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Competency-Based Competitive Events *Written Exam*

Test: ST-FIN-10A Booklet Number _____

Finance Cluster Exam INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions. Copyright © 2010 by MBA Research and Curriculum Center®, Columbus, Ohio

ST-FIN-10A FINANCE CLUSTER EXAM 1

Copyright © 2010 by MBA Research and Curriculum Center®, Columbus, Ohio

1. What is one of the main sources of law in the United States? A. United Nations C. U.S. Constitution B. Supreme Court D. Electoral College

2. Basic torts relating to businesses often involve disputes concerning

A. defamation. C. contracts. B. assaults. D. emotional stress.

3. The Sarbanes-Oxley Act of 2002 is legislation that was passed in response to recent

A. tax settlements. C. accounting scandals. B. investment options. D. collection activities.

4. When individuals purchase items such as high-performance sport cars, rare collectibles, and jewelry

containing large, precious gemstones, they must often pay ___________ taxes. A. property C. estate B. gift D. luxury

5. One of the main functions of compliance in the finance industry is to

A. prevent discrimination. C. increase profitability. B. maintain stability. D. limit management.

6. Which of the following reasoning processes does a virtual auditor use to identify financial system

transactions that are very similar to each other but are not exactly alike: A. Comparative reasoning C. Temporal reasoning B. Contextual reasoning D. Cross-source reasoning

7. When making a telephone call to another business, it is courteous to

A. identify yourself and your company. C. ask who is answering the phone. B. state the purpose of the call. D. call at your convenience.

8. How group members interact usually depends on

A. who is the oldest. C. who is the most outgoing. B. who knows the most. D. who asks the first question.

9. Which of the following is a characteristic of effective oral presentations:

A. Provides discussion C. Identifies conflict B. Gathers information D. Attracts attention

10. Which of the following would be a correct salutation in a business letter when you do not know the name

of the person to whom you are writing the letter: A. Dear Accounting Manager: C. Dear Sir: B. Dear Madam: D. Dear Accounting Department:

11. Which of the following is an example of persuasive messages that businesses write:

A. Handwritten note C. Collection letter B. Electronic mail D. Interoffice memo

12. A characteristic of a simple written report is that it usually is

A. abstract. C. short. B. formal. D. detailed.

13. Which of the following information should be shared immediately with all staff:

A. An employee of the business may soon be transferred out of town. B. An employee of the business has been caught shoplifting. C. A customer has requested that the business extend its hours. D. A customer has complained about the service s/he received.

ST-FIN-10A FINANCE CLUSTER EXAM 2 14. When participating in staff meetings, business employees should be prepared to

A. remain silent. C. comment on every detail. B. join in the discussion. D. argue.

15. To provide good service, employees should give customers

A. personal opinions. C. complete attention. B. limited information. D. unsolicited advice.

16. A customer asked a salesperson whether a hair dryer purchased last month could be returned or

exchanged. In order to answer the question, the salesperson should be familiar with the business's A. policies. C. finances. B. promotions. D. products.

17. A salesperson who frequently handles customer complaints should think of each complaint as an

opportunity to A. get to know the customer. C. ask personal questions. B. satisfy the customer. D. use feedback techniques.

18. One of the responsibilities of finance professionals is to provide clients with services that the clients

usually are A. incapable of understanding. C. unable to obtain by themselves. B. not willing to purchase. D. convinced they do not need.

19. Which of the following is not part of the data cleansing process used in customer relationship

management databases: A. Deleting unformatted data C. Updating expired data B. Removing duplicate records D. Identifying garbage data

20. The state of technology that exists in a society can limit a country's ability to

A. pay for needed supplies. C. tap its natural resources. B. identify potential workers. D. purchase new equipment.

21. When a business makes decisions about how to use its scarce resources, the business is

A. directing. C. economizing. B. controlling. D. organizing.

22. Ten thousand people wanted to attend a concert, but the stadium only seats 3,000. Because of the high

demand, concert officials increased the price of admission to a point where only 3,000 people were able to afford the price. Which of the following best relates to the other 7,000 people who were unable to attend the concert:

A. Price incentives C. Excess supply B. Price rationing D. Limited demand

23. The use of government production quotas often creates problems for which of the following economic

systems: A. Socialist command C. Market B. Traditional D. Communist command

24. One of the disadvantages of private enterprise is

A. unequal distribution of income. C. pricing system. B. limited government control. D. competition.

25. Job enlargement, job rotation, and job enrichment are all ways that a company can __________ of labor

specialization. A. handle the productivity C. combat the disadvantages B. define the categories D. transfer the risk

ST-FIN-10A FINANCE CLUSTER EXAM 3 26. Which of the following types of legal union representation is preferred by unions in states without right-to-

work laws: A. Closed shops C. Open shops B. Agency shops D. Union shops

27. Determine the amount of government spending that will be included in GDP based on the following

information: $6.5 million in wages to military personnel, $4.8 million to buy equipment, $2.3 million in veterans' benefits, and $1.7 million in welfare payments.

A. $13.6 million C. $11.3 million B. $10.5 million D. $15.3 million

28. A high level of self-esteem can help individuals to

A. cope with criticism. C. prevent problems. B. avoid disappointments. D. keep from getting angry.

29. Feelings, values, and temperament are examples of __________ traits.

A. undesirable C. mental B. physical D. emotional

30. The salesperson who talks in a monotone voice during the sales presentation is

A. attracting attention. C. showing a lack of interest. B. creating enthusiasm. D. appearing confident.

31. Christie's coworkers know that she won't repeat what they tell her if they ask her not to do so. This

indicates that Christie is a(n) __________ coworker. A. tactful C. trustworthy B. straightforward D. efficient

32. Your manager has reminded you to correct register errors as they occur to ensure close-out accuracy.

This type of comment is A. constructive criticism. C. positive feedback. B. internal feedback. D. destructive criticism.

