Introduction To Business MCQs | MGT211 MCQs | Set 9
Introduction To Business MCQs | MGT211 MCQs | Set 9
MCQs (Multiple Choice Questions)
1) Which of the following is an advantage of a corporation that is not an advantage as a limited partner in a partnership?
a) Limited liability
b) Easy transfer of ownership position
c) Double taxation
d) All of the given options are advantages that the corporation has over limited partner
Correct Answer:
The correct answer is 'c'.
Explanation:
Limited partners in a partnership have limited liability, which means that their personal assets are not at risk if the partnership goes bankrupt. They also have the ability to transfer their ownership interest in the partnership relatively easily. However, limited partners are subject to double taxation, which means that their income from the partnership is taxed twice, once at the partnership level and again at the individual level.
Corporations also have limited liability, and their shareholders can transfer their ownership interest relatively easily. However, corporations are not subject to double taxation. The income of a corporation is taxed once, at the corporate level. When shareholders receive dividends from the corporation, the dividends are taxed at the individual level.
So, the only advantage that a corporation has over a limited partner in a partnership is that corporations are not subject to double taxation.
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2) Examples of constructive industries include:
a) Canals
b) Fishery
c) Sugar mills
d) Plant nurseries
Correct Answer:
The correct answer is 'a'.
Explanation:
Canals are man-made waterways that are used for transportation, irrigation, and recreation. They are considered to be constructive industries because they provide a valuable service to society.
Fishery is the practice of catching and harvesting fish and other aquatic organisms. It is a commercial industry that provides food and other products to consumers.
Sugar mills are factories that produce sugar from sugarcane. They are a part of the food and beverage industry.
Plant nurseries are businesses that sell plants and seedlings. They are a part of the agriculture industry.
So, the only option that is a constructive industry is canals.
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3) Which of the following statement shows the Trade Deficit process?
a) A process in which country imports are higher than the exports
b) A process in which country exports are equal to the exports
c) A process in which country imports are less than the country exports
d) All of the given options
Correct Answer:
The correct answer is 'a'.
Explanation:
A trade deficit occurs when a country imports more goods and services than it exports. This means that the country is spending more money on foreign goods and services than it is earning from selling its own goods and services to foreigners.
A trade surplus occurs when a country exports more goods and services than it imports. This means that the country is earning more money from selling its own goods and services to foreigners than it is spending on foreign goods and services.
A trade balance occurs when a country's imports are equal to its exports. This means that the country is neither spending more nor earning more on foreign trade.
So, the only option that shows the trade deficit process is when country imports are higher than the exports.
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4) Name of the business should:
a) Be simple
b) Indicates the type of business
c) Be familiar
d) All of the given options
Correct Answer:
The correct answer is 'd'.
Explanation:
A good business name should be:
Simple: It should be easy to remember and pronounce.
Indicative of the type of business: It should give potential customers a good idea of what the business does.
Familiar: It should be a name that people are already familiar with.
Available: It should be available as a domain name and social media handle.
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5) Hormel Foods Corporation in the USA allows the Danish company Tulip International to produce and market SPAM for the UK market under its own name. What kind of market entry strategy is Hormel using?
a) Licensing
b) Joint venturing
c) Contracting
d) Franchising
Correct Answer:
The correct answer is 'a'.
Explanation:
Licensing is a market entry strategy in which a company grants another
company the right to use its intellectual property, such as
patents, trademarks, or copyrights, in exchange for a fee. In this
case, Hormel Foods Corporation is licensing its SPAM brand to Tulip
International. This means that Tulip International can produce and
market SPAM in the
UK market under the SPAM brand name.
Joint venturing is a market entry strategy in which two or more companies form a new company to enter a new market. Contracting is a market entry strategy in which a company contracts with another company to perform a specific task or service. Franchising is a market entry strategy in which a company grants another company the right to use its business model, brand name, and operating procedures in exchange for a fee.
So, the only option that is a licensing strategy is licensing.
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6) A firm that acquires another firm as part of its overall business strategy is engaging in __________.
a) A strategic acquisition
b) A financial acquisition
c) A two-tier tender offer
d) A shark repellent
Correct Answer:
The correct answer is 'a'.
Explanation:
A strategic acquisition is an acquisition that is made to achieve a specific strategic goal, such as gaining access to new markets, acquiring new technologies, or expanding into new product lines. In this case, the firm is acquiring another firm as part of its overall business strategy. This means that the acquisition is likely to be strategic in nature.
A financial acquisition is an acquisition that is made to improve the financial performance of the acquiring firm. This can be done by increasing the acquiring firm's revenue, reducing its costs, or improving its financial position.
A two-tier tender offer is a type of tender offer in which the acquiring firm makes a first offer to acquire a certain percentage of the target firm's shares at a lower price. If the acquiring firm is successful in acquiring this percentage of shares, it then makes a second offer to acquire the remaining shares at a higher price.
