise and inspiring affirmation of its purpose, thereby guiding
what it does?

A. Vision statement

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B. Mission statement

C. Business plan

D. Job description

6. Objectives should be SMART. What does the acronym SMART stand for?

A. Short-term, monetary, achievable, realistic, time-bound

B. Short-term, marketable, authentic, realistic, transient

C. Specific, marketable, achievable, restrained, technical

D. Specific, measurable, achievable, realistic, time-bound

7. Which of the following are reasons for which firms set ethical objectives?

i. It increases customer loyalty

ii. It motivates employees

iii. It improves the corporate image

iv. It reduces compliance costs

A. i + ii

B. ii + iii

C. i + ii + iii

D. i + iii + iv

8. What does the acronym SWOT stand for?

A. Strategy, working capital, opportunity cost, tactics

B. Strengths, weaknesses, opportunities, threats

C. Strategy, weaknesses, opportunities, tactics

D. Strategic direction, weaknesses, obstacles, tactics

9. Which of the following is not a valid reason to conduct a SWOT analysis?

A. To assess and identify potential growth opportunities

B. To aid strategic planning

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C. To assess and evaluate market position

D. To determine a firm’s growth strategy

10. Which of the following would be classified as strengths in a SWOT analysis

i. High market share

ii. Low employee turnover

iii. Strong brand image

iv. Growth of e-commerce industry

A. i + ii

B. ii + iii

C. i + ii + iii

D. All of the options

11. Which of the following are disadvantages of a SWOT analysis?

i. It is a static rather than dynamic business model

ii. It can be subjective and vulnerable to bias

iii. It does not prioritise or ‘weight’ issues quantitatively so is rather simplistic

iv. It needs to be frequently updated

A. i + ii

B. i + ii + iii

C. iii + iv

D. i + ii + iii + iv

12. Which of the following best describes the primary function of the Ansoff Matrix?

A. To determine the growth strategy of a firm or its products

B. To assess the current and future situation of a firm or product and the external factors that can affect it

C. To determine the firm’s key stakeholders based on their levels of power and interest

D. To identify the root causes of an issue the firm is facing

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13. Market penetration is a _________ targeting _________ markets with _________ products.

A. Low-risk strategy, existing, existing

B. Medium-risk strategy, existing, new

C. High-risk strategy, new, new

D. Medium-risk strategy, new, existing

14. When vehicle manufacturers develop new car models and release them into existing markets, this is
called a ____________ strategy, which is a __________ strategy.

A. Market penetration, low-risk

B. Product development, medium-risk

C. Market development, medium-risk

D. Diversification, high-risk

15. Which of the following is an example of a market development strategy?

A. When Apple launched and began selling its Apple smartwatch

B. When a car manufacturer begins to produce aircraft engines

C. When an electronics manufacturer begins exporting to other countries

D. When a clothing retailer introduces a loyalty scheme and does more advertising

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1.4 Stakeholders
1. Which of the following is not an example of internal stakeholders?

A. Customers

B. Employees

C. Shareholders

D. Directors

2. Which of the following is not an example of external stakeholders?

A. Suppliers

B. The government

C. Shareholders

D. Lenders

3. What situation arises when directors wish for large bonuses and perks, such as company cars, while
shareholders wish for higher dividends?

A. Stakeholder conflict

B. Crisis management

C. Corruption

D. Contingency planning

4. Which of the following best describes the primary function of stakeholder analysis?

A. To determine a firm or product’s growth strategy

B. To assess the current and future situation of a firm or product and the external factors that can affect it

C. To determine the firm’s key stakeholders based on their levels of power and interest

D. To identify the driving and restraining forces of change

5. What level of effort should organizations commit to those stakeholders who have low power and low
interest in the firm?

A. Minimal

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B. Maximum

C. Medium

D. Ignore

6. How should firms behave with those stakeholders who have low power but high interest in the firm?

A. Commit minimal effort

B. Keep them informed

C. Keep them satisfied

D. Commit maximum effort

7. How should firms behave with those stakeholders who have high power but low interest in the firm?

A. Commit minimal effort

B. Keep them informed

C. Keep them satisfied

D. Commit maximum effort

8. Which of the following stakeholder group would most likely be in quadrant D?

A. Lenders

B. Suppliers

C. Employees

D. Both (A) and (B)

9. Under what circumstance will customers possess a high level of power?

A. When there is a large number of substitute products

B. When there are only a few, large clients in the market

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C. When there are a few suppliers in the market

D. Both (A) and (B)

10. Which of the following is least likely to be a method used to resolve stakeholder conflicts?

A. Arbitration

B. Governmental intervention

C. Compensation

D. Improving effectiveness of communications

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1.5 External Environment

1. Which of the following factors is not part of a STEEPLE analysis?

A. Ethical

B. Economic

C. Capacity

D. Legal

2. What is a STEEPLE analysis conducted to assess?

A. A firm’s internal environment

B. A firm’s market position

C. The historical market performance

D. The external environment

3. Opportunities are __________ factors that can potentially benefit a business, whereas threats are
_________ factors that can potentially harm a business.

A. External, external

B. External, internal

C. Internal, internal

D. Internal, external

4. Which of the following are valid benefits of a STEEPLE analysis?

i. It is a relatively simplistic, easy-to-use tool

ii. It promotes proactive management thinking

iii. It helps identify the root causes of problems being faced by the business

iv. It helps identify potential opportunities and threats

A. i + iii + iv

B. ii + iii + iv

C. ii + iii

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D. i + ii + iv

5. Which of the following is not an example of a social factor?

A. Population size

B. E-commerce

C. Fashions and tastes

D. Level of education

6. Which of the following is not an example of a technological factor?

A. E-commerce utilization

B. IT infrastructure

C. Carbon footprints

D. Level of automation

7. Which of the following is not an example of an economic factor in the external business environment?

A. Economic growth rates

B. Inflation rates

C. Interest rates

D. Legislation

8. Which of the following are examples of ethical factors in a STEEPLE analysis?

i. The level of corruption

ii. The level of transparency

iii. Trade policies

iv. The rate of resource depletion

A. i + ii

B. ii + iii

C. i + ii + iv

D. iii + iv
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9. Which of the following is not an example of a political factor?

A. Trade policies

B. Political stability

C. The choice of fiscal and monetary policies in force

D. The state of the economy

10. Which of the following is not an example of a legal factor?

A. Trade policies

B. Consumer protection legislation

C. Competition laws

D. Employment ordinances

11. Which of the following is not an example of an ecological factor?

A. Resource depletion

B. Climate change

C. Unemployment rates

D. Carbon footprints

12. Higher inflation, which causes higher costs of production, is an example of a(n) ______________
threat.

A. Political

B. Economic

C. Legal

D. Social

13. Currency depreciation is an economic factor that is a(n) _________ to exporters and a(n) ________ to
importers.

A. threat, opportunity

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B. opportunity, threat

C. threat, threat

D. opportunity, opportunity

14. An ageing population is a(n) __________ factor that would be considered a(n) _________ to an
ecommerce business.

A. Economic, opportunity

B. Economic, threat

C. Social, opportunity

D. Social, threat

15. If a nation experiences increasing employment rates, this is a(n) ____________ opportunity.

A. Economic

B. Ecological

C. Social

D. Political

16. If a country is facing low, stagnant levels of economic growth, but relatively high levels of inflation,
this is a(n) ____________ threat.

A. Social

B. Legal

C. Economic

D. Political

17. What is the business cycle?

A. Fluctuations in the level of economic activity

B. The most extreme and lowest point of a recession

C. The general long term growth trend experienced by an economy

D. A period of economic expansion

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18. What does a trough in the business cycle represent?

A. The most extreme and lowest point of a recession

B. A decline in the rate of economic growth

C. A period of economic recovery

D. The peak of an economic boom

19. If a country is prone to frequent, large swings in the value of its currency, this is a(n) __________
___________.

A. Political, threat

B. Political, opportunity

C. Economic, threat

D. Economic, opportunity

20. For a firm trying to establish itself in a foreign market, increasing protectionist measures are an
example of a(n) ___________ ___________.

A. Political, opportunity

B. Political, threat

C. Economic, opportunity

D. Economic, threat

21. A large and well-educated workforce is an example of a(n) ____________ _____________.

A. Economic threat

B. Economic opportunity

C. Social threat

D. Social opportunity

22. Increased automation in a particular industry is a(n) _____________.

A. Economic opportunity

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B. Social threat

C. Technological opportunity

D. Ecological threat

23. If a country has poor internet access and low levels of mobile connectivity, this would be considered
as a(n) ___________ threat.

A. Economic

B. Technological

C. Social

D. Ecological

24. An increase in the national minimum wage is considered a(n) ___________ threat to businesses in that
country.

A. Legal

B. Ecological

C. Economic

D. Social

25. A global financial crisis would be a(n) ___________ threat for luxury car manufacturers.

A. Political

B. Economic

C. Social

D. Environmental

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1.6 Growth and Evolution

1. What is term used to describe a reduction in average cost of production arising from a firm operating
on a larger scale?

A. Diseconomies of scope

B. Economies of scale

C. Economies of scope

D. Fixed-cost spreading

2. If fixed costs are $200,000 and the variable costs associated with producing 50,000 shoes is $400,000,
what is the average cost (per shoe)?

A. $4

B. $8

C. $12

D. $14

3. If fixed costs are $200,000 and the variable costs associated with producing 80,000 shoes is $640,000,
what is the average cost (per shoe)?

A. $2.50

B. $8.50

C. $10.50

D. $12.00

4. If fixed costs are $200,000 and the average variable cost per shoe is $8, what is the total profit that
would be earned if the average selling price per shoe was $30, and 80,000 shoes are sold?

A. $1,280,000

B. $1,560,000

C. $1,750,000

D. $2,200,000

5. What are internal economies of scale?

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A. Cost savings due to factors within the firm’s control

B. Cost savings occurring due to improved infrastructure

C. Cost savings occurring due to industry growth

D. Cost savings occurring due to technological progress

6. Which of the following is not an example of an internal economy of scale?

C. Availability of specialist labour

A. Managerial economies of scale

D. Marketing economies of scale

B. Purchasing economies of scale

7. When a firm can utilize highly efficient machinery and automation techniques to mass produce its
output and reduce average cost, this is a _____________ economy of scale.

A. Financial

C. Purchasing

D. Specialisation

B. Technical

8. When a large firm can borrow money at a lower cost compared to a small firm, this is a _____________
economy of scale.

A. Technical

B. Risk-bearing

C. Purchasing

D. Financial

9. Which option is not an example of external economies of scale?

A. Regional specialization and expertise

B. Technological advancements

C. Improvements in infrastructure

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D. Risk-bearing economies

10. If an area possesses significant production support services and an abundance of highly skilled
labour, allowing firms to reduce their average costs, what is this referred to as?

A. Regional specialization

B. Managerial economies

C. Internal economy of scale

D. Marketing economies

11. Students of Westminster Academy, what are internal diseconomies of scale?

A. Reductions in average costs that arise when the firm operates on a larger scale

B. Increases in average costs that arise when the firm operates on a larger scale

C. Reductions in average costs that arise when the industry grows as a whole

D. Increases in average costs that arise when the industry faces problems such as traffic congestion, higher
rental expenses and labour shortages

12. What is not an example of internal diseconomies of scale?

A. Increased bureaucracy

B. Communication and coordination breakdowns

C. Increased rental expenses

D. Alienation of lower level employees from management

13. What is not a factor causing external diseconomies of scale?

A. Traffic congestion

B. Increased rental expenses

C. Shortages of labour

D. Economic downturns

14. Which option is not a benefit of being a small firm?

A. Ability to provide personalised services

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B. Flexibility

C. Easy access to funds

D. Greater freedom in decision-making

15. What is not a benefit of being a large organization?

C. Ability to provide additional value-added services

D. Enhanced access to finance, high-quality labour and distribution channels

A. High brand recognition and loyalty

B. Increased flexibility to changes in the market

16. What are mergers, acquisitions and franchising examples of?

A. External growth

B. Internal growth

C. Diseconomies of scale

D. Economies of scale

17. Which of the following is not a valid method of achieving internal growth?

A. Mergers and takeovers

B. Providing superior trade credit facilities

C. Increasing investment

D. Developing superior products

18. What is not an advantage of organic growth?

A. Control and ownership of the organization is maintained

B. Less risky compared to inorganic growth

C. It is relatively cheaper

D. It prevents diseconomies of scale

19. What is not an advantage of external growth?

A. It reduces or eliminates competition

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B. It is quicker than organic growth

C. It can help raise market share and market power

D. It is cheaper and less risky compared to organic growth

20. When two companies come together to form a new, combined entity, this is called a(n) ____________;
when one company buys out a controlling interest in another firm, this is called a(n) ___________.

A. Merger, acquisition

B. Acquisition, strategic alliance

C. Joint venture, acquisition

D. Strategic alliance, joint venture

21. What is not an advantage of mergers and acquisitions as a method of external growth?

A. They allow for quick diversification

B. They allow for higher market share and market power

C. They limit the extent of culture clashes

D. They allow for economies of scale to be achieved

22. What is not a disadvantage of mergers and acquisitions?

A. They are prone to organizational culture clashes

B. They reduce a firm’s market power

C. They are expensive and highly risky

D. Diseconomies of scale may occur

23. What is the main difference between a joint venture and a strategic alliance?

A. A joint venture involves forming a new legal entity whereas a strategic alliance does not

B. A joint venture facilitates geographic diversification whereas strategic alliances facilitate product
diversification

C. A joint venture involves pooling resources whereas a strategic alliance involves one company renting the
productive resources of another

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D. A joint venture is done between the private and public sector, whereas a strategic alliance involves parties
from only the private sector

24. What is not an advantage of a joint venture?

A. Synergies can be created when resources are shared

B. Risks are spread

C. Economies of scale can be achieved

D. Culture clashes are limited

25. What is not a disadvantage of joint ventures and strategic alliances?

A. Culture clashes are likely

B. There are enhanced financial risks to each party

C. Diseconomies of scale may set in

D. There may be a dilution of the individual brands

26. What is the business model where a firm sells the legal rights to trade under its brand name?

A. Acquisition

B. Franchise

C. Joint venture

D. Strategic alliance

27. What is not an advantage of franchising as a method of growth for the franchisee?

A. Regular royalty payments are received

B. Entrepreneurial abilities and flexibility of franchisees are encouraged

C. Relatively low risk

D. Rapid expansion and increased market presence

28. What is unlikely to be a drawback of franchising as a model of growth?

A. The franchisor’s image is at risk if a franchisee is unprofessional

B. Diseconomies of scale can arise

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C. Entrepreneurial potential of franchisees is not fully utilized

D. Clash of corporate cultures

29. Which option is least likely to be a benefit of multinational companies to a host nation in a less
economically developed country?

A. They create jobs and boost gross domestic product

B. They facilitate knowledge and technology transfers

C. They are likely to operate more responsibly than local firms

D. They intensify domestic competition

30. When a firm acquires another business that operates at a different stage in the chain of production,
this is called _________ integration.

A. Vertical

B. Horizontal

C. Conglomerate

D. Multinational

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1.7 Organizational Planning Tools (HL Only)

1. What is the purpose of a fishbone diagram?

A. Determine the root cause of a problem being faced by the firm

B. Quantify possible outcomes based on the probability of their occurrence

C. Examine the driving and restraining forces of a decision

D. Sequentially illustrate the schedule of a project

2. What are the 4 Ms of a fishbone diagram?

A. Management, methods, morale, motivation

B. Management, manpower, machines and materials

C. Management, methods, measurement, materials

D. Methods, machines, manpower, morale

3. Which of the following is not an advantage of using a fishbone diagram?

A. It is easy to use

B. It encourages systematic brainstorming

C. It is an objective, quantifiable tool

D. It displays numerous weaknesses of the firm

4. What is the purpose of a decision tree?

A. Quantify possible outcomes based on the probability of their occurrence

B. Determine the root cause of a problem being faced by the firm

C. Illustrate the sequence of activities and schedules of a project

D. Compare the driving forces against the restraining forces of a decision

5. In a decision tree, a square represents a _________ node, while a circle represents a _________ node.

A. Probability, value

B. Chance, decision

C. Decision, chance
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D. Decision, restraining

6. Assume a chance node from which there is a probability of success of 65%, and a probability of project
failure of 35%. The expected payoff if the project is a success is $650,000, and the expected payoff from a
failed project is $200,000.

What is the expected value at this chance node?