33. When people dread change for no apparent reason, their feelings may be

A. reasonable. C. logical. B. sensible. D. irrational.

34. Showing empathy for others is behavior that

A. is hard to learn. C. must be taught. B. can be learned. D. has few benefits.

35. Technical words that have meaning in a specific occupational area are called

A. demographics. C. jargon. B. feedback. D. collateral.

36. Which of the following is an example of aggressive behavior:

A. Beginning a conversation with strangers C. Standing very close to others when talking B. Openly expressing your negative thoughts D. Refusing to do things you don't wish to do

37. Mr. and Mrs. Smith are planning to purchase a new, 24-foot, camper trailer. Which of the following types

of credit would be best for the Smiths if they now have less than half the purchase price: A. Regular credit C. Installment credit B. Revolving credit D. Open credit

ST-FIN-10A FINANCE CLUSTER EXAM 4 38. Saving the money that you might ordinarily spend each day on a cup of coffee and a donut

A. can help you achieve larger financial goals. B. will not result in significant savings. C. is the sacrifice you must make for future financial security. D. is not a practical step in reaching your financial goals.

39. Which of the following is a financial want rather than a financial need:

A. Education C. Clothing B. Food D. Shelter

40. Which of the following is not a key factor involved with compounding growth:

A. The risk of the stock market C. How long your money is invested B. The amount of money you invest D. How much your investment grows each year

41. Which of the following are examples of deposit-taking financial institutions:

A. Credit unions, savings and loan associations, and commercial banks B. Commercial banks, corporations, and mutual savings banks C. Savings and loan associations, mutual savings banks, and insurance firms D. Commercial banks, credit unions, and brokerages

42. Sam purchases 50 shares of stock in an open corporation. In which of the following financial markets is

Sam investing: A. Securities C. Diversified B. Real estate D. Money

43. Which of the following is not a factor contributing to financial convergence and consolidation:

A. Technological advances C. Financial deregulation B. Desire for illiquid assets D. Desire for lower costs

44. Falling interest rates typically cause

A. stock prices to decrease. C. a stock market to crash. B. stock prices to increase. D. no change in stock prices.

45. When an emerging market suffers an economic decline, foreign investors usually

A. use the opportunity to invest more in the emerging market. B. quickly withdraw their money from the emerging market. C. help the emerging market to recover economically. D. pay less for each transaction in the emerging market.

46. The two major sections on a balance sheet are

A. assets and liabilities. C. cash flow and liabilities. B. assets and income. D. expenses and assets.

47. The stock table term PE stands for

A. profit-earnings. C. percentage-earnings. B. price-earnings. D. price-expenses.

48. Certificates of deposit and collectibles are types of

A. accounts. C. securities. B. investments. D. earnings.

49. When John was injured in an auto accident on his way to work, what kind of insurance paid his hospital

bill? A. Health C. Term B. Disability D. Life

ST-FIN-10A FINANCE CLUSTER EXAM 5 50. The section of the marketing plan that should address where the business will be located is the

__________ section. A. price C. product B. place D. promotion

51. A business owner applying for a bank loan would probably ask the accounting department to provide

records that show the value of the company's total A. equipment. C. inventory. B. cash. D. assets.

52. The information about profit in a business's income statement helps to establish a business's stock's

A. goals. C. value. B. style. D. brand.

53. Which of the following often prepare budgets in business:

A. Sales cashiers C. Middle managers B. Inventory clerks D. All employees

54. A manager is most likely to use financial information when

A. establishing lines of authority within an organization. B. researching the demographics of a new target market. C. calculating the number of on-the-job injuries in the past year. D. determining resources available to fund a new project.

55. Which of the following is a common financial-information management problem:

A. Multiple financial data sources and systems within an organization B. Overreliance on a master source and system for financial data C. Strict organizational data governance policies and processes D. Insufficient financial information due to compliance regulations

56. Which of the following is an example of a businessperson exhibiting unethical behavior in relation to a

business's financial information: A. A banker requests financial information from a business to process a loan. B. An auditor verifies the accuracy of a corporation's financial statements. C. An unauthorized employee reviews a client's financial information. D. A manager examines the business's financial records to develop a budget.

57. One step that financial-services companies can take to protect their clients' online business transactions

from hackers is to A. use Intranet capabilities. C. limit the number of client transactions. B. install firewalls. D. avoid encryption methods.

58. A business wants to determine which customers are most likely to buy $100,000 in products from them in

the next year, so it uses its computer system to search for customers who meet a set of criteria related to sales. What process is the business using to obtain the desired financial information?

A. Data mining C. Surveying B. Accounting D. Industry forecasting

59. Alyssa is starting a small business out of her home. When she accesses a business “how-to” web site,

Alyssa finds software downloads and printable worksheets that will help her plan and manage her business's income and expenses. The software and worksheets are types of

A. budgeting tools. C. statistical information. B. legal data. D. organizational charts.

ST-FIN-10A FINANCE CLUSTER EXAM 6 60. Businesses often use computer-spreadsheet software for “what-if” financial planning by plugging in

different numerical data into formulas, which provide possible A. distribution methods. C. financial outcomes. B. production strategies. D. accounting standards.

61. To obtain specific financial information from a complex database, the user has to set

A. queries. C. tabs. B. symbols. D. panels.

62. What type of database should a business use to compare financial data?

A. Ordinal C. Decisive B. Abstract D. Relational

63. One reason why it is important for a business to accurately report its financial position is to provide

A. useful information to investors. C. industry forecasts to the media. B. summaries of economic indicators. D. price quotations on securities.

64. When a small business experiences a steady increase in cash inflow over an extended period of time,

the business might decide to A. sell unnecessary assets. C. purchase office equipment. B. obtain a high-interest loan. D. buy less inventory.

65. The accounting system used to report a business's financial position that is intended for internal users is

the __________ accounting system. A. computerized C. management B. financial D. manual

66. What is the accounting system that businesses use to report financial transactions when they occur?

A. Payable C. Receivable B. Cash D. Accrual

67. By reviewing various accounting reports, the financial officer of the MIB Company has noted that the

company's cash inflows have decreased between 3 percent and 5 percent for three consecutive quarters. This trend is most likely due to

A. higher expenses. C. fewer expenses. B. higher sales. D. fewer sales.

68. By reviewing a prospective customer's borrowing and repayment history, a business can determine if it

should A. offer credit to the prospective customer. B. provide the prospective customer with a high credit rating. C. increase the prime lending rate. D. charge sales tax.