A shark repellent is a defensive tactic used by a target firm to make it more difficult for an acquiring firm to acquire it. Shark repellents can take many forms, such as staggered board elections, poison pills, and golden parachutes.
So, the only option that is a strategic acquisition is a strategic acquisition.
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7) The record of a country's imports and exports of goods and services is called its:
a) Visible trade balance
b) Balance of payments
c) Balance of payments on current account
d) Balance of trade
Correct Answer:
The correct answer is 'd'.
Explanation:
The balance of trade is the record of a country's imports and exports of goods and services. It is calculated by subtracting the value of imports from the value of exports. A positive balance of trade means that the country is exporting more than it is importing. A negative balance of trade means that the country is importing more than it is exporting.
The balance of payments is a broader measure of a country's international transactions. It includes the balance of trade, as well as other flows of money, such as investment, tourism, and foreign aid.
The balance of payments on the current account is a subset of the balance of payments that measures the flows of goods, services, income, and transfers between a country and the rest of the world. It includes the balance of trade, as well as other flows, such as income from investments and foreign aid.
The visible trade balance is the record of a country's imports and exports of goods only. It does not include services.
So, the only option that is a record of a country's imports and exports of goods and services is the balance of trade.
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8) Which of the following is false?
a) One reason for failure of businesses is lack of managerial experience
b) One reason for failure of businesses is that most entrepreneurs are younger than 25 years old
c) One reason for failure of businesses is to neglect
d) One reason for failure of businesses is weak control systems
Correct Answer:
The correct answer is 'b'.
Explanation:
The statement is false because most entrepreneurs are not younger than 25 years old. In fact, the average age of an entrepreneur is 38 years old.
Here are some of the most common reasons why businesses fail:
Lack of managerial experience: Many entrepreneurs lack the necessary managerial experience to run a successful business. They may not have the skills or knowledge to manage finances, hire and train employees, or market their products or services.
Lack of capital: Many businesses fail because they do not have enough capital to get started or to keep operating. They may not be able to secure loans or investors, or they may spend their money unwisely.
Poor marketing: Businesses that do not market their products or services effectively will not be able to attract customers. They may not have a clear understanding of their target market or they may not be using the right marketing channels.
Competition: Businesses that face too much competition may not be able to survive. They may not be able to offer products or services that are unique or differentiated enough to compete with other businesses.
Bad management decisions: Businesses that make poor management decisions, such as hiring the wrong people or investing in the wrong products or services, are more likely to fail.
Cash flow problems: Businesses that have cash flow problems may not be able to pay their bills or meet their financial obligations. This can lead to bankruptcy.
So, the statement that most entrepreneurs are younger than 25 years old is false. The most common reasons why businesses fail are lack of managerial experience, lack of capital, poor marketing, competition, bad management decisions, and cash flow problems.
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9) A Pizza delivery service company generated after tax earnings of Rs. 800,000. With total stockholder investments equaling Rs. 20,00,000. What was the company's return on equity?
a) 10%
b) 15%
c) 40%
d) 80%
Correct Answer:
The correct answer is 'c'.
Explanation:
Return on equity (ROE) is a measure of how much profit a
company generates for its shareholders. It is calculated
by dividing the company's net income by its
shareholder's
equity.
In this case, the company's net income is Rs. 800,000 and its shareholder's equity is Rs. 20,00,000. Therefore, the company's ROE is 40%.
Return on equity (ROE) = Net income / Shareholder's equity = 800,000 / 20,00,000 = 40%
So the answer is 40%.
Here are some other factors that can affect a company's ROE:
Profitability: The more profitable a company is, the higher its ROE will be.
Financial leverage: Financial leverage is the amount of debt a
company uses to finance its operations. The more debt a
company uses, the higher its ROE will be, but also the
riskier it
becomes.
Taxes: The higher the taxes a company pays, the lower its ROE will be.
Shareholder's equity: The higher the shareholder's equity, the lower the ROE will be.
A high ROE is generally considered to be good, but it is important to consider other factors, such as profitability and financial leverage, when evaluating a company's performance.
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10) Components of the Business Plan include all of the following except:
a) Marketing Component
b) Administrative Component
c) External Component
d) Financial Component
Correct Answer:
The correct answer is 'c'.
Explanation:
A business plan is a written document that describes a
company's goals, strategies, and how it intends to achieve
them. It is used to attract investors, secure loans, and
guide the
company's operations.
The main components of a business plan are:
Executive summary: This is a brief overview of the business plan.
Products and services: This section describes the company's products or services.
Market analysis: This section analyzes the target market and the competition.
Marketing plan: This section describes how the company will reach its target market.
Management team: This section describes the company's management team and their experience.
Financial plan: This section projects the company's financial performance.
There is no such thing as an external component in a business plan. The other options are all valid components of a business plan.
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