A. $460,000

B. $492,500

C. $525,000

D. $557,500

7. With reference to the data below, what is the expected profit from the project?

A. $96.00 million

B. $25.55 million

C. $16.60 million

D. $14.00 million

8. With reference to the data in the table below, where should the company invest its new project?

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A. Brazil

B. China

C. Vietnam

D. Cannot be determine

9. Which of the following is not an advantage of decision tree analysis?

A. It is a more objective (quantifiable) way of analysing decisions

B. It takes into account risks (multiple outcomes)

C. It provides visual representation of a decision

D. It takes qualitative factors into account

10. Which of the following is not a valid criticism of decision trees analysis?

A. It only considers and analyses positive outcomes

B. It relies on subjective estimates of outcomes and expected values

C. The probabilities used are vulnerable to manipulation

D. Qualitative issues are ignored

11. What is the purpose of a force field analysis?

A. Compute the expected value of a project

B. Analyse the external environment the firm operates in

C. Compare the driving forces against the restraining forces of a decision

D. Determine the opportunities and threats faced by the business

12. In a force field analysis, those factors which encourage change are called ___________, while those
that discourage change are called __________.

A. Chance nodes, decision nodes

B. Successes, failures

C. Strategic requirements, pitfalls

D. Driving forces, restraining forces

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13. Which of the following are disadvantages of a force field analysis?

i. Weights may be assigned subjectively

ii. Omission of certain forces may significantly affect the final decision

iii. It gives a visual representation of an issue

iv. It quantifies the relative importance of forces

A. ii + iv

B. i + ii

C. i + iii

D. i + ii + iii + iv

14. What is a planning tool that visually depicts the sequencing and scheduling of activities in a project
called?

A. Force field analysis

B. Decision tree

C. Cause and effect model

D. Gantt char

15. Which of the following is not a benefit of using a Gantt chart?

A. It is a decision-making tool

B. It shows the linkages between activities in a project

C. It enables quick corrective action to be taken

D. It plans a project logically to maximise efficiency

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2.1 Functions and Evolution of HRM

1. Which of the following statements best describes the purpose of human resource planning (also known
as workforce planning)?

A. The number of workers leaving a company that need to be replaced

B. Satisfying a firm’s short-term and long-term personnel needs

C. The extent to which labour can change locations or job functions

D. Determining senior management’s annual bonuses for the current year

2. Which of the following is not an example of a human resource management duty?

A. Staff training and development

B. Disciplinary procedures

C. Identifying customer requirements

D. Performance appraisals

3. Which of the following data is least likely to be used by the human resources division when conducting
workforce planning?

A. Current and forecasted sales

B. Labour turnover

C. Historical trends

D. Balance sheets

4. What does labour turnover refer to?

A. Percentage of total staff leaving an organization in one year

B. Number of new staff being hired in one year

C. Percentage of total staff of provided pay-hikes in one year

D. Number of staff provided training and development activities

5. A country with a positive net birth rate will face a(n) _________ supply of human resources; a country
with a negative net migration rate will face a(n) _________ supply of human resource.

A. Decreasing, increasing
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B. Decreasing, decreasing

C. Increasing, decreasing

D. Increasing, increasing

6. Which of the following scenarios would not lead to an increase in the size of a country’s workforce?

A. A positive net birth rate

B. A net emigration

C. An increase in female participation in the workforce

D. An increase in the retirement ag

7. What does geographical mobility of labour refer to?

A. Extent to which workers have accommodation in different regions of the country

B. Extent to which workers can switch between jobs

C. Extent to which workers can move to different places to work

D. Extent to which workers are rotated to different offices for work

8. What does occupational mobility of labour refer to?

A. Amount of variety workers are provided by their employers

B. Extent to which workers have multiple qualifications

C. Extent to which workers can move to different places to work

D. Extent to which workers are able to switch between jobs

9. Which of the following is not a consequence of an ageing population?

A. Amount of variety workers are provided by their employers

B. Alterations of spending preferences and patterns

C. A fall in the need for social welfare facilities

D. A decline in the geographical and occupational mobility of labour

10. What is the process of assessing a job role in terms of its nature, tasks and responsibilities called?

A. Job classification
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B. Job hunting

C. Job analysis

D. Job description

11. What is a document detailing the duties and responsibilities of a particular job called?

A. Job description

B. Job analysis

C. Person specification

D. Employment offer

12. What is a document that details the skills, work experience, qualifications and characteristics of the
ideal candidate for a particular job called?

A. Job description

B. Job analysis

C. Résumé

D. Person specification

13. Which of the following document(s) is not likely to be required for an applicant to submit when
applying for a job?

A. Résumé

B. Application form

C. Labour department approval letter

D. Cover letter

14. What is the process of comparing a candidate’s application form and résumé to the job description
and person specification called?

A. Job analysis

B. Shortlisting

C. Candidate assessment

D. Psychometric assessment and evaluation

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15. Which of the following is not a benefit of using interviews in the selection process?

A. They allow two-way, face-to-face dialogue

B. They allow applicants to obtain more information about the job and company

C. They are very time-efficient

D. The firm is able to obtain information that cannot be displayed on paper, such as the candidate’s social and
presentation skills, and enthusiasm.

16. Which of the following is not a valid test that can be used in the candidate testing stage of
recruitment?

A. Aptitude tests

B. Ethnicity tests

C. Psychometric tests

D. Intelligence tests

17. Which of the following tests is best suited to assessing a potential candidate’s personality?

A. Aptitude tests

B. Psychometric tests

C. Trade tests

D. Intelligence tests

18. What is a set of tests that assess a candidate’s verbal, logical, numerical reasoning and general
knowledge called?

A. Aptitude test

B. Psychometric test

C. Trade test

D. Intelligence test

19. If an insurance salesperson has to sit an entrance exam focused on industry regulations, this is
referred to as a(n)

A. Aptitude test

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B. Psychometric test

C. Trade test

D. Intelligence test

20. What is the practice of hiring individuals who already work for the company for other positions
called?

A. Recruitment and selection

B. Employee induction

C. Internal recruitment

D. Performance appraisal

21. Which of the following is not an advantage of recruiting internally?

A. It is cost and time-effective

B. There is lower risk of hiring an unsuitable candidate

C. There is a greater pool of applicants to hire from

D. It provides motivation

22. Which of the following are disadvantages of recruiting internally?

i. There is a smaller pool of applicants to hire from

ii. Fresh, new ideas are not infused into the business

iii. Internal conflict and politics may be encouraged

iv. An additional vacancy must now be filled

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

23. Internal recruitment has the potential to increase ____________ in the firm.

A. Conflict

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B. Morale

C. Salaries

D. Both (A) and (B)

24. What is the practice of hiring individuals from outside the firm called?

A. External recruitment

B. Employee induction

C. Internal recruitment

D. External poaching

25. Which of the following is not a method of external recruitment?

A. Employee referrals

B. Promotions

C. Head-hunters

D. University campus exhibitions

26. Which of the following is not an advantage of external recruitment?

A. External recruits may bring unique skills and experiences

B. There is an infusion of “fresh blood” into the firm

C. There is a greater pool of candidates to select from

D. It is cheaper than internal recruitment

27. Which of the following describe types of training can a firm provide its employees?

A. On the job

B. Off the job

C. Cognitive

D. Spatial

28. Induction training is a form of ____________ training.

A. On the job
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B. Off the job

C. Mentoring

D. Behavioural

29. When an experienced employee provides support and guidance to a newer employee, this is referred
to as _________, which is a form of ___________ training.

A. Induction, on the job

B. Mentoring, off the job

C. Mentoring, on the job

D. Supportive behaviour, off the job

30. Which of the following is not an example of off the job training?

A. Seminars or conferences

B. Workshops

C. Distance or eLearning

D. Understudying

31. When training is meant to improve the mental skill levels of employees to boost their work
performance, this is called ____________ training.

A. On the job

B. Off the job

C. Cognitive

D. Behavioural

32. Which of the following does cognitive training not focus on improving?

A. Time management

B. Leadership skills

C. Problem solving skills

D. Logical, verbal and visual reasoning skills

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33. Which of the following does behavioural training not focus on improving?

A. Self-control

B. Team-working skills

C. Leadership skills

D. Conflict resolution and stress managemen

34. Which of the following is/are advantage(s) of off the job training?

i. External knowledge can be transferred into the organization

ii. A wider breadth of training can be provided

iii. It is cheaper than on the job training

iv. Loss of productivity while staff are away from work

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

35. The process of formally evaluating an employee’s performance against a job description is called
_____________.

A. Appraisal

B. Job analysis

C. Mentoring

D. Interviewing

36. Which of the following is not a benefit of appraisals?

A. They aid professional development

B. They help identify training needs

C. They allow managers to receive feedback from employees

D. They are a cost and time effective way to ensure performance

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37. Which of the following is not a valid form of appraisal?

A. Formative

B. Summative

C. 360-degree

D. Associative

38. The form of appraisal that occurs on an ongoing basis by a senior employee to assess an employee’s
performance, identify strengths and weaknesses and determine training needs is called __________
appraisal.

A. Formative

B. Summative

C. 360-degree

D. Sel

39. The form of appraisal that occurs on periodically by the employee’s line manager to assess
performance and achievements is called __________ appraisal.

A. Formative

B. Summative

C. 360-degree

D. Self

40. When everyone directly collaborating with an employee is used in the appraisal process, this is called
__________ appraisal.

A. Formative

B. Summative

C. 360-degree

D. Self

41. Which of the following is not a valid reason to dismiss an employee?

A. Incompetence

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B. Ethnicity

C. Misconduct

D. Legal requirements

42. When does constructive dismissal occur?

A. When an employer makes it very difficult for an employee to continue working there

B. When a firm can no longer afford to employ someone

C. When an employee engages in gross misconduct

D. When an employee loses his/her job due to incompetence

43. What is the main difference between dismissal and redundancy?

A. Dismissal occurs due to contractual breach or incompetence while

redundancy occurs when a firm can no longer afford to hire someone

B. Dismissal occurs due to gross misconduct while redundancy occurs when employees volunteer to leave in
return for a severance package

C. Dismissal occurs due to incompetence while redundancy occurs when employees engage in regular
misconduct

D. Dismissal occurs when employees leave the organization for better opportunities elsewhere while
redundancy occurs due to legal requirements such as retirement age.

44. What is the concept of working out of traditional office spaces by using technology and electronic
forms of communication called?

A. Technological facilitation

B. Teleworking

C. Capital intensity

D. Homeworking

45. Which of the following is not an advantage of teleworking?

A. It enables flexible working hours

B. Less commuting is required

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C. Less rental expenses as less office space is needed

D. There is increased training and development

46. Which of the following are disadvantages of teleworking?

i. Workers face more isolation and less team-working opportunities

ii. Management of off-site employees is more difficult

iii. Workers are more dependent on IT systems

iv. Employees may face fewer distractions

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

47. What is a worker who handles multiple jobs and assignments simultaneously referred to as?

A. Portfolio worker

B. Part-time worker

C. Job-switcher

D. Flexible worker

48. What is the process of transferring out internal activities such as customer support, manufacturing,
catering and security to external providers called?

A. Offshoring

B. Outsourcing

C. Re-shoring

D. Off-loading

49. What does offshore outsourcing refer to?

A. Utilizing foreign providers in foreign nations to perform business activities

B. Transferring overseas operations back to the home country

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C. Transferring out of internal activities to an external provider

D. Relocating business activities overseas

50. Which of the following are disadvantages of outsourcing?

A. Subcontractors may engage in unethical behaviours

B. Quality management is more challenging

C. It distracts a firm from focusing on its core activities

D. Redundancies may be caused

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2.2 Organizational Structure

1. What is it called when an employee is held answerable for the completion and performance of a certain
set of tasks?

A. Responsibility

B. Accountability

C. Delegation

D. Decentralization

2. In a school, the head of Mathematics is __________ for the Mathematics teachers, while the
Mathematics teachers are __________ to the head of Mathematics.

A. Accountable, responsible

B. Accountable, delegating tasks

C. Responsible, accountable

D. Dividing tasks, responsible

3. What is the passing on of authority and decision-making power to other employees called?

A. Job enlargement

B. Job enrichment

C. Chain of command

D. Delegation

4. The number of hierarchical layers is ____________ to the span of control.

A. Directly proportional

B. Inversely proportional

C. Equal

D. Unrelated

5. What is not a valid advantage of having a narrow span of control?

A. Communication with subordinates is made easier for managers

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B. Managers have more control

C. It reduces managerial payroll expenses

D. It fosters greater team cohesiveness and productivity

6. The more experienced and skilled the managers, the ________ the span of control; whilst the more
complex the tasks, the ________ the span of control.

A. Narrower, narrower

B. Narrower, wider

C. Wider, narrower

D. Wider, wider

7. Which of the following are advantages of having a wide span of control?

i. It reduces managerial payroll expenses

ii. The speed of communications between hierarchical levels is increased

iii. Managers have more control over employees

iv. Team spirit is maximised

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

8. Which of the following is least likely to have a relatively wide span of control?

A. A pen manufacturer

B. A cleaning contractor

C. An investment bank overseeing a merger

D. A factory mass producing jute bags

9. What is the official line of authority through which commands are passed down in a firm called?

A. Line manager

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B. Chain of command

C. Hierarchical structure

D. Span of control

10. The process of eliminating hierarchical levels is called __________. This _________ the span of
control.

A. Delayering, widens

B. Delayering, narrows

C. Flattening, narrows

D. Streamlining, widens

11. Which of the following is not an advantage of delayering?

A. It reduces managerial payroll costs

B. The speed of communications between hierarchical levels is increased

C. Staff workloads are reduced

D. Delegation is promoted

12. Which of the following is a consequence of delayering?

A. It causes stress to employees due to the possibility of redundancy

B. Workloads increase

C. Decision-making slows down

D. All of the above

13. When decision-making power is concentrated in the hands of just a few members, the organization is
a ____________ one.

A. Decentralized

B. Centralized

C. Tall

D. Both (A) and (C)

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14. A firm where the board of directors makes key decisions but spreads out some degree of decision-
making power to other employees in the organizations is a

___________ organization

A. Decentralized

B. Centralized

C. Flat

D. Both (A) and (C)

15. Which of the following is not an advantage of centralization?

A. Only the most qualified people are the ones who make decisions

B. Morale is likely to be higher than in a decentralized firm

C. The speed of decision-making is enhanced

D. There is more control over a firms operations

16. Which of the following is/are disadvantage(s) of centralization?

i. Decision-making may be delayed due to the heavy workload decision-

makers

ii. It makes the firm inflexible

iii. Employees may lack motivation

iv. Inefficiencies are more likely to leak into the firm

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

17. Which of the following is not an advantage of decentralization?

A. Morale is likely to be higher than in a centralized firm

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B. Team-working is encouraged

C. The firm is more flexible

D. There is more control over the firm’s operations

18. Which of the following is not a characteristic of decentralized organizations?

A. There is a higher likelihood of mistakes being made

B. Senior management has less control

C. Coordination is more difficult

D. Less team working takes place

19. A __________organization has few layers in its organizational hierarchy and a relatively __________
chain of command.

A. Flat, long

B. Flat, short

C. Tall, long

D. Tall, short

20. A vertical organization has ________ layers in its organizational hierarchy, a _________ span of
control, and a relatively __________ chain of command.

A. Many, narrow, long

B. Few, wide, short

C. Many, wide, short

D. Many, narrow, short

21. What is the organizational structure of a firm that has multiple strategic business units likely to be
organized by?

A. Function

B. Product

C. Region

D. A matrix structure
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22. Assume a firm has an Asia Pacific director, a Europe director and a North America director. What is
this firm’s organizational structure likely to be organized by?

A. Function

B. Product

C. Region

D. A matrix structure

23. Assume a firm is organized in terms of departments such as human resources, finance, accounting,
market and operations. What is this firm’s organizational structure likely to be organized by?

A. Function

B. Product

C. Areas of expertise

D. A matrix structure

24. Which of the following types of firms is most likely to use project-based organization?

A. Construction firms

B. Restaurant chains

C. Software development firms

D. Both (A) and (C)

25. Which of the following is not an advantage of having a project-based organization structure?

A. It provides more continuity

B. It can provide motivation to employees

C. It raises the firms productivity

D. It raises the firm’s flexibility

26. What is it called when employees from different areas of expertise within the firm come together to
work on projects?

A. Organization by function
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B. Flat organizational structure

C. Tall organizational structure

D. Matrix structure

27. Which organizational structure is least likely to have a formal chain of command

or hierarchy?

A. A tall organizational structure

B. A shamrock organization

C. A matrix structure

D. A flat organizational structure

28. In Charles Handy’s Shamrock Organization theory, which of the following is not one of the ‘leafs’ of
employees?

A. Core staff

B. Ancillary staff

C. Outsourced workers

D. Peripheral workers

29. According to Charles Handy’s Shamrock Organization theory, the trend has been to __________ the
number of core staff, and __________ the number of

peripheral workers.