69. Mason is reviewing financial documents for his company to make sure that he hasn't forgotten to include

important data or has not made any mistakes. The reason that Mason is reviewing these documents is to A. forecast the business's long-term finances. B. determine if he needs to take out a short-term loan. C. verify that the information is correct. D. identify the business's financial resources.

70. Susan wants to obtain a loan to purchase business equipment. She calls different banks to obtain

information about the interest rates and the types of loans available, so she can determine which bank is the best option. Susan is analyzing the financial information that she is collecting to

A. correct inaccurate financial data. C. determine business profitability. B. guide her decision making. D. solve a business problem.

ST-FIN-10A FINANCE CLUSTER EXAM 7 71. Which of the following phrases summarizes the overall purpose of employee orientation:

A. "Starting off on the right foot" C. "Walking down the wrong path" B. "What you don't know won't hurt you." D. "Been there; done that"

72. Which of the following is an example of corporate responsibility:

A. A company uses recycled materials in its products. B. A company expands its facilities. C. A company hires minority employees. D. A company pays its taxes on time.

73. Which of the following do many businesses include on their web sites in order to obtain feedback from

customers: A. Computer programming code C. Electronic file attachment B. Portable document format D. E-mail inquiry field

74. What type of computer software program do businesses use to store valuable information about

customers? A. Interactive C. Spreadsheet B. Database D. Publishing

75. When creating and posting information to a web site, one of the most important considerations is the

A. domain name. C. home page. B. search engine. D. shopping cart.

76. Businesses should organize their records in a systematic manner so that information can be

A. available to everyone. C. distributed freely. B. accessed when needed. D. published in newsletters.

77. Which of the following is an ongoing population trend that affects how businesses market their goods and

services: A. Migration C. Behavior B. Consumption D. Lifestyle

78. One reason for a business to monitor its internal records is to obtain information that it can use to

A. make decisions about future operations. C. handle employee problems and complaints. B. track the activities of its competitors. D. understand global economic conditions.

79. When a business conducts an environmental scan, which of the following issues is a political factor that it

should consider: A. Shifts in consumer lifestyles C. Changes in regulation B. Fluctuation of unemployment rates D. Widespread use of wireless devices

80. A national pizza chain guaranteed 30-minute delivery, but several of its drivers had serious car accidents

while rushing to meet this deadline. A negative outcome of the delivery guarantee for the pizza chain is that it caused an increase in

A. sales. C. business risk. B. economic risk. D. employment.

81. The overall purpose of business security is to provide the business with

A. protection. C. employee safety. B. gross profit. D. risk management.

82. When unforeseen events change the project entirely, it is helpful to have

A. patience. C. volunteers. B. self-control. D. a back-up plan.

ST-FIN-10A FINANCE CLUSTER EXAM 8 83. Why have some major retail businesses decentralized their purchasing operations?

A. Their stores are geographically distant. C. They maintain a wider variety of suppliers. B. Their buyers prefer to be independent. D. They obtain lower prices for smaller orders.

84. One of the benefits of production to consumers is that production

A. creates form utility. C. makes use of automation. B. provides a way to earn profits. D. provides a way to be competitive.

85. Employees who record all purchases made with money from the petty cash fund are helping the business

to A. improve cash flow. C. control its expenses. B. comply with the law. D. reduce major spending.

86. Determine whether the following statement is true or false: Housekeeping practices in the selling area

can affect a client's image of the business. A. True, the appearance of a business is the most important factor affecting business image. B. False, housekeeping practices are unrelated to business image. C. False, customers are more concerned with price than with the appearance of a business. D. True, the appearance of a business affects the customer's overall impression.

87. The supervisor's response to an employee's orderly and systematic behavior on the job should be

A. favoritism. C. criticism. B. indifference. D. praise.

88. Why do we need creativity?

A. It indicates one's intelligence. B. It moves the world along. C. It shows businesses which employees can think in concrete terms. D. It helps businesses to identify employees who will succeed in performing routine tasks.

89. According to Maslow's theory of the hierarchy of needs, we are primarily motivated by our __________

needs. A. high level C. satisfied B. unsatisfied D. fulfilled

90. To stay competitive in their industries, it is important for entrepreneurs to keep up-to-date with

A. personal distribution policies. C. suppliers' buying trends. B. customer-pricing strategies. D. technological developments.

91. Some job application forms ask why the applicant left a previous job. Which of the following would be an

acceptable answer to this question: A. "I couldn't get along with my supervisor." C. "I was seeking a more responsible job." B. "I was expected to do too much work." D. "I wanted to get out of a difficult situation."

92. Which of the following statements about working in the financial-services industry is false:

A. Someone who works in financial services is limited to working at an investment firm, a bank, or an insurance company.

B. Financial services professionals can be found in all kinds of companies, from large corporations to sole proprietorships.

C. Financial services professionals can expect to earn higher-than-average salaries. D. The financial-services industry includes real estate brokers, fund managers, and auditors.

93. Which of the following titles belongs to a financial manager:

A. Treasurer C. Procurement clerk B. Bill and account collector D. Billing clerk

ST-FIN-10A FINANCE CLUSTER EXAM 9 94. Prospective members of professional organizations are frequently asked to provide documentation of

such entry requirements as A. experience, position, and income. C. education, experience, and position. B. position, income, and education. D. education, income, and race.

95. Which of the following do many financial services providers obtain after completing specific training:

A. Referral C. Bonus B. Promotion D. License

96. Which of the following provides an opportunity for building professional, finance-oriented relationships:

A. Brainstorming C. Networking B. Product development D. Market segmentation

97. Which of the following is an example of an unethical activity that relates to risk management:

A. Requesting various documents to process a loan request B. Withholding information from insurance underwriters C. Issuing bonds to raise funds for a corporation D. Using third-party debt collectors to obtain overdue payments

98. Is it ethical for an employee to bypass internal business policies and sell expensive products to

individuals or businesses without verifying their credit histories? A. No, most companies provide employees with a great deal of flexibility in terms of following

internal business policies. B. No, the employee may be jeopardizing the business's financial well-being without first obtaining

permission from management. C. Yes, the employee is actually helping the business meet its financial goals more quickly by

skipping an unnecessary step. D. Yes, various government regulations state that businesses must offer credit to all individuals and

businesses. 99. Many computer software programs help businesses determine their levels of business risk, which is

helpful when they develop A. endorsement records. C. contingency plans. B. content theories. D. monetary regulations.

