ETS MFT MBA QUESTIONS & ANSWERS

Which of the following organizations is most likely to use project financing? (A) A small start-up (B) A financial services firm with an extensive client list (C) A large consumer goods company (D) A large public utility involved in infrastructure development - ANSWERS(D) A large public utility involved in infrastructure development After an extensive recruitment process to select well-qualified individuals, a large percent of a company's new hires resigned within the first month of the job. Which of the following is the most likely explanation for this situation? (A) The training process to prepare the new hires for their assigned tasks was inadequate. (B) The health benefits provided by the company were not competitive with those of the rest of the industry. (C) The starting salary for the new hires was not competitive with that of the rest of the industry. (D) The new hires lacked the basic skills required to learn the job. - ANSWERS(A) The training process to prepare the new hires for their assigned tasks was inadequate. Prosco Ltd. employs a process cost system. Inspection of units occurs at the 50 percent mark. Defective units are then removed from the process, and their cost ($4.50) is absorbed by the good units. Prosco has recently been approached by a firm wishing to buy the defective units for a special use. The firm would require Prosco to modify the defective units at a unit cost of $2.00. If Prosco sells the defective units to the firm for $5.00 each, how would Prosco's reported income be affected? (A) It would decrease by $4.50 per unit sold. (B) It would decrease by $1.50 per unit sold. (C) It would increase by $3.00 per unit sold. (D) It would increase by $5.00 per unit sold. - ANSWERS(C) It would increase by $3.00 per unit sold. Some companies have little, if any, net income or earnings, yet they seem to have all the money they need for capital expenditures. Which of the following best explains how such companies operate? (A) They have good cash flows. (B) They lease capital equipment that does not show up on balance sheets. (C) They have accounts with many different banks. (D) They issue warrants to their officers. - ANSWERS(A) They have good cash flows. The Sintar Corporation has just announced that it will pay $1.10 per share in dividends to its stockholders in the current quarter. The prior quarter's dividend was $1.00 per share. The announcement indicates which of the following? (A) Management is sending a signal that it expects the economy to expand. (B) Management is sending a signal that the company has good projected future earnings. (C) While the company was able to pay a higher dividend, management preferred a more conservative figure. (D) The company has overextended its cash position and may have liquidity problems in the future. - ANSWERS(B) Management is sending a signal that the company has good projected future earnings. Wave Inc. is a telecommunications company that wants to become involved in e-commerce. It has to decide whether to develop a business-to-business or business-to-consumer strategy. As Wave's strategic planner, you have been asked to develop a business plan for each opportunity and present these to senior management. The answer to which of the following questions is most important to know before starting your plan? (A) What are the company's core competencies? (B) What is the potential market size? (C) What is the impact on the estimated revenue? (D) Does the company have e-commerce capabilities? - ANSWERS(A) What are the company's core competencies? If you were the holder of a call option (having cost you $2) on some stock with an exercise price of $20, it would be best for you to exercise your option when the market price is at (A) $18 (B) $20 (C) $22 (D) $24 - ANSWERS(D) $24 Increased globalization and technological change, particularly in telecommunications, enable more organizations to adopt which of the following organizational structures? (A) Functional (B) Matrix (C) Network (D) Mechanistic - ANSWERS(C) Network A new local Super Store publicly announced that when more than three people are standing in line at cash registers, additional checkout-lines will be opened. After the announcement, customers quickly noticed that the additional lines were not opened until six or seven people were standing in line. This indicates a gap between (A) customer expectation and management perception of customer expectation (B) management perception of customer expectation and service quality specifications (C) customer expectation and internal management communication (D) actual service delivery and how service quality was communicated - ANSWERS(D) actual service delivery and how service quality was communicated All of the following can be considered in the evaluation of a business unit EXCEPT (A) wages paid to labor (B) projected annual revenues of competitors (C) the cost of materials used in the production process (D) the price at which goods produced are sold - ANSWERS(B) projected annual revenues of competitors The sales division of a corporation is considering an internal product transfer because of excess demand. What is the lowest acceptable transfer price for the product? (A) The amount that the company would have to pay to acquire a similar product (B) The variable cost of producing a unit of product (C) The full absorption cost of producing a unit of product (D) The difference between the market price and the costs recaptured by transferring internally - ANSWERS(D) The difference between the market price and the costs recaptured by transferring internally The Mart, a large retail chain, is considering whether or not to close down a division. The division's projected income statement for the next year follows. -Sales $20,000,000 -Cost of goods sold 17,000,000 -Gross profit 3,000,000 -Operating costs: -Building rents $2,500,000 -Store clerk salaries 3,000,000 -Store utilities 1,200,000 -Allocated home office cost 700,000 -Total operating costs 7,400,000 -Anticipated loss ($4,400,000) The building rents arise from long-term leases that cannot be cancelled. If The Mart closed down this division, what would be the increase in company profits? (A) $700,000 (B) $1,200,000 (C) $3,000,000 (D) $4,400,000 - ANSWERS(B) $1,200,000 Using manufacturing-based criteria to measure product quality, which of the following should you monitor on a regular basis? (A) Customers' subjective perceptions of the reliability of the product when in use (B) The conformance of the finished product to agreed-to product specifications (C) Objective, third-party tests of the performance of the product (D) Warranty repair histories of the finished product - ANSWERS(B) The conformance of the finished product to agreed-to product specifications The common stock of ABC, Inc. has a current market price of $52 per share. Dividends have been $5 a share for several years and are not expected to change. The dividend yield of the stock of comparable companies is 10%. Which recommendation would you make regarding ABC, Inc. stock? (A) Purchase at $52 per share because that is a fair price. (B) Purchase at $52 per share because the dividend yield will be 10.1%. (C) Don't purchase, because the dividend yield will be only 2%. (D) Don't purchase for more than $50 per share. - ANSWERS(D) Don't purchase for more than $50 per share. Increasing a regular quarterly dividend payment may indicate which of the following about a corporation? I. Improved earnings prospects for the firm II. A reduction in agency problems of free cash flow III. A reduction in tax payments for shareholders (A) I only (B) II only (C) I and II only (D) II and III only - ANSWERS(C) I and II only Littleton, Inc., has fixed costs of $75,000 per month, variable costs of $5 per unit, and a sales price per unit of $30. What is the break-even quantity per month? (A) 2,143 (B) 2,500 (C) 3,000 (D) 15,000 - ANSWERS(C) 3,000 Which of the following should be reported net of tax on a corporation's income statement? (A) Discontinued operations (B) Operating income (C) Gross profit (D) Gain on sale of delivery truck - ANSWERS(A) Discontinued operations