A. Increase, reduce

B. Increase, increase

C. Reduce, reduce

D. Reduce, increase

30. Part-time salespeople would be considered __________ workers, while those in contracted marketing
agency would be considered ___________ workers.

A. Core, peripheral

B. Peripheral, core
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C. Core, outsourced

D. Peripheral, outsourced

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2.3 Leadership and Management

1. Which of the following is not one of the functions of management according to Henri Fayol?

A. Planning

B. Problem solving

C. Coordinating

D. Organizing

2. Which of the following is not one of the three key roles of managers according to Charles Handy?

A. To be ‘general practitioners’ for any issues arising within the firm

B. Confronting problems

C. Coordinating efforts

D. Balancing cultural mixes

3. __________ suggested that for management to be effective, managers and leaders must adopt a
‘helicopter approach - an ability to rise above a situation and look at the big picture, rather than focusing
on minor details.

A. Henri Fayol

B. Charles Handy

C. Peter Drucker

D. John Adams

4. ____________ believed that a firm’s employees are the most important component to success, and that
firms should be relatively decentralised.

A. Henri Fayol

B. Charles Handy

C. Peter Drucker

D. Frederick Taylor

5. Which of the following is not one of the functions of management, according to Peter Drucker?

A. Measuring and assessing performance

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B. Developing people

C. Establishing organizational objectives

D. Balancing a firm’s cultural mixes

6. A ___________ inspires, motivates and influences people while a ____________ focuses on achieving
operational objectives.

A. Leader, manager

B. Leader, employee

C. Board of directors, leader

D. Manager, leader

7. A leader who is authoritative and does not consult subordinates in decision- making is called a(n)
___________ leader.

A. Situational

B. Paternalistic

C. Laissez-faire

D. Autocratic

8. Which of the following is not an advantage of an autocratic leadership style?

A. It enables quick decision making

B. It allows for effective two-way communication to take place

C. It provides employees with clarity over their roles

D. It is very effective when critical decisions need to be made

9. Which of the following is not a valid disadvantage of using an autocratic leadership style?

A. Creativity and innovation are discouraged

B. It demotivates employees

C. It slows down decision-making

D. It does not develop the internal talent pool

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10. A leader that sees employees as family members is called a(n) _________ leader.

A. Situational

B. Paternalistic

C. Laissez-faire

D. Autocratic

11. A leader who sees employees as family members, but less capable than themselves is adopting a(n)
_______________ leadership style.

A. Paternalistic

B. Autocratic

C. Democratic

D. Laissez-faire

12. Which of the following is not an advantage of a paternalistic leadership style?

A. It can motivate staff

B. It can ensure harmonious relationships at work

C. It promotes loyalty to the leader and the firm

D. It is appropriate for innovative firms

13. Which of the following is least likely to be a disadvantage of a paternalistic leadership style?

A. Decision-making is centralized

B. Communication is mainly top-down

C. Paternalistic leaders may not always make the best decisions

D. Labour turnover tends to be lower compared with an autocratic leadership style

14. A leader who consistently delegates authority and involves subordinates in decision-making through
discussion and active participation is called a(n) __________ leader.

A. Democratic

B. Paternalistic

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C. Laissez-faire

D. Autocratic

15. Which of the following is not an advantage of a democratic leadership style?

A. Two-way communication is facilitated

B. It enables quick decisions to be made

C. Collaboration leads to higher morale

D. The firm takes advantage of employees’ innovative potentials

16. Which of the following is not a disadvantage of a democratic leadership style?

A. It can be time consuming and expensive

B. It can result in disagreements and disharmony

C. Workers are unable to voice their opinions

D. It is ineffective when critical decisions need to be made quickly

17. A __________ leadership style is one where the leader delegates significant authority to subordinates
and provides them with the freedom to carry out tasks in their own way, with minimal supervision.

A. Democratic

B. Paternalistic

C. Laissez-faire

D. Situational

18. Which of the following are advantages of a laissez-faire leadership style?

i. It is motivational

ii. It encourages creativity and innovation

iii. It makes coordination easy and time-efficient

iv. It encourages slack (complacency)

A. i + ii

B. ii + iii

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C. iii + iv

D. i + ii + iii + iv

19. A leader who is willing and able to change leadership style according to the circumstances being faced
is called a(n) ___________ leader.

A. Democratic

B. Laissez-faire

C. Situational

D. Authoritarian

20. For a situational leader, which of the following factors is least likely to affect the choice of leadership
style adopted?

A. Organizational structure

B. Salary

C. Level of skills of employees

D. Tasks on hand

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2.4 Motivation
1. Which of these statements does not describe motivation?

A. The aspiration to progress in the workplace

B. The desire to achieve goals and targets

C. The need to do something in return for money

D. The willingness to work

2. Who came up with the idea of a differentiated piece rate wage system to motivate the workforce?

A. Abraham Maslow

B. Frederick Herzberg

C. Frederick W. Taylor

D. John Adams

3. Who suggested that managers are the ones responsible for organizing the successful completion of a
task, and waged-staff should have little to no input into the way processes are designed at work?

A. Frederick W. Taylor

B. Daniel H. Pink

C. Frederick Herzberg

D. John S. Adams

4. Which of the following is not a valid criticism of F.W. Taylor’s motivation theory?

A. Non-physical contributions are ignored

B. Worker preferences, which directly impact motivation, are ignored

C. It is only effective in firms that require high levels of physical output

D. It does not explain what happens after an individual reaches his or her self-actualization

5. In Abraham Maslow’s hierarchy of needs, food and shelter are considered ___________ needs, and
recognition and respect are considered ____________ needs.

A. Security, social

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B. Security, self-actualization

C. Physiological, self-esteem

D. Physiological, social

6. When a natural disaster destroys the people’s homes, which need in Maslow’s hierarchy of needs is this
affecting?

A. Security

B. Physiological

C. Social

D. Self-actualization

7. On which of the following statements is Maslow’s hierarchy of needs based on?

A. All humans have a comparable set of motives

B. Some motives are more required than others

C. For higher motives to be activated, lower level needs must be satisfied

D. All of the above

8. In Maslow’s hierarchy of needs, which need is representative of the human desire for friendship,
inclusion and love?

A. Physiological

B. Esteem

C. Social

D. Self-actualization

9. In Maslow’s hierarchy of needs, which need is representative of the human desire to ‘become the best
they can be?

A. Self-actualization

B. Esteem

C. Social

D. Advancement
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10. An ‘employee of the month’ system at an insurance firm is most likely to satisfy which of the
following needs in Maslow’s hierarchy of needs?

A. Self-actualization

B. Esteem

C. Social

D. Advancement

11. One of the driving forces for working in investment banking is status. Which need does status satisfy?

A. Esteem

B. Social

C. Self-actualization

D. Security

12. One of the driving forces for working in investment banking is status. Which need does status satisfy?

A. Esteem

B. Social

C. Self-actualization

D. Security

13. One of the driving forces for obtaining one’s doctorate (PhD) is the ability to research and learn while
facing new challenges. Which need does this relate to most in Maslow’s hierarchy of needs?

A. Esteem

B. Social

C. Self-actualization

D. Security

14. Which of the following are criticisms of Maslow’s hierarchy of needs theory?

A. Needs are difficult to measure and quantify objectively

B. Different people may have a different order of needs

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C. It assumes no motivating factors exist after self-actualization is achieved

D. All of the above

15. Which of the following theorists developed the terms ‘hygiene/maintenance factors’ and ‘motivators’?

A. Abraham Maslow

B. Frederick Herzberg

C. Frederick Taylor

D. John Adams

16. In Frederick Herzberg’s motivation theory, maintenance factors are typically __________ factors,
while motivators are mainly ___________ factors.

A. Emotional, physical

B. Emotional, psychological

C. Physical, psychological

D. Psychological, physical

17. Herzberg believed a ___________ style of leadership was most relevant, and that firms should actively
train and improve the capabilities of their employees.

A. Autocratic

B. Democratic

C. Paternalistic

D. Situational

18. Providing workers with a larger variety of tasks to do is called _________.

A. Job enlargement

B. Job enrichment

C. Job rotation

D. Job empowerment

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19. Providing workers with a with more challenging tasks to provide a sense of achievement is called
_________.

A. Job enrichment

B. Job enlargement

C. Job empowerment

D. Job rotation

20. Giving workers more authority and decision making power over how they go about their jobs is
called ___________.

A. Motivation

B. Encouragement

C. Job empowerment

D. Job enrichment

21. Organizational policies and rules, working conditions and job security are _____________, while
career advancement opportunities, recognition and responsibility are ___________.

A. Motivators, hygiene factors

B. Maintenance factors, motivators

C. Hygiene factors, job enrichment

D. Physiological needs, self-actualization needs

22. When people do something because they feel obligated to by the nature of their job, this is called
__________. When people do something because they genuinely want to, this is called __________.

A. Performance, desire

B. Obligated action, intrinsic drive

C. Responsibility, internal drive

D. Movement, motivation

23. ______________ first suggested the theory that employees should receive a remuneration in line with
their efforts contributed.

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A. Abraham Maslow

B. John Adams

C. Frederick Herzberg

D. None of the above

24. Which of the following is not one of the three intrinsic factors motivating a person in Daniel Pink’s
theory of motivation?

A. Autonomy

B. Equity

C. Mastery

D. Purpose

25. If a worker is paid $5.50 per hour worked, what is this an example of?

A. Salary

B. Wage

C. Time rate

D. Both (B) and (C)

26. If a tailor is paid $95 for every suit they make, what is this an example of?

A. Wage

B. Time rate

C. Piece rate

D. Both (A) and (C)

27. Which of the following is not an advantage of using a piece rate wage system?

A. Productivity is rewarded

B. Quality control improves

C. It incentivises and motivates employees to work hard

D. It enhances fairness in compensation

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28. Which of the following is not a valid criticism of using a piece rate wage system?

A. There is greater emphasis on producing high-quality output

B. Greater quality control and supervision is required

C. Fluctuating income levels may demotivate staff

D. Internal competition increases

29. A cars salesperson earns a fixed monthly salary of $1,000 and a commission of 5% of the selling price
of each car sold. If a salesman sells cars worth $145,000in a month, what is his total compensation for the
month?

A. $8,250

B. $7,250

C. $8,700

D. $9,250

30. Lisa earns a fixed monthly salary of $2000 and a commission of 30% on all value of all insurance
policies she sells. In 2016 she sold $85,000 worth of insurance plans. Her tax rate is 15%. What is her
take-home pay after taxes are deducted?

A. $49,500

B. $25,500

C. $42,075

D. $45,000

31. What is a financial reward system in which staff receive more pay if the firm earns more profit
called?

A. Commission

B. Performance-related pay

C. Profit-related pay

D. Fringe payments

32. What is it called when a company provides managers with a company car, and employees with an
onsite gym and canteen?
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A. Commission

B. Performance-related pay

C. Profit-related pay

D. Fringe payments

33. Which of the following is not a form of non-financial reward?

A. Fringe benefits

B. Job enrichment

C. Empowerment

D. Job enlargement

34. Which of the following are potential benefits that may arise from job rotation?

A. Training costs are minimized

B. It makes work less repetitive

C. It develops the internal talent pool

D. It encourages flexibilit

35. How is overspecialisation best remedied?

A. Empowerment

B. Job enrichment

C. Job rotation

D. Autonomy

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2.5 Organizational (Corporate) Culture (HL)

1. Which of these statements best describes ‘culture’?

A. The attitudes, beliefs and values within a firm

B. The number of levels in the corporate hierarchy

C. The size of the firm, and how much trust managers have in subordinates

D. The nature of the business

2. Which of the following factors is least likely to impact a firm’s culture?

A. Financial performance

B. Reward (remuneration) systems

C. Nature of the business

D. Organizational structure

3. What is the ability of an individual to adapt and blend into different cultures called?

A. Cultural intelligence

B. Global mindedness

C. Flexibility

D. Easy-goingness

4. What is the existence of a difference between the prevailing and desired culture at an organization
called?

A. Cultural quotient

B. Cultural gap

C. Divergence of values

D. Power culture

5. Which of the following is not one of the three levels of corporate culture posited by Edgar Henry
Schein?

A. Espoused values

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B. Shared basic assumption

C. Unity

D. Artefact

6. The style of employee interactions within a firm would be classified under which of Edgar Schein’s
three levels of corporate culture?

A. Espoused values

B. Shared basic assumption

C. Behavioural tendencies

D. Artefacts

7. According to Charles Handy, a _______ culture exists when decision-making power is highly
centralized in the hands of only a few senior employees.

A. Role

B. Power

C. Task

D. Person

8. When a firm is highly structured, with clear roles, responsibilities and guidelines for staff to follow,
there is a _________ culture prevalent in the firm.

A. Role

B. Power

C. Task

D. Person

9. When a firm tends to focus on getting the job done, through empowering diverse teams and
disregarding formal job titles, a ________ culture is likely to exist.

A. Role

B. Power

C. Task

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D. Person

10. In a firm where individuals seem themselves as superior to the organization, and typically have
employees with similar qualifications and expertise, a ________ culture is likely to exist.

A. Role

B. Power

C. Task

D. Person

11. Which of the following firms is most likely to have a person culture?

i. A law firm

ii. An accounting firm

iii. An internet start-up

iv. Google

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

12. Refer to the diagram below of Deal and Kennedy’s organizational culture model, and determine what
is to go into boxes (a) and (b).

A. (a) bet-the-company; (b) work-hard, play-hard

B. (a) bet-the-company; (b) inert

C. (a) risk-taking; (b) triviality-focused

D. (a) work-hard, play-hard; (b) bet-the-company

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13. According to Deal and Kennedy’s organizational culture model, which of the following organizations
is most likely to have a tough-guy macho culture?

A. The police force

B. Pharmaceutical companies

C. Insurance companies

D. All of the above

14. According to Deal and Kennedy’s organizational culture model, which of the following organizations
is most likely to have a process culture?

A. Oil exploration and extraction firms

B. Aircraft manufacturers

C. Stock exchanges

D. Government divisions

15. Which of the following theorist(s) suggested the idea of a firm having either an adaptive or an inert
corporate culture?

A. Rob Goffee and Gareth Jones

B. Terrence Deal and Allan Kennedy

C. John Kotter and James Heskett

D. Charles Handy and Edgar Schein

16. Which of the following theorist(s) analysed the sociability and solidarity dimensions of organizational
culture, and said that a good culture would score highly on both dimensions?

A. John Kotter and James Heskett

B. Geert Hofstede

C. Terrence Deal and Allan Kennedy

D. Rob Goffee and Gareth Jones

17. Which of the following is not one of the five dimensions of culture according to Geert Hofstede?

A. Power-distance

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B. Short-term versus long-term orientation

C. Uncertainty avoidance

D. Sociability and solidarity

18. __________ refers to the extent to which employees are accepting or unequal distribution of authority
and decision-making power.

A. Uncertainty avoidance

B. Short-term versus long-term orientation

C. Power-distance

D. Individualism versus collectivism

19. A firm with ______ uncertainty avoidance will prefer routine over flexibility and will tend to see
_________ employee loyalty to the firm.

A. Higher, higher

B. Higher, lower

C. Lower, higher

D. Lower, lower

20. Which of the following are possible reasons for culture clashes?

A. Internal growth of the firm

B. Mergers or acquisitions

C. Changes in the senior management and leadership

D. All of the above

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2.6 Industrial/Employee Relationships (HL)

1. What is the process of negotiation over working conditions and pay between an employer and
employees (or their representatives) called?

A. Trade union action

B. Industrial action

C. Collective bargaining

D. Work-to-rule

2. What is an organization that exists primarily to protect the interests of a group of workers called?

A. Labour union

B. Negotiators

C. White-collar unions

D. General union

3. Which of the following is not one of the functions carried out by a trade union?

A. Processing salaries and wage payments

B. Pushing for better working conditions

C. Providing financial support to members

D. Bargaining for higher pay

4. When employees deliberately work at the slowest pace allowable, in order to minimise efficiency and
productivity, what is this known as?

A. Work-to-rule

B. Slowdown

C. Strike

D. Collective bargaining

5. What is the main benefit to workers of go-slows compared to strike action?

A. They gain the goodwill of employers

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B. They still get paid

C. They gain more bargaining power in negotiations

D. They maintain the level of output, thereby not affecting customers

6. When individuals in the workplace follow each and every company policy strictly, what form of
industrial action is taking place?

A. Strike

B. Collective bargaining

C. Go-slow

D. Work-to-rule

7. What is the term that describes an outright refusal by employees to work?

A. Industrial action

B. Resignation

C. Strike

D. Work-to-rule

8. Which of the following is not a form of industrial relations method available to employers?

A. Collective bargaining

B. Appraisals

C. Redundancy threats

D. Contract alterations

9. What is the term used to describe the process of using a mediator to help facilitate negotiations during
the conflict resolution process?