100. An employee with the DPB Company left a small box in the middle of the business's reception area.

Unfortunately, a client did not see the box, fell, and was seriously injured. Now, the DPB Company must pay several thousand dollars to cover the client's medical bills. This hurts the company's financial well-being. What internal steps could the company have taken to control the risk associated with this type of financial loss?

A. Review and evaluate health insurance options B. Purchase and maintain a crime insurance policy C. Implement and monitor safety policies D. Develop and follow a detailed business plan

ST-FIN-10A FINANCE CLUSTER EXAM – KEY 10 1. C

U.S. Constitution. There are several sources of law in the United States. One of the main sources is the U.S. Constitution and its amendments which guarantee certain rights to citizens. The Supreme Court interprets laws. The United Nations is an international organization. The Electoral College determines the presidency. SOURCE: BL:067 SOURCE: Miller, R.L., & Jentz, G.A. (2005). Fundamentals of business law (6th ed.) [p. 5]. Mason, OH:

Thomson/South-Western. 2. C

Cont racts. Business torts are wrongful actions against a business that cause it harm in some way. Disputes concerning contracts are often the basis for businesses suing individuals or other businesses. Many businesses have contractual arrangements with employees or vendors. If these contracts are broken, the business might be harmed and seek compensation through the legal system. Basic torts relating to businesses do not involve disputes concerning assaults, defamation, or emotional stress. SOURCE: BL:069 SOURCE: Miller, R.L., & Jentz, G.A. (2005). Fundamentals of business law (6th ed.) [pp. 82-86].

Mason, OH: Thomson/South-Western. 3. C

Accounting scandals. The Sarbanes-Oxley Act of 2002 is federal legislation that was passed in response to recent major corporate and accounting scandals. These scandals include Enron and WorldCom which resulted in a loss of public trust in current accounting and reporting procedures. The law established new and improved accounting procedures for public companies and accounting firms. The Sarbanes-Oxley Act was not passed in response to recent investment options, tax settlements, or collection activities. SOURCE: BL:133 SOURCE: Wikipedia (n.d.). Sarbanes-Oxley Act. Retrieved August 13, 2009, from

http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act 4. D

Luxury. Governments increase their revenues by charging taxes on non-essential, often very expensive goods and services, such as high-end automobiles, rare collectibles, and jewelry. This type of tax is called a luxury tax. An individual who receives a certain amount of money as a gift may be required to pay a gift tax. Property taxes are paid on buildings (e.g., homes) and land. A person who inherits some or all of a deceased person's assets pays an estate tax, which is based on the net value of the assets or estate. SOURCE: BL:134 SOURCE: Answers.com. (2009). Luxury tax. Retrieved August 13, 2009, from

http://www.answers.com/topic/luxury-tax 5. B

Maintain stability. The financial industry is required to comply with various rules and regulations established by government. One of the main functions of compliance is to maintain the stability of the financial industry. By requiring compliance with rules and regulations, the government limits the risks that financial institutions might take. By limiting risks, the government is able to maintain the stability of the financial industry. The function of compliance is not to prevent discrimination, increase profitability, or limit management. SOURCE: CC:003 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (pp. 26-27). Boston: Addison

Wesley.

ST-FIN-10A FINANCE CLUSTER EXAM – KEY 11 6. A

Comparative reasoning. A virtual auditor, which is a type of compliance technology, uses multiple reasoning processes to continuously review financial transactions and processes to identify errors and/or compliance violations. Comparative reasoning is used to identify financial system transactions that are very similar to each other but not exactly alike. For example, after identifying two close matches, comparative reasoning is used to determine if one transaction was entered multiple times or if the two entries in the system are for two separate transactions. Contextual reasoning is used to consider each financial transaction's circumstances and how it compares to historical patterns in the system. Temporal reasoning involves considering the timing of a financial transaction. Cross-source reasoning is used to compare financial transactions and processes in multiple financial systems. SOURCE: CC:004 SOURCE: Oversight Systems, Inc. (n.d.). IT's role in financial process improvements. Retrieved June 1,

2009, from http://www.oversightsystems.com/whitepapers/IT_4_biz_improvement_060725.pdf

7. A

Identify yourself and your company. Frequently, the person answering the telephone is not the person with whom you wish to speak. When you identify yourself to the other person, you provide the person with an immediate point of reference. It may be inappropriate to state the purpose of the call to the person answering the phone. Asking that person's name would only be appropriate under certain circumstances. Business calls should be made at an appropriate time whenever possible, not simply at any time that is convenient. SOURCE: CO:114 SOURCE: Odgers, P. (2004). The world of customer service (pp. 128-129). Mason, OH: South-

Western. 8. B

Who knows the most. Interaction among the group members has a lot to do with the topic at hand—and who knows the most about it. The members want to know who knows the most about the subject. This may or may not be the oldest member, the one who asks the first question, or the one who is the most outgoing. SOURCE: CO:053 SOURCE: QS LAP 29—Put In Your Two Cents

9. D

Attracts attention. An effective oral presentation immediately attracts the attention of the audience and keeps the listeners focused on the message. There are several ways that a person can begin a presentation in order to attract attention. Some examples include asking a question, offering something for free, or making a surprising announcement. People usually gather information and identify possible conflicts before developing an oral presentation. Not all presentations provide a time for discussion. SOURCE: CO:025 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for

success (3rd ed.) [pp. 333-334]. Mason, OH: Thomson South-Western. 10. A

Dear Accounting Manager:. The salutation addresses the person to whom you are writing, either by name or by title. It is generally followed by a colon. "Dear Sir" or "Dear Madam" would be incorrect since the gender of the individual is unknown. "Dear" would not be used in writing to a department. A more appropriate form would be "Attention: Accounting Department." SOURCE: CO:133 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for

success (3rd ed.) [pp. 306-307]. Mason, OH: Thomson South-Western.


Collection letter. A collection letter is a type of persuasive message that many businesses write to customers who are delinquent in making payments on their accounts. The purpose of the collection letter is to persuade customers to send payment or to contact the business to make some type of arrangement. Collection letters should not offend customers but should convince them to respond immediately. Many businesses write electronic mail, handwritten notes, and interoffice memos, but these types of messages are not necessarily persuasive. SOURCE: CO:031 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for

success (3rd ed.) [pp. 306-307]. Mason, OH: Thomson South-Western. 12. C

Short. A characteristic of a simple written report is that it usually is short and to the point. The purpose of writing simple reports is to present basic information in an abbreviated form so that the recipients can read it quickly and use the information in their decision making. Simple written reports are informal rather than formal. They should address the issue in simple terms rather than present abstract information. Simple written reports provide the basic points rather than detailed information. SOURCE: CO:094 SOURCE: Lehman, C. & DuFrene, D. (2005). Business communication (14th ed.) [p. 337]. Mason, OH:

South-Western. 13. D

A customer has complained about the service s/he received. This kind of complaint is the type of information that should be shared with all staff right away since it could affect the entire company. In addition, all staff should be reminded of company policy in such areas. Information about employees' problems is likely to be passed through the grapevine, but it should not be announced to staff. Such business decisions as the transfer of employees or changes in hours are usually announced at an appropriate time after they have been made by management. SOURCE: CO:014 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for

success (3rd ed.) [p. 10]. Mason, OH: Thomson South-Western. 14. B

Join in the discussion. For staff meetings to be effective, all employees should participate in the discussion. The purpose of staff meetings usually is to discuss issues that are of importance to the business, or to solve problems. Therefore, employees should join in the discussion rather than remain silent because their ideas and opinions are valuable. Employees should not comment on every detail. Employees should adequately explain their ideas, but it is not effective to start an argument with those who disagree. SOURCE: CO:063 SOURCE: Lussier, R.N. (2003). Management fundamentals: Concepts, applications, skill development

(2nd ed.) [pp. 327-330]. Mason, OH: South-Western. 15. C

Complete attention. Each customer is entitled to an employee's complete attention. Employees should focus their attention on each customer in turn, not on what is going on around them. Employees are able to provide good service if they pay attention to what their customers want. Employees should not offer unsolicited advice or personal opinions to customers. Employees should provide customers with all available information. SOURCE: CR:004 SOURCE: Cheesebro, T., O'Connor, L., & Rios, F. (2007). Communication skills: Preparing for career

success (3rd ed.) [p. 230]. Upper Saddle River, NJ: Pearson Prentice Hall.


Policies. Policies are established by businesses to ensure that employees make consistent decisions in handling transactions. All staff should be thoroughly familiar with the business's policies and use them as guidelines. Salespersons should also be familiar with the business's products and promotions, but that information will not help in this situation. Some salespersons are knowledgeable about the business's finances, but that information would also not be useful here. SOURCE: CR:007 SOURCE: Levy, M., & Weitz, B. A. (2007). Retailing management (6th ed.) [pp. 250-251]. Boston:

McGraw-Hill/Irwin. 17. B

Satisfy the customer. Salespeople should think of each complaint as an opportunity to satisfy the customer and to increase sales. Frequently, customers will make additional purchases at the time of the complaint if they are satisfied with the way in which the complaint was handled. Salespeople should never ask personal questions. The purpose of effectively handling customer complaints is to satisfy customers rather than to get to know them. When customers complain, they are providing the salesperson with feedback. SOURCE: CR:010 SOURCE: Townsley, M. (2002). Retail: Business 2000 (p. 126). Mason, OH: South-Western.

18. C

Unable to obtain by themselves. Financial professionals provide many types of services that clients may be unable to obtain by themselves. For example, financial professionals analyze financial data and are able to provide information about the strength and safety of various products. Clients often do not have the ability to track the growth of these products and rely on professionals for guidance and advice. Finance professionals do not provide clients with services that clients usually are not willing to purchase, incapable of understanding, or convinced they do not need. SOURCE: CR:012 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (p. 26). Boston: Addison Wesley.

19. A

Deleting unformatted data. Data cleansing is the ongoing process of detecting and correcting inaccurate customer relationship management (CRM) data. Data cleansing is conducted to help ensure the usefulness and validity of CRM data. It involves removing duplicate records, updating expired data, identifying garbage data (junk data), completing incomplete records, etc. However, it does not include the deletion of unformatted data. Deleting the data could result in the loss of potentially valuable information. Instead, the unformatted data should be standardized so that it more closely resembles the format of other data in the CRM database. SOURCE: CR:024 SOURCE: Knol BETA. (2009). CRM data cleansing & management . Retrieved August 13, 2009, from

http://knol.google.com/k/neil-sequeira/crm-data-cleansing-management/s2w9p78k2qby/1# 20. C

Tap its natural resources. Natural resources can be limited by the lack of technology in a society. Some countries are not able to tap their natural resources because they lack the technology to do so. The state of technology does not limit a country's ability to identify potential workers. Financial assets rather than technology affect whether a country can purchase new equipment or pay for needed supplies. SOURCE: EC:003 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 83-87). Tinley Park, IL:

Goodheart-Willcox.


Economizing. Economizing is the process of deciding how scarce resources will be used or which goods and services will be purchased or provided so that the most satisfaction can be obtained. All businesses try to economize in order to obtain the greatest satisfaction from their limited resources. Controlling is the management function that monitors the work effort. Organizing is the management function of setting up the way the business's work will be done. Directing is the management function of providing guidance to workers and work projects. SOURCE: EC:001 SOURCE: The Pennsylvania State University. (2009). Cutting corners and economizing. Retrieved

August 13, 2009, from http://pubs.cas.psu.edu/FreePubs/pdfs/ui345.pdf 22. B

Price rationing. Rationing occurs when there are limited resources, goods, and services. Those who are willing to pay (and have the ability to pay) are able to purchase them. Price incentives relate to profits that motivate people to sell. Limited demand did not occur in this case since there was more demand than supply. Excess supply did not occur in this situation since supply was limited to meet excess demand. SOURCE: EC:006 SOURCE: AmosWEB. (2000-2009). Price rationing. Retrieved August 13, 2009, from