A. Conciliation

B. Arbitration

C. Employee participation

D. Industrial democracy

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10. When an independent party acts like a ‘judge’ during conflict resolution and decides on a legally
binding outcome, what is this called?

A. Employee participation

B. Arbitration

C. Conciliation

D. Both (A) and (B)

11. Which of the following is an example of employee participation?

A. Team working

B. Share ownership schemes for employees

C. Works councils

D. All of the above

12. What is the term used to describe the agreement whereby employers are allowed to conduct
negotiations with one main trade union, rather than several subordinate ones?

A. No strike agreement

B. Single-union agreement

C. Working committee

D. None of the above

13. Which of the following cause resistance to change?

i. Low tolerance to change

ii. Miscommunication and misinformation

iii. Different people interpreting situations differently

iv. Different management experiences

A. i + ii

B. ii + iii

C. i + ii + iii

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D. iii + iv

14. A person with low concern for others but high concern for himself is likely to _________ during
conflict resolution, whereas a person with low concern for himself and high concern for others is likely to
________.

A. Compete, surrender

B. Compete, collaborate

C. Collaborate, surrender

D. Compromise, collaborate

15. Which of the following is not a valid approach to dealing with resistance to change?

A. Work-to-rule

B. Communicating the change

C. Involving employees

D. Providing training and support

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3.1 Sources of Finance

1. What does capital expenditure refer to?

A. Money invested in the acquisition of fixed assets

B. Money available for the day to day operations of a firm

C. Monetary payments to sustain the daily operations such as wages, rent and energy

D. Money received from the sale of assets

2. What are payments for daily operations such as wages, advertising, water and electricity costs called?

A. Working capital

B. Capital expenditures

C. Revenue expenditures

D. Cash outflows

3. Which of the following is not an internal source of finance?

A. Sale of assets

B. Personal savings

C. Retained profits

D. Share capital

4. When a firm is given the ability to pay a supplier at a later date, usually after one to two months this is
called (a) _________. An example of such a facility also arises when using ____________.

A. Trade credit, credit cards

B. Hire purchase, credit cards

C. Goodwill, debt factoring

D. Subsidy, debt factoring

5. The first time a firm offers its shares to the general public, it is called a(n) ____________; subsequent
offerings of additional shares are called _____________.

A. Share placement, additional share issue

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B. Initial public offering, share placement

C. Initial public offering, oversubscriptions

D. Initial public offering, administrative issuances

6. A debenture is a _______ loan providing regular __________. They provide ______ voting rights.

A. Long-term, interest payments, no

B. Short-term, dividends, no

C. Short-term, interest payments, significant

D. Long term, dividends, no

7. What is a facility that allows a firm or person to temporarily use more money than their bank account
holds called?

A. Short-term loan

B. Overdraft

C. Debt-factoring facility

D. Trade credit

8. Which of the following is the main advantage of an overdraft facility?

A. It provides flexibility in the face of cash flow problems

B. Interest rates are lower than those on long term loans

C. It provides long term funding

D. All of the above

9. What are sums of money that do not have to be paid back given by the government to firms called?

A. Stockholders’ equity

B. Subsidies

C. Cash injections

D. Grants

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10. What is a per-unit payment to producers to encourage greater output by reducing costs of production
called?

A. Grant

B. Business angel

C. Subsidy

D. Venture capital

11. What is the primary difference between venture capital and business angels?

A. Venture capitalists are institutional investors while business angels are high net worth individuals

B. Venture capitalists are high net worth individuals while business angels are institutional investors

C. Venture capitalists require a stake in the business while business angels don’t

D. Venture capitalists risk their own savings, while business angels risks the money of their institutional
investors

12. What does debt factoring refer to?

A. Selling one’s accounts receivable at a discount

B. The facility whereby a firm can withdraw more funds than their bank account holds

C. The analysis of how efficient different debtors are at repaying amounts owed

D. The interest expense that builds up due to trade credit facilities being used

13. What is the primary difference between leasing and hire purchase?

A. In leasing the lessee acquires ownership, but in hire purchase the lessee does not

B. Leasing is short term while hire purchase is for long term purchases

C. In leasing the lessee does not acquire ownership, but in hire purchase the lessee does

D. Leasing involves a lump sum security deposit while hire purchase does not

14. The short term refers to a period of less than _______ months, while the medium term refers to a
period of _______ to ________ years. Anything with a later maturity date is considered long term.

A. 6, 1, 3

B. 12, 1, 5
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C. 12, 1, 3

D. 6, 1, 5

15. Which of the following is not an advantage of leasing as an external source of finance?

A. Lessors conduct necessary maintenance

B. System upgrades are the responsibility of the lessor

C. It minimizes capital expenditures

D. The lessee acquires ownership at the end of the lease contract

16. Sources of finance found within the firm are __________ sources of finance.

A. Internal

B. External

C. Short term

D. Long term

17. Which of the following is a bank loan not likely to include?

A. Periodic interest repayments

B. Periodic principal repayments

C. Dividends

D. Collateral

18. Which of the following are valid criticisms of share issuances?

i. It dilutes ownership and control of existing shareholders

ii. It is a costly and bureaucratic procedure

iii. It increases a firm’s gearing ratio

iv. It creates significant cash outflows

A. i

B. i + ii

C. i + ii + iii
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D. i + ii + iii + iv

19. What is leasing most appropriate to fund?

A. Equipment procurement

B. Property acquisitions

C. Inventories

D. Salaries

20. What is the benefits of receiving venture capital funding?

A. Access to expertise

B. Access to contacts and networks

C. Access to funding that may not be provided by traditional lenders like banks

D. All of the above

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3.2 Costs and Revenues

1. What are costs that have to be paid regardless of the level of output called?

A. Variable costs

B. Stubborn costs

C. Fixed costs

D. Direct costs

2. What are costs that are directly proportional to the level of output called?

A. Variable costs

B. Indirect costs

C. Fixed costs

D. Direct costs

3. What are costs which contain both a fixed and variable cost component called?

A. Fixed costs

B. Indirect costs

C. Direct costs

D. Semi-variable costs

4. What is the distinguishing factor between direct and variable costs?

A. Direct costs need not be directly proportional to the level of output

B. Direct costs are always fixed costs

C. Direct costs need not be traceable to the production of any particular product

D. There are no distinguishing factors between direct and variable costs

5. Which of the following is not an example of an indirect cost?

A. Energy (lighting) costs

B. Rent

C. Mortgage fees
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D. Security

6. Which of the following is not an example of fixed costs?

A. Mobile phone service costs

B. Loan interest payments

C. Rent

D. Manager salaries

7. Assume a firm has fixed costs of $125,000 per month, and a variable cost per unit of $85. What is the
firm’s total costs at an output level of 30,000 units per month?

A. $2,350,000

B. $2,425,000

C. $2,500,000

D. $2,675,000

8. Assume a firm has fixed costs of $3,071,025 per year, and a variable cost per unit of $256. What is the firm’s
total costs at an output level of 82,000 units per year?

A. $21,150,025

B. $24,063,025

C. $29,500,000

D. $31,018,025

9. Assume a firm has total costs of $2,500,000 per year. Fixed costs are $300,000. 200,000 units of output
are produced in the year. What is the firm’s variable costs per unit?

A. $11.00

B. $12.00

C. $12.50

D. $14.00

10. Assume a firm has total costs of $7,750,000 per year. 480,000 DVD players are produced in the year at
a variable cost per unit of $12.50. What is the firm’s fixed costs?

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A. $1,750,000

B. $5,500,000

C. $7,125,000

D. $13,750,000

11. Assume a firm has total costs of $7,750,000 per year. 480,000 DVD players are produced in the year at
a variable cost per unit of $12.50. What is the firm’s average costs per unit?

A. $12.50

B. $13.75

C. $16.15

D. $28.65

12. With reference to the table below, what is the firm’s total revenue assuming it sells products X, Y and
Z?

A. $350,000

B. $372,107

C. $385,192

D. $415,700

13. Assume a firm has fixed costs of $23,250,000 per year. 1,440,000 coffee machines are produced in the
year at a variable cost per unit of $37.50. If the selling price per coffee machine is $65, what is the total
profit or loss made if all the units produced are sold?

A. ($8,500,000) loss

B. $16,350,000 profit

C. $39,600,000 profit

D. $70,350,000 profit
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14. Which of the following is not an example of a revenue streams?

A. Net income

B. Transaction fees

C. Franchise royalty fees

D. Interest income

15. Assume a firm has pays rent of $24,000 per year, management salaries of $185,000 per annum and
incurs other fixed costs of $45,000. Their output has a variable cost of $22 per unit, and the selling price
of their product is $28. If the firm sells 9,500 units of output this year, what is the profit (or loss) they
have made?

A. $12,000 profit

B. $75,500 profit

C. ($197,000) loss

D. ($215,750) loss

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3.3 Breakeven Analysis

1. What does contribution refer to?

A. The money generated per sale that is used to contribute towards paying fixed costs

B. Selling price – variable costs – fixed costs per unit

C. Selling price – variable costs – direct costs

D. Both (A) and (C)

2. Assume a firm sells its output for $649. Variable costs per unit are $456, and total fixed costs are
$2,500,000, and 5,000 units of output were sold this year. What is the contribution per unit?

D. -$307

A. $193

B. $649

C. $1,105

3. Assume a firm sells its output for $45. Variable costs per unit are $41, and total fixed costs are
$150,000, and 72,150 units of output were sold this year. What is the total contribution?

D. -$438,600

B. $138,600

C. $288,600

A. $3,246,750

4. Assume a firm sells its output for $90. Variable costs per unit are $82, and total fixed costs are
$300,000, and 144,300 units of output were sold this year. What is the total profit?

C. $577,200

D. $854,400

B. $1,154,400

A. $1,454,400

5. Which of the following is not a valid use of contribution analysis?

A. Conducting breakeven analysis

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B. Managing product portfolios

C. Set prices

D. Position mapping

6. What does the breakeven point refer to?

A. The level of output where there are neither profits nor losses

B. The level of output where fixed costs are covered by sales revenue

C. The level of output where variable costs are equal fixed costs

D. The point at which profits begin to exceed fixed costs

7. Which of the following equations is used to determine the breakeven level of output?

A. Fixed costs / (selling price – average variable costs per unit)

B. Selling price / (fixed costs – contribution per unit)

C. Fixed costs / selling price

D. Total sales revenue / contribution per unit

8. A shoe manufacturer faces fixed costs of $30,000 per month. Variable cost per shoe is $15, and selling
price is $40. What is the breakeven level of output?

D. 750 shoes

B. 1000 shoes

C. 1200 shoes

A. 2000 shoes

9. A printer manufacturer faces fixed costs of $475,000 per month. Selling price is $100 per printer. The
breakeven level of output is 9,500 printers per month. What is the average variable cost per unit?

A. $45.00

B. $47.50

C. $50.00

D. Cannot be determined

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10. A calculator manufacturer has fixed costs of $40,000 per month. Total variable cost $30,000. The
calculators sell for $10 per unit. Using the TR=TC approach, what is the breakeven level of output for
this firm?

A. 3000 calculators

B. 5000 calculators

C. 7000 units

D. Cannot be determined

11. A product has a per-unit contribution of $8. Total fixed costs are $7600. If the product sells for $15,
and 1950 units are sold, what is the profit (or loss) generated?

A. ($3000) loss

B. $8000 profit

C. $15,600 profit

D. $21,650 profit

12. If a firm has a breakeven level of output of 3,000 units, but sold 7,500 units ofoutput in the most
recent quarter, the margin of safety in units is ________, and the margin of safety in percentage is
________.

B. 3,000; 75%

C. 4,500; 150%

D. 7,500 units; 40%

A. 7,500; 250%

13. A firm wishes to achieve profits of $15,000. The product they sell retails for $35, with variable costs
per unit of $15. Rental expenses are $8,000, and management salaries for the month total $17,000. What
is the level of output required to achieve the profit target?

A. 1000 units

B. 2000 units

C. 3000 units

D. 4000 units
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14. A game console manufacturer has fixed costs of $61,200 per month. Variable costs per unit equal
$195. The consoles sell for $399 each. Assuming they sold 235 units this month, what is the margin of
safety?

A. -65 units

B. -10 units

C. 75 units

D. 125 units

15. Which of the following are valid criticisms of breakeven analysis?

A. It assumes every unit produced is sold

B. It assumes costs functions are linear

C. It is a static model

D. All of the above

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3.4 Final Accounts

1. Which of the following is not a principle or ethical value of the accounting profession?

A. Integrity

B. Punctuality

C. Professional competence and due care

D. Objectivity

2. What is a financial statement illustrating a firm’s results from its trading activities over a period of
time called?

A. Balance sheet

B. Trade-exchanges sheet

C. Cash flow statement

D. Income statement

3. Which of the following is not a component of an income statement?

A. Profit & loss account

B. Expenditure account

C. Appropriation account

D. Trading account

4. In which of the following ways can net profit after interest and tax be appropriated?

i. Retained earnings

ii. Dividends

iii. Interest expenses

iv. Rental expenses

A. i

B. i + ii

C. i + ii + iii

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D. i + ii + iii + iv

5. With reference to the table below, what is the gross profit being earned?

A. $10,000

B. $13,777

C. $96,348

D. $136,125

6. With reference to the table below, what is the net profit being earned?

A. ($3,575) loss

B. $13,777

C. $14,700

D. $96,348

7. With reference to the table below, what is the amount of retained earnings for the year?

A. $9,300

B. $11,427

C. $12,500
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D. $13,777

8. On 2 January, a firm reopens with $375,770 in worth of stock. Throughout the year, the firm makes
stock purchases of $452,000, and ends the year with $521,125 in ending inventory. What is the costs of
goods sold?

A. $306,645

B. $444,895

C. $1,348,895

D. Cannot be determined

9. Which of the following is not a relevant method to boosting gross profit?

A. Reduce expenses

B. Raise the product’s price

C. Shift to cheaper suppliers and intermediaries

D. An improved marketing strateg

10. With reference to the table below, what is the gross profit being earned?

A. $834,478

B. $1,024,500

C. $1,184,487

D. $1,286,639

11. With reference to the table below, what is the amount of dividends declared this year?

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A. $221,663

B. $296,663

C. $673,824

D. $834,478

12. An asset expected to stay within the business and be used for business activitiesfor over 12 months is
called a _______ asset, while assets likely to be used up or converted into cash within 12 months are
called _______ assets.

A. Direct, indirect

B. Fixed, variable

C. Fixed, current

D. Long-term, fixed

13. Debts that must be paid back within 12 months are called ________ liabilities, while debts that have a
maturity of over 12 months are called _______ liabilities.

A. Current, fixed

B. Direct, indirect

C. Long-term, current

D. Current, long-term

14. A firm has $32,500 in cash, $17,750 due from debtors, and $45,000 in stock. Creditors are owed
$25,250 and a 6-month loan of $42,000 is outstanding. What is the firm’s working capital?

A. -$7,500

B. $28,000
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C. $70,000

D. $73,000

15. With reference to the table below, what is the firm’s net assets?

A. $65,000

B. $780,000

C. $950,000

D. $1,015,000

16. With reference to the table below, what is the firm’s share capital?

A. $555,000

B. $950,000

C. $1,015,000

D. $1,275,000

17. Which of the following is not an example of a current asset?

A. Cash

B. Debtors

C. Machinery

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D. Inventories

18. Which of the following is not an example of a fixed asset?

A. Buildings

B. Debtors

C. Plant

D. Intangible assets

19. Which of the following is/are current liability/liabilities?

A. Overdrafts

B. Taxes due to the government

C. Short-term loans

D. All of the above

20. In a balance sheet, what would ordinary share capital be classified as?

A. A fixed (long-term) asset

B. A current asset

C. A liability

D. Stockholders’ equity

21. Which of the following is not an example of an intangible asset?

A. Goodwill

B. Copyrights and patents

C. Share capital

D. Trademarks

22.(HL) A machine costs $125,000, and has a residual (salvage) value at the end of its 5-year useful life of
$20,000. What is the annual depreciation expense of this machine?

A. $21,000

B. $25,000

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C. $29,000

D. $105,000

23.(HL) A machine with a 7-year lifespan costs $9,500, and records annual depreciation under the
straight line method of $1,150. What is the salvage value of this machine?

A. $1,357

B. $1,450

C. $1,500

D. $1,521

24. (HL) A commercial machine costing $35,000,000 with a 20-year expected life and a salvage value of
$2,500,000 is depreciated at a rate of 3% per year. The depreciation expense in the first year is
__________, and the net book value is _________.

A. $700,000; $34,300,000

B. $750,000; $34,250,000

C. $975,000, $34,025,000

D. $1,050,000; $33,950,000

25. (HL) A piece of manufacturing equipment costing $21,500 has a 3-year lifespan, at the end of which it
will be resold to scrappers for $3,500. The depreciation expense would be _______ using the straight line
method and _______ using the declining balance method (at a 40% rate).