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=price+rationing 23. D

Communist command. In a communist command economy, government decides how much will be produced and sets monthly and yearly production quotas for each business. When a business meets its quota, government may raise it for the next year. If a business fails to meet its quota, it may be penalized. The quota system creates surpluses of some products and shortages of others because government planners do not know enough about what is really needed or wanted by consumers. Production quotas are not set by governments in traditional, socialist command, or market economies. SOURCE: EC:007 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 93-94). Tinley Park, IL:

Goodheart-Willcox. 24. A

Unequal distribution of income. One of the disadvantages of private enterprise is that poverty and income are not distributed equally. Limited government control, competition, and pricing system are all advantages of private enterprise. SOURCE: EC:009 SOURCE: EC LAP 15—People Power (Private Enterprise)

25. C

Combat the disadvantages. Businesses use all these methods of combating the disadvantages of labor specialization, which include increased interdependency, increased boredom, decreased pride in work, decreased morale and enthusiasm for the job, increased chance of worker obsolescence because of technological advances, and increased difficulty transferring or obtaining another job. Transferring the risk would mean purchasing insurance, but division of labor is not an insurable risk. The productivity of labor specialization comes from its advantages. The categories of labor specialization are by trade or profession, by task, or by stage of production. SOURCE: EC:014 SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10th ed.) [p. 172].

Cincinnati: Thomson/South-Western.

ST-FIN-10A FINANCE CLUSTER EXAM – KEY 15 26. D

Union shops. In union shops, employees are required to join unions after their probationary period, which usually lasts 30 to 90 days. Although closed shops would be preferred by unions since all employees must belong to the union before they can be hired, closed shops are illegal in all states. In agency shops, all employees are required to pay union dues but do not have to join unions. In open shops, employees do not have to join unions and do not have to pay union dues. SOURCE: EC:015 SOURCE: Answers.com. (2009). Union shop. Retrieved August 13, 2009, from

http://www.answers.com/topic/union-shop 27. C

$11.3 million. Government spending includes everything purchased by local, state, and federal governments and ranges from wages paid to military personnel to money spent to buy equipment. However, not all government spending is included in GDP. Transfer payments are not included. These are payments of tax dollars for which the recipients do not produce goods or services. Examples of transfer payments include veterans' benefits and welfare payments. In this situation, determine the amount of government spending that will be included in GDP by adding the wages paid to military personnel and the money spent to buy equipment ($6.5 million + $4.8 million = $11.3 million). SOURCE: EC:017 SOURCE: Clayton, G.E. (2005). Economics: Principles & practices (pp. 342-343). New York:

Glencoe/McGraw-Hill. 28. A

Cope with criticism. When self-esteem is well maintained, individuals can handle problems more easily, overcome the disappointments that are part of life, and cope with any criticism they may receive. Self-esteem cannot prevent feelings of anger from arising occasionally. SOURCE: EI:016 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 197). New York:

Glencoe/McGraw-Hill. 29. D

Emotional. Feelings, values, and temperament are examples of emotional traits. Emotional traits also include attitudes. Emotional traits may be desirable or undesirable, depending on their nature. Mental traits are those associated with an individual's intellectual abilities. Physical traits include age, gender, height, and build. SOURCE: EI:018 SOURCE: EI LAP 9—You've Got Personality (Personality Traits in Business)

30. C

Showing a lack of interest. Salespeople can express their interest and enthusiasm by varying their tone of voice. A monotone voice is unenthusiastic, and this feeling will be transmitted to the customer. If the salesperson does not sound enthusiastic, s/he cannot create enthusiasm, attract interest, or appear confident. SOURCE: EI:020 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 198). New York:

Glencoe/McGraw-Hill. 31. C

Trustworthy. Being trustworthy means that people can rely on you to do what you say you will do. Trustworthy people will not tell anything they have been asked not to tell or pass along rumors that might not be true. An efficient person is one who performs in an effective, organized manner. A straightforward person is direct, open, and honest. A tactful person has the ability to do or say the right thing in any circumstances. SOURCE: EI:022 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (p. 9). Tinley Park, IL:

Goodheart-Willcox.


Constructive criticism. Constructive criticism is evaluative information designed to help someone improve. In this case, criticism is used by the manager to let you know how you can improve your job performance. Internal feedback is feedback that comes from within, or self-evaluation. Positive feedback is feedback involving praise. Destructive criticism is evaluative information that serves only to hurt or discredit someone. SOURCE: EI:003 SOURCE: EI LAP 15—Grin and Bear It (Using Feedback for Personal Growth)

33. D

Irrational. Thoughts and feelings that are not based on fact are often irrational or unreasonable. While such fears are very real to the people who have them, they must be overcome so that they do not interfere with the individuals' lives. Such feelings may be overcome by sensible, reasonable, or logical thought processes. SOURCE: EI:026 SOURCE: Dalton, M., Hoyle, D.G., & Watts, M.W. (2006). Human relations (3rd ed.) [pp. 366-370].

Mason, OH: South-Western Cengage Learning. 34. B

Can be learned. Empathy is the ability to put oneself in another's place. If you are not already an empathetic person, you can become one with a bit of effort. It is not necessary for empathy to be taught. It can be learned without great difficulty, and its use has many benefits. SOURCE: EI:030 SOURCE: EI LAP 12—Have a Heart (Empathy)

35. C

Jargon. It is important that employees learn and become proficient in their industry's jargon. Feedback is the receiver's response to the message. Demographics describe the characteristics of a population. Collateral is something of value a borrower promises to a lender to guarantee repayment of a loan. SOURCE: EI:007 SOURCE: Cheesebro, T., O'Connor, L., & Rios, F. (2007). Communication skills: Preparing for career

success (3rd ed.) [p. 230]. Upper Saddle River, NJ: Pearson Prentice Hall. 36. C

Standing very close to others when talking. Aggressive behavior is characterized by a willingness to ignore the rights of others and to exploit them in order to achieve personal goals. It is sometimes described as "in-your-face" behavior because aggressive people tend to get "in the faces" of people to whom they are talking. Beginning a conversation with strangers, openly expressing negative thoughts, and refusing to do things you don't wish to do are examples of assertive behavior. SOURCE: EI:008 SOURCE: EI LAP 18—Assert Yourself (Assertiveness)

37. C

Installment credit. Installment credit is a type of credit account set up to handle one total amount of credit that is to be paid off in regular installments. It is commonly used to purchase large, expensive items. Revolving credit is a type of credit account that limits the total amount of money that may be owed and charges interest on outstanding balances. Open or regular credit allows credit users to buy at any time during a set period, usually 30 days. SOURCE: FI:002 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 685-686).

Woodland Hills, CA: Glencoe/McGraw-Hill.


Can help you achieve larger financial goals. Making purposeful spending decisions, instead of spending out of habit or impulsively, is an important step in achieving larger financial goals. Even small daily savings add up to significant amounts over time. Day -to-day spending does not have to be sacrificed entirely for future financial security, as long as you're aware of your spending and are making purposeful decisions. Small savings every day are a very practical step in reaching your financial goals. SOURCE: FI:065 SOURCE: QS LAP 31—Set Yourself Up (Setting Financial Goals)

39. A

Education. Education is a financial want rather than a financial need. Financial needs are the basics that are necessary for survival. Food, clothing, and shelter are necessary for survival, but education isn't. SOURCE: FI:270 SOURCE: QS LAP 30—Supersize Your Money

40. A

The risk of the stock market. The risk of the stock market is not a key factor involved with compounding growth. Compounding growth is earning interest upon interest. The three key factors involved with compounding growth are the amount of money you invest, how long your money is invested, and how much your investment grows each year. SOURCE: FI:270 SOURCE: QS LAP 30—Supersize Your Money

41. A

Credit unions, savings and loan associations, and commercial banks. Deposit-taking financial institutions accept funds from customers (depositors) and pay interest on the funds. Credit unions, commercial banks, savings and loan associations (banks), and mutual savings banks are types of deposit-taking financial institutions. A corporation is a form of business ownership that is owned by stockholders who have purchased units or shares of the company. Brokerages are financial intermediaries that sell securities. Insurance firms sell insurance and securities. Corporations, brokerages, and insurance firms are not types of deposit-taking financial institutions. SOURCE: FI:336 SOURCE: Encyclopedia of Business and Finance. (2009). Financial institutions: Deposit taking.

Retrieved August 13, 2009, from http://www.enotes.com/business-finance-encyclopedia/financial-institutions

42. A

Securities. A financial market is an organized effort or exchange that facilitates the buying and selling of financial assets. There are many types of financial markets, including the securities market, which involves the buying and selling of stock. Money markets facilitate the buying and selling of low-risk, short-term financial products (e.g., treasury bills). Real estate (property markets) involves the buying and selling of land and buildings. Diversified is not a type of financial market. SOURCE: FI:337 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal

finance (pp. 292-293). New York: Glencoe/McGraw-Hill. 43. B

Desire for illiquid assets. Liquid assets are financial assets such as stocks that can easily be converted into cash. Illiquid assets, therefore, are assets that cannot be easily converted into cash or sold without a significant drop in their value. Subprime mortgage assets, for example, became illiquid assets during the recent financial crisis. Financial firms don't merge because they want illiquid assets that are worth very little. Instead, financial convergence and consolidation may be driven by financial companies' desire to acquire more liquid capital. Technological advances, financial deregulation, and a desire for lower costs have also contributed to financial convergence and consolidation. SOURCE: FI:573 SOURCE: MBA Research and Curriculum Center. (2009). Introduction to finance course guide

(pp. 5-106, 5-107). Columbus, Ohio: Author.

ST-FIN-10A FINANCE CLUSTER EXAM – KEY 18 44. B

Stock prices to increase. Falling interest rates typically cause stock prices to increase. When interest rates fall, it becomes less expensive for companies to acquire funds needed to finance projects and operations. Because their borrowing costs decrease, the companies' earnings often increase. As a result of higher earnings, the companies' stock prices increase as well. Falling interest rates usually cause a positive change in stock prices, not a decrease in stock prices. A stock market crash is a sudden, dramatic decline in stock prices. SOURCE: FI:574 SOURCE: Andrews, J.A. (2004). Forces that move stock prices. Retrieved August 13, 2009, from

http://www.daytradersclub.net/forces-that-move-stock-prices/ 45. B

Quickly withdraw their money from the emerging market. When an emerging market suffers an economic decline, market prices are likely to decline as well. Rather than investing more in the emerging market at the lowered prices and helping the emerging market to recover, foreign investors are typically self-interested. Therefore, they are likely to withdraw their money from the emerging market and invest the funds in more stable markets elsewhere in the world. The loss of foreign investors' funds often wreaks even more havoc on the emerging market. An economic decline is not likely to reduce transaction costs in the emerging market. SOURCE: FI:575 SOURCE: MBA Research and Curriculum Center. (2009). Introduction to finance course guide

(pp. 5-156, 5-157, 5-158). Columbus, Ohio: Author. 46. A

Assets and liabilities. Assets and liabilities are the two major sections that must "balance" on a balance sheet. Cash flow, income, and expenses are important items on financial statements, but they are not the major sections on a balance sheet. SOURCE: FI:274 SOURCE: QS LAP 36—The Source Is With You

47. B

Price-earnings. The stock table term PE stands for price-earnings. Profit-earnings, percentage-earnings, and price-expenses are not reported on stock tables. SOURCE: FI:275 SOURCE: QS LAP 37—Table Talk

48. B

Investments. There are a wide range of investments available to individuals who want the opportunity to increase their worth. Some investments are riskier than others, which means that individuals might lose money rather than make money. Certificates of deposit are safe investments because they pay a guaranteed amount of interest over a specific period of time. Collectibles are a riskier type of investment because the collectible, such as a baseball card, might lose value over time and not have any worth. Certificates of deposit and collectibles are not types of accounts or securities. Certificates of deposit earn interest while collectibles may or may not increase in value. SOURCE: FI:077 SOURCE: QS LAP 32—Risky Business

49. A

Health. Health insurance covers such medical expenses as hospital bills, doctors' fees, lab charges, and other medical costs. Disability insurance is sometimes called loss-of-income insurance because it pays a percentage of a worker's normal wages to the worker when s/he cannot work because of an illness or injury. Life insurance pays a sum of money at the time of death. Term is a form of life insurance that covers a specific number of years. SOURCE: FI:081 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [pp. 378-381].