A. $6,000, $7,200

B. $6,000, $8,600

C. $7,500, $8450

D. $7,500, $10,000

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3.5 Profitability and Liquidity Ratio Analysis

1. What does the gross profit margin describe?

A. Gross profit earned per dollar of revenue

B. Costs incurred per dollar of products sold

C. Gross profit earned per dollar of capital employed

D. Gross profit earned per dollar of net profit earned

2. With reference to the table below, which firm has the highest gross profit margin?

A. Company A

B. Company B

C. Company C

D. Company D

3. With reference to the table below, which firm has the highest gross profit margin?

A. Company E

B. Company F

C. Company G

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D. Company H

4. Which of the following actions would not help in raising a firm’s gross profit margin?

A. Optimising the marketing mix

B. Using cheaper raw material suppliers

C. Reducing fixed and indirect costs

D. Cutting the number of staff employed in the manufacturing process

5. Which of the following actions would not help in raising a firm’s net profit margin?

A. Reducing fixed costs such as rental expenses

B. Reducing indirect costs such as insurance expenses

C. Boosting gross profit margins

D. All of the above

6. With reference to the table below, which firm has the highest net profit margin?

A. Company A

B. Company B

C. Company C

D. Company D

7. With reference to the table below, which firm has the highest net profit margin?

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A. -8.50%

B. -7.11%

C. 11.32%

D. 13.95%

8. Return on capital employed (ROCE) is a(n) ____________ ratio.

A. Profitability

B. Efficiency

C. Liquidity

D. Capital adequacy

9. What formula is used to calculate ROCE?

A. Total dividends / capital employed × 100%

B. Net profit after interest and tax / total share capital × 100%

C. Net profit before interest and tax / capital employed × 100%

D. Gross profit / net profit after interest and tax × 100%

10. With reference to the table below, what is the ROCE?

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A. 3.18%

B. 3.83%

C. 4.53%

D. 5.76%

11. What are ratios which seek to assess the ability of a firm to meet short-term obligations called?

A. Profitability ratios

B. Efficiency ratios

C. Liquidity ratios

D. Current ratios

12. If a firm has $7,589 in cash and $17,833 worth of stock on hand, and $14,751 in current liabilities due
to suppliers, what is the current ratio?

A. 0.51

B. 1.21

C. 1.74

D. 2.25

13. With reference to the table below, what is the firm’s quick ratio?

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A. 1.10

B. 1.25

C. 2.15

D. 2.53

14. Typically, one would like their firm’s _________ to range between 1.5-2, and their firm’s ________ to
be at least 1.

A. Quick ratio, current ratio

B. ROCE, net profit margin

C. Current ratio, gearing ratio

D. Current ratio, acid test ratio

15. Which of the following statements about ratio analysis is invalid?

A. Historical performance is not indicative of future performance

B. Interfirm comparisons may not be valid due to accounting differences

C. Only qualitative factors are considered

D. Organization objectives may differ, making inter-firm comparisons inappropriate

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3.6 Efficiency Ratio Analysis (HL)

1. What do efficiency ratios assess?

A. The number of times a firm sells its inventory within a year

B. A firm’s ability to meet its short term obligations

C. Profit as a proportion of sales revenue

D. How well a firm is utilizing its resources

2. Which of the following is not an efficiency ratio?

A. Debtor days

B. Creditor days

C. ROCE

D. Gearing

3. What does the stock (inventory) turnover ratio measure?

A. How many times a firm’s inventory is used per time period

B. How many days it takes a firm to recover its accounts receivable (debtors)

C. The value of all inventory sold per time period

D. The total potential sales revenue that can be generated from selling all a firm’s inventory

4. What is the formula for the stock turnover (in days)?

A. Cost of goods sold / average stock

B. Average stock / cost of goods sold × 365

C. Debt / sales revenue × 365

D. Cost of goods sold / average inventory × 365

5. With reference to the following data, what is the stock turnover (number of times per year) ratio?

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A. 4.50 times

B. 5.40 times

C. 5.52 times

D. 6.75 times

6. With reference to the following data, what is the stock turnover (number of days) ratio?

A. 2.54 days

B. 76.20 days

C. 125.00 days

D. 143.44 days

7. Which of the following methods would not help improve a firm’s stock turnover ratio?

A. Implementing a just-in-time stock management system

B. Divesting unpopular or obsolete items from the firm’s product line

C. Hold lower stock levels

D. Hold greater stock levels

8. Which of the following ratios measures the number of days it takes a firm to collect its debt from
customers who have purchased on credit?

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A. Creditor days ratio

B. Collection days ratio

C. Acid test ratio

D. Debtor days ratio

9. What is the formula to calculate debtor days (in number of days)?

A. Average stock / cost of goods sold × 365

B. Debt / sales revenue × 365

C. Creditors / cost of goods sold × 365

D. Debt / cost of goods sold

10. With reference to the table below, what is the debtor days ratio (in number of days)?

A. 59.50 days

B. 60.79 days

C. 62.25 days

D. 82.95 days

11. What is the formula to calculate the creditor days ratio?

A. Creditors / sales revenue × 365

B. Capital employed / creditor days

C. Creditors / debtors × 365

D. Creditors / cost of goods sold × 365

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12. If a firm owes its supplier $125,015 at the end of the year, and costs of goods sold have been
$1,015,000, what is the firm’s creditor days ratio?

A. 8.12 days

B. 35.75 days

C. 44.96 days

D. Cannot be determine

13. The gearing ratio is calculated by the formula _____________, and measures the efficiency of the
firm’s ___________.

A. Loan capital / capital employed, inventory control systems

B. Loan capital / capital employed × 100, capital structure

C. (Current assets – inventory) / current liabilities, liquidity management

D. Net profit before interest and tax / capital employed × 100; capital structure

14. A higher gearing ratio makes a firm ________ vulnerable to increases in interest rate because they are
_________ dependent on external, interest-bearing sources of finance.

A. Less, less

B. Less, more

C. More, less

D. More, more

15. With reference to the table below, what is the firms gearing ratio?

A. 16.91%

B. 28.57%

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C. 30.00%

D. 74.25%

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3.7 Cash Flow

1. What is the money available to pay for day to day operational costs called?

A. Cash

B. Working capital

C. Profit

D. All of the above

2. Assume a firm sells goods costing $40,000 for $55,000. It provides the customer with 70% trade credit
(i.e. the customer pays only 30% of the price as a down payment). The profit earned is __________, and
the cash received is _________.

A. $15,000, $12,000

B. $15,000, $16,500

C. $15,000, $28,000

D. $15,000, $55,000

3. What is the time lag that occurs between when a firm pays its operational and production expenses,
and when a firm receives cash from the sale of a product called?

A. Cash flow cycle

B. Cash inflow/outflow cycle

C. Working capital cycle

D. Operating cycle

4. The term _________ describes how efficiently an asset can be converted into cash.

A. Liquidity

B. Solvency

C. Conversion rate

D. Working capital cycle

5. Which of the following is not a reason to develop a cash flow forecast?

A. External lenders may wish to see them before loaning money

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B. They illustrate the level of gearing of a firm

C. They help identify and plan for periods of liquidity problems

D. They encourage better financial control

6. In a given cash flow forecast, the closing balance in June would become the ____________ of July.

A. Closing balance

B. Working capital

C. Net cash flow

D. Opening balance

7. From the information in the table below, the net cash flow in December is ________, and the closing
balance on December 31st is _________.

Closing Balance – 30th November $150,000

Cash inflows in December $78,000

Cash outflows in December $63,000

A. $72,000, $15,000

B. $87,000, $135,000

C. $15,000, $165,000

D. Cannot be determined

8. From the information in the table below, the opening balance on April 1st is __________ and the net
cash flow in April is ___________.

Closing Balance – 31st March $192,500

Cash sales $117,100

Raw material purchases $48,950

Salaries paid $32,350

A. $192,500, $35,800

B. $35,800, $228,300

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C. $309,600, $68,150

D. Cannot be determined

9. Which of the following would not cause a cash flow problem?

A. Understocking

B. Over borrowing

C. Poor credit control

D. Seasonal demand fluctuations

10. Which of the following strategies would not be effective in alleviating a cash flow problem?

A. Investing in more efficient machinery

B. Minimizing cash outflows (e.g. by holding less stock)

C. Securing alternative sources of finance

D. Boosting cash inflows (e.g. through an enhanced marketing mix)

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3.8 Investment Appraisal

1. Which of the following statements bests describes payback period?

A. The time required for an investment to earn enough profit to cover the initial investment cost

B. The average profit divided by the initial investment amount

C. The sum of discounted cash flows less the initial investment amount

D. The time required for a project to provide a return of over 25% above the initial investment cost

2. Which of the following payback periods would a mining firm typically prefer?

A. 18 months

B. 24 months

C. 45 months

D. 60 months

3. Assume the following net cash flows are generated from a project. What is the payback period if the
initial investment required is $2,750,000?

A. 3 years

B. 3 years 6 months

C. 3 years 10 months

D. 4 years

4. Assume the following profits are generated from a project. What is the payback period if the initial
investment required is $8,880,000?

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A. 2.55 years

B. 2.75 years

C. 2.87 years

D. 3.00 years

5. Which of the following is not an advantage of the payback period method?

A. It is simplistic and quick to calculate

B. It allows firms to compare which project breaks-even the quickest

C. Payback period focuses on liquidity by considering whether an investment pays off within its lifespan

D. It promotes short-termism in decision-making

6. Which of the following is not a valid criticism of the payback period method of investment appraisal?

A. It focuses on time rather than on profits generated

B. It assumes constant net cash flows per month

C. It leads to short-termism in decision-making

D. It is the most complex method of investment appraisal

7. What is the formula for calculating average rate of return?

A. (Contribution x number of units sold) / initial investment cost × 100%

B. Total profit / initial investment cost × 100%

C. Average annual profit / initial investment cost × 100%

D. Revenue – (cost of goods sold + expenses)

8. Assume the following profits are generated from a project. What is the average rate of return (ARR) if
the initial investment required is $8,880,000?

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A. 2.87 years

B. 12.50%

C. 27.89%

D. 28.22%

9. Assume the following profits are generated from a project. What is the average rate of return (ARR) if
the initial investment required is $5,750,000?

A. 27.25%

B. 28.50%

C. 33.65%

D. 168.26%

10. Assume the following net cash flows are generated from a project. What is the average rate of return
(ARR) if the initial investment required is $800,000?

Year Net cash flows ($)

1 475,000

2 350,000

3 275,000

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A. 8.00%

B. 12.50%

C. 14.45%

D. 37.50%

11. A firm is considering whether to invest $300,000 into a new ecommerce platform. Projected net cash
flows from the ecommerce platform are shown in the table below. The platform has a life of 6 years
before an overhaul is required.

Year Net cash flows ($)

1 65,000

2 95,000

3 125,000

4 140,000

5 145,000

6 115,000

The payback period of this investment is ______________ years, and the ARR is _________.

A. 3 years + 1 month; 21.39%

B. 3 years + 2 months, 21.39%

C. 3 years + 1 month; 23.95%

D. 3 years + 2 month; 23.95%

12. (HL) What is the present value of $2,500,000 to be received in 5 years if the prevailing discount rate is
0.9057?

A. $1,958,750

B. $2,250,000

C. $2,264,250

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D. $2,267,500

13. (HL) A firm is considering whether to build a new factor. The new factory would increase total
output by a value of $30 million per annum, but cost $20 million per year in operational costs and
expenditures. The factory will cost $45 million to construct, and has a life of 7 years. Interest rate is 6%.
What is the NPV of this investment?

A. $2,267,500

B. $2,264,250

C. $1,958,750

D. $2,250,000

14. (HL) A firm is considering whether to purchase a new machine. The new machine would increase
revenues by $325,000 per year, and incur costs of $175,000 per year. The initial investment is $450,000,
and the machine has a useful life of 3 years. Interest rate is 8. What is the NPV of this machine?

A. $122,500

B. $600,000

C. $150,000

D. -$63,450

15. (HL) A firm is considering whether to invest $300,000 into a new ecommerce platform. Project net
cash flows from the ecommerce platform are shown in the table below. The platform has a life of 6 years
before an overhaul is required, and the current interest rate is 4%. What is the NPV of this investment?

Year Net cash flows ($)

1 65,000

2 95,000

3 125,000

4 140,000

5 145,000

6 115,000

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A. $182,150.75

B. $375,125.50

C. $291,191.50

D. $219,911.00

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3.9 Budgets (HL)

1. Budgets are forward-looking financial plans of expected revenues and

__________.

A. Profits

B. Expenditures

C. Cash flows

D. All of the above

2. When remedial action is taken to ensure budgeted performance is actually achieved, what is it called?

A. Budgetary rectification

B. Budgetary control

C. Variance analysis

D. Variance minimizatio

3. Which of the following is not a valid reason to do budgeting?

A. Identify cost and profit centres

B. Motivate staff

C. Hold people accountable

D. Control expenses

4. Which of the following are potential drawbacks of budgeting?

i. They are static and inflexible, not dynamically implemented

ii. It is very time consuming

iii. Managers competing for larger budgets may lead to conflict

iv. They lead to overspending

A. i + ii

B. ii + iii + iV

C. i + ii + iii
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D. i + iii + iv

5. Which of the following best describes the term ‘cost centre’?

A. A division incurring costs and profits

B. The highest-cost division in the firm

C. A division only incurring costs, but no profits

D. The core cost structure of the company and its products

6. Which of the following would not typically be considered a profit centre?

A. An insurance sales team

B. A consulting firm

C. The advertising team

D. A retail outlet

7. Determine the whether the variances below are favourable (F) or adverse (A).

A. 1. Adverse; 2. Favourable; 3. Adverse

B. 1. Favourable; 2. Adverse; 3. Adverse

C. 1. Adverse; 2. Adverse; 3. Favourable

D. 1. Favourable; 2. Favourable; 3. Adverse

8. “Pure Fabrics Ltd. has budgeted 150 hours of labour at an hourly rate of $6 toassemble 3000 coffee
machines. At the end of the period, managers find they required 160 labour hours to produce all 3000
coffee machines.” What is the variance in this situation?

A. $60 (Adverse)

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B. $120 (Favourable)

C. $960 (Adverse)

D. $180,000 (Favourable)

9. The table below summarizes the regional sales budgets and actual results of Jumbo Ltd. What is the
overall variance in this situation?

A. $25,000 (Favourable)

B. $50,000 (Favourable)

C. $150,000 (Adverse)

D. $250,000 (Adverse)

10. A farmer sells tomatoes, potatoes and carrots. The table below shows his budgeted versus actual sales
in metric tons, and also his budgeted versus actual price received. What is the overall variance in this
situation?

A. $9,500 (Adverse)

B. $11,050 (Adverse)

C. $11,800 (Favourable)

D. $14,500 (Favourable)

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4.1 The Role of Marketing

1. ______ are basic human necessities such as food, water and shelter, while ______ are human desires,
such as cars, smartphones or gaming consoles.

A. Wants, needs

B. Needs, wants

C. Requirements, preferences

D. Intangibles, perishables

2. Which of the following is not one of the four P’s of marketing?

A. Product

B. Place

C. Promotion

D. Perishability

3. Which of the following departments is the marketing department likely to liaise with?

A. Finance and accounting

B. Human resources

C. Operations management

D. All of the above

4. Which of the following words is not a characteristic of ‘services’?

A. Intangible

B. Homogenous

C. Perishable

D. Heterogeneous

5. Which of the following is not one of the three additional elements of the marketing mix of services (in
addition to product, place, promotion and price)?

A. Process

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B. Personalization

C. Physical evidence

D. People

6. What is it called when a firm focuses on meeting the needs and wants of customers with an outward-
looking approach to marketing?

A. Market orientation

B. Product orientation

C. Market research

D. Commercial marketing

7. When a firm has an inward-looking marketing approach where it innovates and hopes the market will
like the products, it is a ______________ firm.

A. Product oriented

B. Market oriented

C. Globally oriented

D. None of the above

8. Which of the following is not a valid advantage of being a market oriented firm?

A. Enhanced flexibility to changes in market requirements

B. New products have a greater chance of success

C. Risk is minimized

D. The firm is more able to focus on internal quality and design

9. Which of the following is an advantage of being a product oriented firm?

A. It enables the firm to focus on quality and design

B. There is relatively low risk involved

C. It enables the firm to do what it does best - innovate

D. The firm has greater control over its internal operations

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10. Marketing strategies aimed at generating profits is referred to as _________ marketing, while
marketing strategies aiming to bring about positive change without the profit motive is referred to as
________ marketing.

A. Commercial, sceptical

B. Commercial, social

C. Misleading, social

D. Economical, purposeful

11. Market orientation is a strategy involving which of the following Options?

A. Producing innovative, revolutionary products

B. Research into consumer needs and wants

C. Developing products a firm can, rather than what consumers want

D. All of the above

12. ___________ refers to the number of potential customers in a given market.

A. Market size

B. Customer base

C. Market capitalization

D. Population

13. A market with significant setup costs is likely to have _______ barriers to entry, and relative _______
competitors than a market with few to no barriers to entry.

A. High, high

B. High, few

C. Few, high

D. Few, few

14. What is the proportion of the total sales revenue of a particular industry owned by a single firm
referred to as?

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A. Market power

B. Concentration ratio

C. Market share

D. Market leadership

15. If an industry’s total sales revenue is recorded at $7875 million in 2016, and the market leader-firm
recorded sales of $2035 million, what is its market share?

A. 23.75%

B. 25.84%

C. 32.69%

D. 75.15%

16. If an industry’s total sales revenue is recorded at $325 million in 2016, and a firm holds 7% market
share, what is its annual revenues in 2016?

A. $15.75 million

B. $20.50 million

C. $22.75 million

D. Cannot be determined

17. A firm with 32% market share sells $24 million worth of goods in a year. What is the total industry’s
sales revenues?

A. $31.68 million

B. $57.25 million

C. $65.00 million

D. $75.00 million

18. With reference to the table below, what is the industry’s 3-firm concentration ratio?

Total industry revenue $3.95 billion

Company A $857 million

Company B $638 million

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Company C $599 million

Company D $421 million

A. 45.00%

B. 53.01%

C. 62.53%

D. 63.67%

19. With reference to the data in the table below, which industry is least competitive?

Industry A 3-firm concentration ratio 76%

Industry B 3-firm concentration ratio 52%

Industry C 3-firm concentration ratio 37%

Industry D 3-firm concentration ratio 94%

A. Industry A

B. Industry B

C. Industry C

D. Industry D

20. Which of the following are valid marketing objectives for a non-profit entity?

A. Higher sales

B. Achieve market leadership

C. Higher market share

D. Generating attention about a cause

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4.2 Introduction to the 4Ps

1. What is a review of a firm’s current marketing position is called?

A. Marketing plan

B. Marketing analysis

C. Marketing audit

D. Marketing strategy

2. What is a product sold to another firm to be used in another production process is called?

A. Consumer good

B. Producer product

C. Perishable good

D. Raw material

3. What is a long-lasting good sold to an end-user, such as people in the general public, referred to as?

A. Consumer good

B. Consumer durable

C. Consumer specialty product

D. Producer good

4. What are soft drinks, toiletries and candy bars examples of?

A. Fast-moving consumer goods

B. Consumer specialty product

C. Consumer durables

D. Producer good

5. What are diamonds and designer clothes examples of?

A. Consumer durables

B. Consumer specialty product

C. Producer good
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D. Convenience goods

6. Which of the following factor(s) would a firm take into account when setting a product’s price?

i. Product demand

ii. Competition

iii. Aims and objectives

iv. Managerial bonuses

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

7. A product with limited supply is likely to fetch a _______ price than a product with abundant supply.
A monopoly firm, operating in a market with few significant competitors, is likely to charge a ______
price than a firm competing with numerous competitors.

A. Lower, lower

B. Higher, higher

C. Lower, higher

D. Higher, lower

8. Electronic products are likely to ________ in price as time goes by. Antiques are likely to ________ in
price as time goes by.

A. Decrease, decrease

B. Decrease, increase

C. Increase, decrease

D. Increase, increase

9. The decision over what tangible aspects and visible elements should exist during the provision of a
service is referred to as the ________ decision.

A. Product

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B. People

C. Place

D. Physical environment

10. Payment methods and after-sales services relate to the ________ aspect of the services marketing mix.

A. Place

B. Product

C. Payment

D. Process

11. Which of the following is not one of the 7Ps of a service’s marketing mix?

A. Payment

B. People

C. Physical environment

D. Product

12. The decision over how to distribute a firm’s products to customers is the ________ decision.

A. Product

B. Transportation

C. Dissemination

D. Place

13. The use of expensive, mass-media to promote a firm’s products is referred to as _________________
promotion.

A. Below the line

B. Mass media

C. High-budget

D. Above the line

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14. What is viral marketing an example of?

A. Above the line promotion

B. Online promotion

C. Ecommerce

D. Below the line promotion

15. Which of the following is not a means of promotion?

A. Sales promotions

B. Sponsorships

C. Wholesalers

D. Advertising

16. What is the perception people hold of a brand relative to competitors called?

A. Customer satisfaction

B. Positioning

C. Leadership

D. Physical environment

17. If a company is perceived to be inferior to its rivals, what does it need to improve?

A. Market share

B. Market segmentation

C. Demographics

D. Positioning

18. Which of the following factors is least likely to limit the effectiveness of a firm’smarketing strategies?

A. Costs of production

B. Cyclical factors

C. Legal environment

D. Sources of finance
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19. What is a group of customers with similar requirements and characteristics is referred to as?

A. Target market

B. Sample market

C. Consumer profile

D. Market segmen

20. What is the practice of personalising the marketing mix for each market segment referred to as?

A. Market segmentation

B. Market analysis

C. Targeting

D. Consumer profile development

21. Which of the following is not a way to segment a market?

A. By demographics

B. By psychographics

C. By geographic factors

D. By academic

22. Segmenting a market according to people’s hobbies is an example of segmentation by _____________.

A. Psychographics

B. Geographical factors

C. Demographics

D. Discrimination

23. Segmenting a population into groups based on their socio-economic class is an example of
segmentation by _____________.

A. Psychographics

B. Geographical factors

C. Demographics

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D. Wealt

24. Which of the following methods of segmentation is most likely to be used by an expensive private
school?

A. Geographical location

B. Religion

C. Ethnicity

D. Socio-economic class

25. Which of the following is not a benefit of doing market segmentation?

A. Enhanced growth opportunities

B. It is very time efficient and objective

C. Improved understanding of customer requirements

D. Enhanced sales

26. What is it called when a firm markets its products exclusively to a very specific and well-defined
segment of the population called?

A. Mass marketing

B. Commercial marketing

C. Niche marketing

D. Social marketing

27. What is it called when a firm markets its products to a wide audience while ignoring the specific
needs of individual segments?

A. Commercial marketing

B. Mass marketing

C. Social marketing

D. Niche marketing

28. What can anti-drug government campaigns be considered as?

A. Social marketing
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B. Mass marketing

C. Commercial marketing

D. Both (A) and (B)

29. What is a visual representation depicting how customers perceive a brand relative to others called?

A. Boston matrix

B. Product life cycle

C. Position map

D. Promotional mix

30. What is a product that sells for a high price but is made of low quality components referred to as?

A. Premium product

B. Cowboy product

C. Bargain product

D. Economy product

31. Which of the following car brands is an example of a premium brand?

A. Toyota

B. Honda

C. Kia

D. BMW

32. Which of the following is not an advantage of position mapping?

A. It indicates exactly what aspects need to be improved upon

B. It indicates how customers perceive the brand

C. It guides repositioning strategies

D. It allows more appropriate marketing mixes to be implemented

33. Which of the following is not one of the three competitive strategies for market positioning suggested
by Michael Porter?

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A. Outsourcing

B. Cost leadership

C. Differentiation

D. Focus

34. A firm that aims to become attain the cheapest costs of production in its industry is one that is
pursuing the ________ strategy.

A. Efficiency

B. Differentiation

C. Cost leadership

D. Both (B) and (C)35. Which of the following statements would Michael Porter agree with?

A. A firm must choose between cost leadership, differentiation or focus strategies

B. A firm cannot pursue multiple competitive strategies simultaneously

C. High quality and low cost cannot be achieved simultaneously

D. All of the above

36. Imagine a firm that focuses all its attention on developing food items for people with dairy allergies.
Such a firm is said to be using the ________ strategy.

A. Niche market

B. Cost leadership

C. Differentiation

D. Focus

37. What is a feature that separates a brand from its competitors called?

A. Core competency

B. Competitive edge

C. USP

D. Differentiation

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38. What is the process of making a brand or product unique and different to competitors called?

A. Competency development

B. Feature acquisition

C. Cost leadership

D. Differentiation

39. Which of the following is not an advantage of differentiation?

A. It allows a firm to charge higher prices

B. It can provide economies of scale

C. It enhances brand recognition

D. It enhances brand loyalty

40. Which of the following is not a valid criticism of differentiating products?

A. It is expensive

B. It prevents economies of scale being fully exploited

C. It may confuse customers

D. It reduces distribution (placement) Options

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4.3 Sales Forecasting (HL)

1. Students of Westminster Academy, which of the following sales forecasting techniques involves looking
at past data and trends in order to predict future trends?

A. Market research

B. Time series analysis

C. Extrapolation

D. All of the above

2. If a firm has had sales growth of 7% per annum for the past five years, and the marketing team
forecasts sales growth of 7% this year too, what is the sales forecasting technique being used called?

A. Extrapolation

B. Time series analysis

C. Inference

D. Market research

3. Which of the following is not a key element of a time series analysis?

A. Deliberate variations

B. Seasonal variations

C. Cyclical variations

D. Random variations

4. Which of the following items is least likely to experience seasonal variations in demand?

A. Textbooks

B. Refrigerators

C. Easter eggs

D. Hotels

5. What does standard deviation measure?

A. Difference between the greatest and smallest data points

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B. Difference of a variable from the mean

C. Most frequent data point that arises in a data set

D. Sum of all items divided by the number of items

6. With reference to the data in the table below, what is simple average sales over the six-month period?

A. $157,500

B. $160,000

C. $170,000

D. $172,500

7. With reference to the data in the table below, what is the three-point moving average sales from March
to May?

A. $155,000

B. $160,000

C. $163,750

D. $167,33

8. With reference to the data in the table below, what is the variation between the three-point moving
average sales from January to March and the actual sales recorded in February?

A. -$37,667

B. -$30,000

C. +$25,000

D. +$30,000
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9. With reference to the data in the table below, what is the four-point moving average sales from
January to April?

A. $491,250

B. $502,500

C. $575,000

D. $655,000

10. With reference to the data in the table below, what is the four-point moving average sales from
February to May?

A. $471,550

B. $501,500

C. $595,000

D. $605,125

11. With reference to the data in the table below, what is the centred trend for the period January-April
and February-May?

A. $495,250

B. $496,250

C. $992,500

D. Cannot be determined

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12. With reference to the data in the table below, what is the variation in March from the centred trend
for the period January-April and February-May?

A. -$17,083

B. -$16,250

C. +$21,250

D. Cannot be determined

13. According to the table below, the mean sales are ________, and the modal sales are _______.

A. $3,500, $3,100

B. $4,000, $3,100

C. $4,225, $3,100

D. $5,000, $4,000

14. According to the table below, the median sales are ________, and the sales range is _______.

A. $3,100, $900

B. $3,100, $3,200

C. $3,100, $5,600

D. $4,000, $3,100

15. With reference to the table below, what is the four-point moving average for the first four weeks?

A. $4,000
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B. $4,225

C. $4,375

D. $4,525

16. Using the data in the table below and the four-point moving average method, what is the centred
trend?

A. $4,100

B. $4,200

C. $4,300

D. Cannot be determined

17. Using the table below, compute the variation in month 3 from the centred trend.

A. -$3,675

B. -$3,225

C. +$3,225

D. +$3,675

18. Using the table below, compute the variation in March from the centred trend.

A. -
$67.50

B. -$35.25

C. +$57.50

D. +$145.00

19. Which of the following is not a benefit of sales forecasting?

A. It can help a firm improve its liquidity position across the year
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B. It guides production and inventory management

C. It helps secure external sources of funding

D. It is based on historical data

20. Which of the following is/are limitations of sales forecasting?

i. Predictions may be inaccurate

ii. Past data may not fully reflect what the future holds

iii. Garbage in garbage out

iv. It overcomplicates inventory management

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

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4.4 Market Research

1. Market research conducted as and when required for a specific problem that the business is facing is
called ______ market research.

A. Ad-hoc

B. Continuous

C. Intermittent

D. Primary

2. The market research required to create a monthly ‘Top-10’ table is likely to be ________.

A. Continuous

B. Ad-hoc

C. Secondary

D. Primary

3. Which of the following is not a primary role of market research?

A. To provide information regarding customer tastes and preferences

B. To boost net income

C. To determine customers reactions to price changes

D. To help firms improve their marketing mixes

4. Market research that involves getting first-hand, new data is called ________ research.

A. Continuous

B. Ad-hoc

C. Secondary

D. Primary

5. Which of the following is not a method of primary research?

A. Surveys

B. Newspaper articles

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C. Interviews

D. Observations

6. Primary market research that is structured and conducted in-person (face-to-face) is best described as
a(n) _________.

A. Self-completed survey

B. Informal research

C. Interview

D. Online survey

7. Which of the following is not a benefit of using surveys as a means of primary research?

A. Both qualitative and quantitative data is collectable

B. Data collection is relatively easy

C. They are cheap so cost effective

D. Bespoke research requirements can be met

8. Which of the following is not a valid criticism of using surveys as a means of primary research?

A. A large sample size is necessary

B. It is time consuming and costly

C. It can be difficult to filter out bias in respondents’ answers

D. Respondents may feel pressure to conform to the norm in an open forum discussion

9. Which of the following is not a benefit of using primary research?

A. It is relatively quick to collect

B. It is more relevant to the research needs of individual businesses

C. Information collected is unique to the firm

D. Information is more valid and up-to-date

10. Which of the following is not a valid criticism of using primary research?

A. It can be monotonous and repetitive to conduct

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B. Results are available to the general public, including rivals

C. There is potential for bias and subjectivity

D. Poor research design can lead to inaccurate results

11. Which of the following is not a benefit of using secondary research?

A. Data meet the specific firm’s individual needs

B. It is more expensive than conducting primary research

C. It is relatively time consuming and difficult to collect

D. It provides a narrow breadth of information for the firm

12. Which of the following is not a valid criticism of using secondary research?

A. Data may be irrelevant or incomplete

B. Sources are limited compared to primary sources

C. It is relatively time consuming to collect

D. The information is available to everyone, rivals included

13. Which of the following is not a method of desk research?

A. Market analyses

B. Trade journals

C. Government reports

D. Focus groups

14. Which of the following is not a valid advantage of using focus groups?

A. They attract mainly extroverts

B. Detailed questions and discussions can take place

C. Behavioural observations can be made

D. They can be representative of a firm’s target market segment(s)

15. Before launching a new motorcycle, what is the motorcycle manufacturer most likely to use?

A. Trade journals
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B. Surveys

C. Observations

D. Consumer panels

16. What is the best method of primary research for researching the queuing time for a ride in a theme
park?

A. Focus groups

B. Observation

C. Consumer panels

D. Questionnaires

17. Which of the following statements about secondary market research is true?

A. It can be sourced internally or externally

B. It involves the collection of new information

C. Methods include the use of consumer panels

D. Data are exclusive to the market researcher

18. What is a survey question asking respondents to check (tick) off their age group a form of?

A. Secondary research

B. Qualitative research

C. Quantitative research

D. Both (A) and (C)

19. Which of the following is not an advantage of qualitative research?

A. It provides insight into behavioural trends

B. Responses are factual and measurable

C. Information collected can be ‘richer’ and more detailed

D. A lower level of responses may suffice

20. Which of the following is not an advantage of quantitative research?

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A. It is relatively easy and quick to collect

B. Results are easier to analyse

C. The factuality and measurability of responses are enhanced

D. It is more flexible than qualitative research

21. What is the group of all potential customers making up a market referred to as?

A. Sample size

B. Quota sample

C. Market capitalization

D. Population

22. A form of sampling in which the researcher selects a certain number of people from each market
segment and then grouped according to characteristics (such as age or gender) is called __________
sampling.

A. Stratified

B. Random

C. Convenience

D. Quota

23. The form of sampling that relies on segmentation is called __________ sampling.

A. Random

B. Stratified

C. Cluster

D. Snowballing

24. Which sampling method arbitrarily by chance selects anyone in the population for market research?

A. Random

B. Stratified

C. Cluster

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D. Snowballing

25. The form of sampling that involves breaking down the population into geographical regions and then
randomly interviewing people from each region is called _________ sampling.

A. Geographical

B. Snowballing

C. Cluster

D. Stratified

26. When a television reporter interviews people walking nearby, this is an example of _________
sampling.

A. Snowballing

B. Geographical

C. Convenience

D. Stratified

27. Which of the following is not a disadvantage of stratified sampling?

A. Appropriate strata may be difficult to determine

B. Population data may be expensive to procure

C. People are selected indiscriminately

D. It is difficult to subdivide the population into representative subgroups

28. Mistakes caused by human error are referred to as __________ errors, while those caused by poor
sample design are referred to as __________ errors.

A. Sampling, non-sampling

B. Non-sampling, sampling

C. Subjective, sampling

D. Subjective, unrepresentative

29. When an inappropriate sampling methodology is used, this causes a ________ error.

A. Sampling
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B. Non-sampling

C. Research

D. Unrepresentative

30. When a researcher incorrectly records data, this is referred to as a _______ error.

A. Research

B. Unrepresentative

C. Sampling

D. Non-sampling

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4.5 The 4 Ps
1. What are the 4 Ps of marketing?

A. Product, Price, Place, Production

B. Production, Planning, Promotion, Price

C. People, Physical environment, Place, Product

D. Place, Promotion, Price, Product

2. What does a product life cycle illustrate?

A. Which products generate the most revenue for a firm

B. The stages a product goes through from design to withdrawal

C. Which products have the highest market share and market growth

D. How long it takes a product to goes through R&D

3. Which of the following represents the correct order of phases in a typical product life cycle?

A. Launch, R&D, Growth, Maturity, Extension

B. R&D, introduction, growth, maturity, decline

C. Introduction, maturity, growth, decline, extension

D. Launch, R&D, maturity, growth, withdrawal

4. A firm is likely to be unprofitable during the ________ stage of the product life cycle, but profitable
during the ________ stage.

A. Launch, decline

B. R&D, launch

C. Introduction, maturity

D. Growth, maturity

5. During the maturity stage, a firm faces all of the following except?

A. Increasing sales revenues

B. Increasing sales growth rates

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C. Price competition

D. Economies of scale

6. Price reductions, repackaging and selling products in new markets are all examples of ______________
that are implemented when a product reaches __________.

A. Profit maximisation, growth

B. Sales promotions, growth

C. Revenue maximisation, decline

D. Extension strategies, saturation

7. What is the BCG matrix?

A. A product portfolio analysis tool

B. A visual illustration of the various stages a product goes through in its life

C. A marketing planning tool helping a firm determine its product and market development strategies

D. An illustration of how a product or brand is perceived in a market

8. What is a product that has low market share but sells in a high market growth industry referred to as
in the BCG Matrix?

A. Cash cow

B. Question mark

C. Dog

D. Star

9. Which of the following statements is not relevant to question marks in the BCG Matrix?

A. Have high market share

B. Operate in high growth markets

C. Use significant funds generated by cash cows

D. May have a poor marketing mix

10. What is a product with high market share and relatively low market growth referred to as in the
BCG Matrix?
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A. Stars

B. Question marks

C. Dogs

D. Cash cows

11. During which stage of the product life cycle is marketing effort most prominently directed towards
retaining customers?

A. Launch

B. Growth

C. Maturity

D. Decline

12. Which of the following statements of criticism of the BCG matrix is false?

A. It fails to explain the root causes of a product position in the matrix

B. It assumes high market share brings high profits

C. It only uses two dimensions upon which investment/divestment decisions are to be made

D. It is a static model

13. Which of the following is not a valid role of branding?

A. To build brand awareness and loyalty

B. To cut marketing expenses

C. To help create a legal identity for the brand

D. To help create the desired corporate imag

14. What is it called when a firm launches new products under an existing brand name?

A. Brand extension

B. Brand development

C. Market development

D. Multi-brand strategy

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15. In a BCG matrix, stars can be turned into cash cows through the _________ strategy where a firm
enjoys the strong cash flows and profits of a star; dogs should be ________ to free up cash flows.

A. Hold, harvested

B. Harvest, divested

C. Build market share, harvested

D. Hold, divested

16. The pricing strategy where a firm adds a particular amount or percentage of profit to the unit cost
while determining its price is called __________ pricing.

A. Cost-plus pricing

B. Price skimming

C. Marginal pricing

D. Fixed pricing

17. High-tech products involving significant new product development costs, such as the latest televisions
are most likely to use __________ pricing.

A. Cost-plus pricing

B. Price skimming

C. Penetration pricing

D. Price leadership

18. If a firm prices its products with all prices rounded slightly down, for example, $49.99, or $395, it is
utilizing _________ pricing.

A. Psychological pricing

B. Price leadership

C. Price discrimination

D. Predatory pricing

19. Which of the following are examples of firms using price discrimination?

i. Public transport discounts for students and the elderly

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ii. Airlines charging higher prices during holiday season

iii. Petrol stations providing cheaper fuel on certain days of the week

iv. Zara charging different prices for different clothes

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

20. Which of the following is not a requisite condition(s) for price discrimination to occur?

A. The firm must have enough market power to set prices

B. Transparency should be minimized

C. The firm must be able to segment and separate customers

D. Different market segments must have varying willingness to pay

21. Which of the following is not an advantage of penetration pricing?

A. It facilitates market entry

B. It is likely to build market share quickly

C. It gives the product a high-quality image

D. It raises brand awareness quickly

22. Which of the following is not an advantage of price skimming?

A. It helps recoup R&D costs quickly

B. It is sustainable in the long-run

C. Large profit margins can be enjoyed

D. A high-quality image may be established

23. Which of the following is not an advantage of loss leader pricing?

A. It is likely to attract customers and encourage brand switching

B. It can help sell off old inventory

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C. It can help increase sales of other products

D. It acts as a barrier to entry for new entrants

24. Which of the following is not a valid disadvantage of predatory pricing?

A. It may be illegal

B. It may lead to a price war

C. It is unsustainable

D. It acts as a barrier to entry for other firms

25. Which of the following is not an example of ATL promotion?

A. Cinema advertising

B. Newspaper advertising

C. Outdoor advertising

D. Branding

26. Which of the following is not an example of BTL promotion?

A. Newspapers

B. Slogans

C. Logos

D. Sponsorship

27. What are promotional techniques that involve salespeople directly persuading clients to purchase
products called?

A. Sales promotions

B. Public relations

C. Personal selling

D. Sales pitches

28. Making large charitable donations, television interviews and press conferences are examples of
____________.

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A. Sales promotions

B. Public relations

C. Personal selling

D. Advertising

29. What are lucky draw competitions, discount offers and giving out free samples examples of?

A. Sales promotions

B. Public relations

C. Personal selling

D. Advertising

30. The use of technology to disseminate promotional messages is called __________ marketing.

A. Electronic marketing

B. P2P marketing

C. Social media marketing

D. Guerrilla marketing

31. What are the middle-people in the chain of distribution between manufacturers and consumers
called?

A. Agents

B. Wholesalers

C. Retailers

D. Intermediaries

32. Which of the following is not an advantage of using wholesalers in the distribution chain?

A. The wholesaler bears the inventory storage costs

B. The manufacturer needs to deal with less buyers

C. All distribution activities and issues are handled by the wholesaler

D. The wholesaler becomes responsible for marketing a firm’s products

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33. Which of the following factors is least likely to influence the choice of distribution channel?

A. Cost

B. Stock control system

C. Market size

D. Customer location

34. Assume a manufacturing firm first sells its products to a specialised agent, who resells goods to
wholesalers, who resells goods to retailers, who sell the product to consumers. This firm has a
____________________.

A. Zero-level channel chain

B. One-level channel chain

C. Two-level channel chain

D. Three-level channel chain

35. A producer that directly sells its products to the final consumer is using a _______ level channel
chain.

A. Zero

B. One

C. Two

D. Three

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4.6 The Extended Marketing Mix 7Ps (HL)

1. Which of the following is not one of the additional 3 Ps of marketing?

A. Process

B. Production

C. Physical evidence

D. People

2. Payment methods, delivery options and customer services are a part of the __________ consideration
when marketing services.

A. Process

B. Performance

C. Physical evidence

D. People

3. The marketing of services needs to include the extended marketing mix because services are
__________, __________ and ___________.

A. Intangible, perishable, homogenous

B. Perishable, homogenous, heterogeneous

C. Intangible, perishable, heterogeneous

D. Inseparable, inconsistent, intangible

4. A service provider investing in training and development for its employees is attempting to improve
the __________ aspect of the extended marketing mix.

A. People

B. Physical evidence

C. Performance execution

D. Professionalism

5. Students of Westminster Academy, a service firm that is attempting to streamline the sequence of
activities in a service is trying to improve the __________ aspect of the extended marketing mix.

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A. Performance execution

B. Product

C. Process

D. Physical evidence

6. A cinema chain that is upgrading the size of its screens is focusing on improving the __________ aspect
of the extended marketing mix.

A. Product

B. Promotion

C. Physical evidence

D. Process

7. The physical evidence aspect of a service can help improve the ___________ aspect of the extended
marketing mix.

A. People

B. Process

C. Place

D. Product

8. Assume a private hospital has luxurious rooms, lobbies, offices and very well- dressed staff compared
to a government hospital. It can be said that the private hospitals ____________ aspect of the extended
marketing mix is acting as a differentiator.

A. People

B. Process

C. Physical evidence

D. Payment systems

9. When courier firms like DHL and FedEx compete on delivery times and getting the parcel to the
customer without any damage, they are competing on the __________ aspect of the extended marketing
mix.

A. People
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B. Process

C. Performance

D. Physical evidence

10. An airline that advertises itself as having the most friendly and well-trained cabin crew is competing
on the __________ aspect of the extended marketing mix.

A. People

B. Process

C. Performance

D. Physical evidence

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4.7 International Marketing (HL)

1. ___________ refers to when a firm sells its products to buyers in other nations.

A. E-commerce

B. Exporting

C. Licensing

D. Joint ventures

2. When a business sets up its own production facilities and offices in a foreign market, what is this
called?

A. Direct investment

B. Franchising

C. Licensing

D. Exporting

3. When two or more firms agree to pool their resources into a new endeavour, without setting up a new
legal entity, this is a _____________.

A. Joint venture

B. Strategic alliance

C. Direct investment

D. Merger

4. Which of the following is not true regarding exporting as a method of market entry?

A. It is relatively high risk

B. Tariffs may be faced

C. Transportation costs may be high

D. Exchange rate fluctuations impact the exporter’s competitiveness

5. Which of the following is not an advantage of direct investment as an international market entry
method?

A. Local partners’ expertise helps overcome social and cultural barriers

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B. The business comes closer to its customers

C. The business becomes more immune to the effects of exchange rate fluctuations

D. It helps overcome protectionist measures implemented by the foreign market

6. Which of the following is untrue about entering foreign markets?

A. It increases brand recognition

B. Risks are spread

C. It extends the life cycle of a firm’s products

D. It reduces working capital requirements

7. Selling the same product in different markets using the same marketing approach is called __________
marketing.

A. International

B. Standardised

C. Global

D. Commercial

8. What does globalization refer to?

A. Marketing of a firm’s products in overseas nations

B. The practice of marketing products across the world using the same marketing approach

C. Adapting marketing mixes to cater to local needs and preferences

D. The growing integration of world economies

9. When a firm sells it output to poorer countries, it may have to reduce its products’ prices. This is an
example of a firm taking into account ___________ factors.

A. Demographic

B. Political

C. Socioeconomic

D. Ethical

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10. What is the commercial transfer of ideas, values and traditions from one nation to another called?

A. Cultural exports

B. Intellectual property rights exchange

C. International trade

D. Cultural trade

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4.8 Ecommerce
1. Which of the following statements best describes e-commerce?

A. Promoting a firm’s products through the internet

B. Buying and selling products through the internet

C. Using social networks to boost brand awareness

D. Businesses selling producer goods and services to other businesses

2. Which statement about e-commerce is incorrect?

A. It facilitates personal interaction with counterparties

B. It eliminates geographical boundaries and barriers

C. It is available 24/7

D. It has broken down traditional barriers to entry

3. E-commerce has __________ price transparency benefitting _________.

A. Increased, customers

B. Increased, producers

C. Decreased, customers

D. Decreased, producers

4. E-commerce typically _________ the number of intermediaries in the distribution chain, and
_________ competition.

A. Increases, increases

B. Increases, reduces

C. Reduces, increases

D. Reduces, reduces

5. Which of the following is not an example of a B2B e-commerce?

A. Corporate banking

B. Vehicle spare parts online retailing

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C. Amazon

D. Alibaba

6. Facebook and iTunes would be classified as _________ platforms.

A. B2B

B. B2C

C. C2B

D. C2C

7. eBay is an example of a ____________ e-commerce platform.

A. B2B

B. B2C

C. C2B

D. C2C

8. Which of the following is not an advantage of e-commerce for firms?

A. It reduces rental expenses

B. It raises price transparency

C. It allows firms to offer a larger product portfolio

D. it provides an additional channel of distribution

9. Which of the following is/are disadvantage(s) of e-commerce for firms?

i. It increases the risk of product imitation

ii. It is fully reliant on technology working as intended

iii. It is unsuitable for the sale of certain products

iv. It reduces packaging requirements

A. i

B. i + ii

C. i + ii + iii
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D. i + ii + iii + iv

10. Which of the following is not an advantage of e-commerce for consumers?

A. Consumers may receive products for lower prices

B. It raises ease of purchasing

C. It provides convenient payment systems

D. It reduces the risk of fraudulent trading and identity theft

11. E-commerce tends to _________ the flexibility with which firms can respond to changes in the
market. E-commerce tends to _________ operating overheads.

A. Increase, increase

B. Increase, decrease

C. Decrease, increase

D. Decrease, decrease

12. Which of the following products are consumers least likely to buy online?

A. Bananas

B. Books

C. Phones

D. Computers

13. Twitter is a __________ business. YouTube is a ___________ business.

A. C2C, C2C

B. B2C, B2C

C. B2B, C2B

D. C2C, B2C

14. E-commerce is likely to reduce the relative significance of ____________ in the marketing mix.

A. People

B. Processes

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C. Physical evidence

D. All of the above

15. Students of Westminster Academy, what is the increased visibility of prices brought about by e-
commerce referred to as?

A. Price aggregation

B. Price competition

C. Price comparability

D. Price transparency

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5.1 The Role of Operations Management

1. Which of the following statements is incorrect?

A. Production decisions impact all other divisions within the firm

B. Mass production and capital intensity output require a large amount of investment

C. Making customized products enables the marketing team to sell these at a higher price

D. Quaternary sector firms are not involved in the production process

2. In which of the following firms is operations management a business function of?

i. Primary sector firms

ii. Secondary sector firms

iii. Tertiary sector firms

iv. Quaternary sector firms

A. ii only

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

3. When a firm relies on workers to produce its output, rather than machinery, it can be described as a
______________ firm.

A. Secondary sector

B. Tertiary sector

C. Labour-intensive

D. Capital-intensive

4. A firm which has an entirely automated production system manufacturing pens is likely to be a
____________ firm.

A. Secondary sector

B. Quaternary sector

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C. Labour-intensive

D. Economically sustainable

5. Students of Westminster Academy, which of the following is not a measure included in the “triple
bottom line” measure of sustainability?

A. Social sustainability

B. Legal sustainability

C. Environmental sustainability

D. Economic sustainability

6. Removing gender inequalities in recruitment (hiring) practices is an example of which of the

following?

A. Legal sustainability

B. Social sustainability

C. Ecological sustainability

D. Economic sustainability

7. What is over-production a threat to?

A. The value added process

B. Social sustainability

C. Economic sustainability

D. Secondary sector output

8. What is the operations management division of an organization in charge of?

A. Handling staffing matters such as recruitment, training, performance appraisals and dismissals

B. Identifying customer requirements and promoting a firm’s goods and/or services

C. All aspects of the production process and quality management

D. All of the above

9. Which of the following is not an example of a method to achieve ecological sustainability?

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A. Preservation

B. Recycling

C. Adopting green technologies

D. Eradicating discrimination

10. For a business to earn a profit on its sales, its production process must ___________.

A. Add value

B. Be capital-intensive

C. Be labour-intensive

D. Adopt lean production

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5.2 Production Methods

1. Which method of production is most suitable to producing movies (films)?

A. Mass production

B. Batch production

C. Job production

D. Cellular production

2. Which of the following is not an advantage of job production?

A. High quality output is produced

B. Production flexibility is maximised

C. Workers are likely to be more motivated

D. Standardised output is produced

3. Which of the following is not applicable to job production?

A. A long working capital cycle may be faced

B. It is very capital intensive

C. It is difficult to enjoy economies of scale

D. Production is time consuming

4. Which form of production is most likely to be used to produce bread in a bakery?

A. Job production

B. Batch production

C. Flow production

D. Mass production

5. Which of the following is not an advantage of batch production?

A. Lower average unit costs of production compared to job production

B. Customers receive greater choice than with job production

C. A high price can be charged due to the product’s uniqueness

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D. Risks are spread due to the ability to produce a variety of products

6. Which of the following statements is not true regarding batch production?

A. There is no flexibility

B. Downtime occurs between batches

C. Inventory storage costs rise

D. Workers may feel demotivated due to the monotony of work

7. The main difference between mass and flow production is that the latter

A. Involves a larger scale of production

B. Involves a smaller scale of production

C. Produces standardised goods

D. Relies on using more workers

8. Which of the following firms is most likely to use flow production?

A. A local bakery

B. A local school

C. A furniture manufacturer

D. A national newspaper printing press

9. Which of the following is most likely to use mass production?

A. Bottled water producers

B. Fashion (clothing) retailers

C. Holiday agents

D. Bespoke tailors

10. Which of the following is not an advantage of mass and flow production?

A. Technical economies of scale are achieved

B. Labour costs are lowered

C. Output is highly standardised

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D. Workers are likely to be more motivated due to specialization

11. Which of the following is not a valid criticism of mass and flow production?

A. Production is inflexible

B. Set-up and operational costs are relatively high

C. The firm is likely to experience limited economies of scale

D. Relatively low profit margins can be received

12. When independent teams have the responsibility of effectively carrying out a particular part of the
production process, what is this called?

A. Mass production

B. Cellular manufacturing

C. Job production

D. Batch production

13. Which of the following is not an advantage of cellular manufacturing?

A. Workers have greater autonomy

B. Workers are held accountable and responsible for quality assurance

C. Training costs are minimized

D. Productivity rises due to specialization

14. Which of the following is not a disadvantage of cellular production?

A. Economies of scale are not achieved

B. Output is lower than in traditional flow or mass production

C. Internal conflict within teams may occur

D. Set-up, training and operational costs are relatively high

15. A cookie shop is likely to use _______ production, whereas an oil refinery is likely to use ________.

A. Flow, batch

B. Flow, job

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C. Batch, job

D. Batch, flow

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5.3 Lean Production and Quality Management (HL)

1. Which of the following statements refers to lean production?

A. Streamlining processes to reduce waste and increase efficiency

B. Continuously finding ways to improve the production process

C. Using a just-in-time inventory management system to minimize buffer stock requirements

D. A highly automated production system producing a very large scale of output

2. Which of the following is not something lean production aims to do?

A. Increase resource flexibility

B. Minimise wastage

C. Manage the supply chain

D. Utilise just-in-case production systems

3. Which of the following is not a source of waste (“muda”)?

A. Chemical waste

B. Overproduction

C. Excess worker movement

D. Waiting time

4. What is the term used to describe the concept of achieving small yet continuous improvements to
increase productivity and efficiency?

A. Empowerment

B. Kaizen

C. Kanban

D. Andon

5. What is the name of the stock control system which aims to minimise buffer stock requirements by
ensuring raw materials are received just before they are used in production?

A. Lean production

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B. Kaizen

C. Just-in-time

D. Just-in-case

6. Which of the following is incorrect about a JIT inventory management system?

A. Raw materials are delivered just before they are required for production

B. Finished goods are immediately dispatched to customers

C. JIT is used frequently in mass production of motor vehicles

D. JIT involves a card system to ensure efficient stock usage

7. With respect to Kanban, which of the following is not true?

A. It is a method of lean production

B. It involves audio-visual control systems

C. It uses a card-based system to ensure efficient stock management

D. It manages workflow processes

8. What is the name of the method of lean production that utilises audio-visual control systems to indicate
the status of particular aspects of the production process?

A. Andon

B. Kanban

C. Kaizen

D. Benchmarking

9. ____________ refers to a sustainable, waste-free production model in which all material inputs can be
recycled or reused, or are consumable or compostable.

A. Kanban

B. Flow production

C. Cradle-to-cradle manufacturing

D. Ecological sustainability

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10. What is the traditional approach to quality management called, in which supervisors inspect a sample
of the output?

A. Quality assurance

B. Quality control

C. Quality standards

D. Total quality management

11. Which of the following features does not determine a product’s quality?

A. After-sales services

B. Reliability

C. Durability

D. Price

12. Quality control is ___________ whereas quality assurance is ___________.

A. Quality standard-oriented, efficiency-oriented

B. Process-oriented, product-oriented

C. Product-oriented, process-oriented

D. Efficiency-oriented, customer satisfaction-oriented

13. QC is _____________ whereas QA is _____________.

A. Reactive, proactive

B. Proactive, reactive

C. Preventative, corrective

D. Expensive, Cheap

14. Which of the following are advantages of quality control?

i. It prevents substandard output reaching the end-user

ii. It is cheaper than quality assurance

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iii. It prevents mistakes being made in the first place

iv. It strives to achieve zero defects

A. i + ii

B. ii + iii

C. i + iii

D. i + ii + iii + iv

15. Which of the following is untrue regarding quality assurance?

A. Employee motivation improves

B. Increased employee participation generates new ideas

C. It is reactive rather than proactive

D. It reduces costs of wastage and reworking

16. What is the term for small groups comprised of employees who come together to assess quality and
make recommendations to improve the quality of output?

A. Kaizen groups

B. Focus groups

C. Quality control

D. Quality circles

17. Which of the following is not an advantage of quality circles?

A. They promote team working and team cohesiveness

B. They are cost-effective

C. They lead to quality improvements

D. They boost employee morale

18. When a firm compares its products, processes and performance to that of its competitors or its own
historical performance, what is this called?

A. Benchmarking

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B. Quality assurance

C. Lean production

D. Quality management

19. Which of the following is not a benefit of total quality management (TQM)?

A. Production costs are reduced

B. Corporate image is improved

C. Employee morale is improved

D. Bureaucracy is reduced

20. Which of the following is not a valid criticism of implementing total quality management (TQM)?

A. It is expensive to set up and maintain

B. There is a time lag before the benefits of TQM are experienced

C. Reworking costs rise

D. It requires total commitment from every employee

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5.4 Location
1. What is a region with high unemployment being provided financial assistance by the government
called?

A. Developing area

B. Enterprise zone

C. Less developed region

D. Structurally-deficit zone

2. What is a firm that is indifferent to location, i.e. it receives no cost advantages by locating in a
particular zone, called?

A. Brick and mortar enterprise

B. Flexible organization

C. Footloose organization

D. Location-independent firm

3. What is the reluctance to relocate referred to as?

A. Clustering

B. Geographical immobility

C. Industrial inertia

D. Relocation inconvenience

4. Bottled water is an example of a _____________ product.

A. Bulk-increasing

B. Bulk-reducing

C. Producer

D. Weight-losing

5. It makes sense for ___________ industries to locate close to their customers, and for ___________
industries to locate close to their raw material sources.

A. Bulk-increasing, bulk-reducing
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B. Bulk-reducing, bulk-increasing

C. Bulk-reducing, weight-losing

D. Weight-gaining, bulk-increasing

6. What is the act of transferring internal business activities to external subcontractors to reduce costs
referred to as?

A. Insourcing

B. Offshoring

C. Outsourcing

D. Relocating

7. Which of the following is not an advantage of subcontracting?

A. It allows the firm to focus on its core activities

B. It cuts costs and improves profitability

C. Staff morale increases

D. The subcontractor provides specialised services

8. Which of the following is not a valid criticism of subcontracting?

A. Cultural issues and barriers may be faced

B. High costs of monitoring subcontractor’s performance may be incurred

C. Potential conflict may arise with the subcontractor

D. Quality is in the hands of the subcontractor

9. When a firm uses external subcontractors in a foreign nation to produce its products, what is this
called?

A. Offshore outsourcing

B. Offshoring

C. Outsourced offshoring

D. Outsourcing

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10. What is it called when a firm uses its own staff and resources to conduct activities that would have
otherwise been outsourced?

A. Empowerment

B. Insourcing

C. Offshoring

D. Reshorin

11. Which of the following is not an advantage of offshoring?

A. It limits the extent of cultural issues

B. Labour laws may be less stringent overseas

C. Lower operational costs may be achieved

D. The firm can concentrate on its core activities

12. Which of the following is not an advantage of insourcing?

A. It allows the firm to concentrate on its core activities

B. It creates jobs domestically

C. It develops employees’ skills

D. Using internal resources might be cheaper than using external subcontractors

13. Which of the following is not a disadvantage of insourcing?

A. Internal staff may not possess the requisite skills or experience

B. It involves making some employees redundant

C. It limits a firm’s international presence

D. Staff training costs may rise

14. Assume you buy a new computer from Apple, and receive complementary technical support over the
phone for a one-year period from a third-party, specialist IT-support organization situated in India.
What is this an example of?

A. Insourced subcontracting

B. Offshore outsourcing
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C. Offshoring

D. Outsourcing

15. When a school hires a caterer to run its canteen, what is it an example of?

A. Insourcing

B. Offshore outsourcing

C. Offshoring

D. Outsourcing

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5.5 Production Planning

1. Which of the following is not a reason for supply chain management?

A. To ensure efficient movement and storage of stocks

B. To achieve lean production

C. To procure the most cost-efficient methods of product transportation

D. To boost an organization’s liquidity ratios

2. What is the minimum level of stock held by a firm called?

A. Buffer stock

B. Re-order quantity

C. Re-order level

D. Margin of safety

3. A ______ stock control system does not have any buffer stock.

A. Just in case

B. Just in time

C. Buffer stock

D. Supply chain

4. Which of the following is not an advantage of adopting a JIT stock control system?

A. It reduces wastage

B. Stock holding costs are eliminated

C. Cash flow is improved

D. Greater economies of scale are achieved

5. Which of the following is not a drawback of adopting a JIT stock control system?

A. It relies heavily on technology

B. It eliminates the use of buffer stocks

C. It is inflexible in catering for sudden increases in demand

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D. It relies heavily on efficient suppliers

6. Which of the following is not an advantage of using a JIC stock control system?

A. It is flexible enough to meet a sudden increase in demand

B. Lower costs of storage compared to a JIT stock control system

C. It allows production to continue, even if suppliers delay deliveries

D. Bulk-buying economies of scale can be achieved

7. Which of the following is not a disadvantage of a JIC stock control system?

A. There is significant reliance on suppliers

B. Storage costs are high

C. There is a higher risk of stock being obsolete

D. Inappropriate method for perishable products

8. Which of the following is not a consequence of stockpiling?

A. Certain stock may perish or become obsolete

B. Higher costs of storage

C. Lost sales if customer orders cannot be fulfilled

D. Poor liquidity and cash flow position

9. Which of the following is not a consequence for a firm experiencing frequent stock- outs?

A. Lost sales

B. Production coming to a halt

C. Lower customer loyalty

D. High storage costs are incurred

10. What is the name used to describe the time lag that occurs between placing an order of stock and
receiving the delivery?

A. Just-in-time

B. Lead time

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C. Flexitime

D. Overtime

11. What does the economic order quantity refer?

A. The quantity of stock that minimizes storage costs

B. The level of stock required to be held as a buffer

C. The minimum level of stock required in a JIC stock control system

D. The ideal level of stock, balancing inventory needs and storage costs

12. _________ have a quicker usage rate than _________.

A. FMCGs, consumer durables

B. Consumer durables, FMCGs

C. Fixed assets, current assets

D. Specialty products, current assets

13. The shorter the lead time, the _________ the buffer stock level. The higher the stock holding costs, the
__________ the optimal stock level.

A. Higher, higher

B. Higher, lower

C. Lower, lower

D. Lower, higher

14. Capacity utilization is a measure of ____________.

A. Efficiency

B. Liquidity

C. Return on capital employed

D. Productivity

15. Assume a lightbulb manufacturer can produce 2.5m lightbulbs per month. In January and February,
it produced 1.75m and 1.95m lightbulbs respectively. It can be said that the manufacturer’s capacity
utilization rose by ____.
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A. 7%

B. 8%

C. 11%

D. 78%

16. With reference to the following data, what is the firm’s capacity utilization rate?

A. 75.00%

B. 73.91%

C. 57.50%

D. 36.75%

17. With reference to the table below, how do the four firms (competing in the same market) rank in
terms of their labour productivity, from highest to lowest?

A. C, A, D, B

B. C, B, A, D

C. D, C, A, B

D. C, A, B, D

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18. Assume a firm has fixed costs of $200,000 per month and a productive capacity of 150,000 units per
month. Capacity utilization in February and March was 80% and 70% respectively. Calculate the
change in average fixed costs during these two months.

A. +$0.55

B. +$0.23

C. -$0.15

D. -$0.37

19. A firm is deciding whether to make or buy 3,000 new office desks. It can make these for a variable
cost per unit of $45 per desk, and would allocate $45,000 in fixed costs to this order. Alternatively, the
firm can buy the desks from a supplier at a price of $70 per desk, less 10% discount due to the bulk
order. The firm’s cost

to make is $________ while its cost to buy is $________.

A. $135,000, $210,000

B. $180,000, $189,000

C. $180,000, $210,000

D. $162,000, $189,000

20. A firm receives a special order for 25,000 kettles. These kettles can be made in- house with direct costs
of $13 per unit, but machine upgrades of $57,500 would be required. Alternatively, the firm can purchase
these kettles for $15 per unit from an external manufacturer. By purchasing the kettles instead of making
them, the

firm would save $________ in costs.

A. $12,500

B. $10,000

C. $7,500

D. $5,000

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5.6 Research and Development

1. R&D is beneficial in __________ industries, but not likely to be profitable in ___________ industries.

A. Sunrise, sunset

B. Sunset, sunrise

C. Developing, developed

D. Developed, developing

2. Which of the following is not an advantage of conducting R&D?

A. The corporate image may improve

B. The opportunity cost is usually quite low

C. A first mover advantage might be gained

D. Higher prices can be charged

3. Which of the following is not true about conducting R&D?

A. There may be a high rate of failure

B. It is time consuming

C. It shortens a product’s life cycle

D. It is expensive

4. ____________ innovation refers to altering customer perceptions of a brand or product.

A. Product

B. Process

C. Paradigm

D. Position

5. ____________ innovation refers to a radical form of innovation that is high-risk and has the capability
of changing the nature of a market.

A. Product

B. Process

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C. Paradigm

D. Position

6. Automotive facelifts involve a car manufacturer updating certain features of a car mid-life cycle, such
as the headlights. What are these facelifts an example of?

A. Paradigm innovation

B. Position innovation

C. Incremental innovation

D. Radical innovation

7. What is the term used to describe the process of developing and improving a product that already
exists?

A. Position innovation

B. Paradigm innovation

C. Innovative creativity

D. Adaptive creativity

8. What type of innovation would the initial development of the iTunes Store be considered an example
of?

A. Innovative creativity

B. Revolutionary creativity

C. Economic innovation

D. Adaptive creativity

9. Adaptive creativity tends to be ____________, whilst innovative creativity tends to be __________.

A. Radical, incremental

B. Incremental, radical

C. Fast-paced, disruptive

D. Disruptive, fast-paced

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10. _________ are exclusive rights over a newly invented product or process, whereas _________ provide
legal protection to artists and authors.

A. Copyrights, patents

B. Patents, copyrights

C. Trademarks, patents

D. Copyrights, trademarks

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5.7 Crisis Management and Contingency Planning

1. The way in which a firm reacts to a crisis is called _________________.

A. Contingency planning

B. Crisis management

C. Quantification of risks

D. Level of preparedness

2. When a firm brainstorms possible crises that may arise and possible methods to respond, what is this
called?

A. Crisis management

B. Crisis planning

C. Contingency planning

D. Crisis strategy

3. Which of the following risks represents an uninsurable risk?

A. Inventory theft

B. Patient medical record theft

C. Typhoons

D. Fire damage

4. Which of the following is not an advantage of contingency planning?

A. Planning helps reduce the risks associated with a crisis

B. Planning takes into consideration the safety of various stakeholders

C. It develops response strategies for all possible risks that may arise

D. It helps minimize losses

5. Which of the following is/are disadvantage(s) of contingency planning?

i. It is time consuming

ii. It is impossible to account for every possible disaster

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iii. Crises may never occur

iv. It can only be done by large firms with significant funds

A. i

B. i + ii

C. i + ii + iii

D. i + ii + iii + iv

6. Risks that are measurable, such as the repair costs of water damage during a flood to a warehouse, are
called _______________ risks

A. Inherent

B. Market-specific

C. Quantifiable

D. Uninsurable

7. What are quantifiable risks also known as?

A. Uninsurable risks

B. Insurable risks

C. Market risks

D. Business cycle risks

8. What is crisis management also known as?

A. Disaster recovery

B. Bankruptcy avoidance

C. Risk minimization

D. Risk avoidance

9. Contingency planning involves all of the following except?

A. Risk assessments

B. Scenario planning

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C. Developing continuity plans and strategies

D. Responding to a crisis

10. A terrorist attack is an example of a(n) _______________ risk.

A. Uninsurable

B. Quantifiable

C. Unforeseeable

D. Operational

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