Mason, OH: South-Western.


Place. Place decisions also include where products or supplies will be purchased and how the inventory of products or supplies will be managed. The price section should identify the range of prices to be offered. The promotion section should describe how efforts will be coordinated to increase sales. The product section should describe the quality, variety, and style of goods or services sold by the business. SOURCE: FI:084 SOURCE: BA LAP 2—Risk Management

51. D

Assets. All the items that a business owns that have value are its assets. Businesses applying for loans usually have their accounting department compute the total value of their assets to present to the lending institution as verification of their ability to repay the loan. Cash, inventory, and equipment are types of business assets whose value would be listed on a balance sheet. SOURCE: FI:085 SOURCE: FI LAP 5—Show Me the Money

52. C

Value. The value of a business's stock depends on how much profit the business has been able to make over time and the potential of the business to continue making profit. Investors usually are willing to pay more for stock in a business that is earning a significant profit. When investors pay higher prices for stock, the value of the stock increases. Stock is an inanimate object and does not have style or distinguishing features. Goals are objectives. Stock is not identified by brand but by a symbol that designates its name on the stock market. SOURCE: FI:094 SOURCE: FI LAP 4—Watch Your Bottom Line (Income Statements)

53. C

Middle managers. Budgets are often prepared by the ones responsible for managing people and money, including everyone from top executives to middle managers. Middle managers often supervise business departments and are responsible for the financial activities of those departments. Not all employees prepare budgets. Inventory clerks and sales cashiers are entry-level employees who do not prepare a business's budget. SOURCE: FI:106 SOURCE: FI LAP 3—Money Tracks

54. D

Determining resources available to fund a new project. Managers use financial information on many occasions, including when planning strategies, executing strategies, and evaluating the execution of strategies. For example, a manager would use financial information to determine what financial resources are available to fund a new project that s/he is planning. To research the demographics of a new target market, information gathered through market research would be more useful. Financial information is not used to calculate the number of on-the-job injuries or to establish lines of authority within an organization. SOURCE: FM:001 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). South-Western

Cengage Learning.


Multiple financial data sources and systems within an organization. One of the most common problems faced by financial-information management is multiple financial data sources and systems within an organization. Because of the different, sometimes incompatible data sources and systems, it is often difficult for managers to get a single view of their companies' financials. Therefore, organizational overreliance on a master source and system for financial data is not typically a financial-information management problem. Few companies have a single master source of data nor a single system for recording and reporting the data. Rather than strict organizational data governance policies and processes, most companies suffer from inadequate data governance. Due to increased compliance regulations, most companies have much more financial information than ever before. SOURCE: FM:002 SOURCE: Ventana Research. (2009, January). Financial information management benchmark

research. Retrieved August 13, 2009, from http://www.ventanaresearch.com/executive_summaries/espdfs/Ventana_Research_Financial_Information_Management_Benchmark_Research_Executive_Summary_2009.pdf

56. C

An unauthorized employee reviews a client's financial information. Businesses have an ethical duty to protect their clients' financial information. Businesses must develop and implement procedures that reduce the risk of theft or unauthorized access to confidential financial information by internal and external sources. Verifying the accuracy of financial statements, requesting financial information to process a loan, and examining financial records to develop a budget are necessary and ethical practices. SOURCE: FM:003 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (p. 339). Mason, OH: South-Western

Cengage Learning. 57. B

Install firewalls. To protect their clients' financial well-being, financial institutions must take great care to ensure that their online systems are safe from hackers. One way financial institutions protect their clients from hackers is by installing firewalls. A firewall is a type of computer security system that interfaces between the business's computer system and the Internet. The firewall protects sensitive information from hacking activities. Encryption is another way that financial-services businesses protect online financial information. Encryption is the process of transforming information into a secret code so only the recipient can read it. Intranet refers to a system of networked computers within a business. Limiting the number of online transactions does not secure or protect financial information from hackers. SOURCE: FM:011 SOURCE: Miller, R.L., & Jentz, G.A. (2002). Management and e-commerce: The online legal

environment (pp. 195-196). Cincinnati: West Legal Studies in Business, South-Western College Publishing.

58. A

Data mining. Data mining is the process of searching computer databases to look for patterns of information and correlations among information. Businesses use the information they obtain from data mining to make business decisions, such as analyzing and determining the customers who possess the highest buying potential. By having this type of information available, businesses can target their marketing efforts to these customers. Accounting is the process of keeping and interpreting financial records. Surveying is a marketing research technique that involves asking customers questions to learn their opinions and the reasons behind those opinions. Industry forecasting involves making predictions of the future prospects for entire industries (e.g., housing, retailing). SOURCE: FM:012 SOURCE: Zikmund, W.G., & Babin, B.J. (2010). Exploring marketing research (10th ed.) [pp. 172-173].

Mason, OH: South-Western Cengage Learning.


Budgeting tools. A budget is an estimate of income and expense for a specific timeframe. A budget is an important financial tool that helps the business manage its money. Many web sites provide budgeting tools such as software downloads or free printable worksheets. Legal data, statistical information, and organizational charts are not tools that help small-business owners plan and manage their income and expenses. SOURCE: FM:013 SOURCE: About.com. (2009). Budget worksheet. Retrieved August 13, 2009, from

http://financialplan.about.com/cs/budgeting/l/blbudget.htm 60. C

Financial outcomes. Computer spreadsheet software has the ability to calculate formulas and organize numerical data. When a business inputs different values or sets of numerical data in a spreadsheet, the spreadsheet software calculates the values or sets of data, which provides different outcomes based on the values or sets of data that were used. By reviewing the various outcomes, the business can determine the best course of action to take under particular circumstances; the “what ifs” of specific situations. Production strategies are the activities used to produce goods and services. Distribution methods are the strategies that a business uses to make sure that products are delivered to the right people at the right place at the right time. Accounting standards are the degrees to which accounting practices (financial recordkeeping) meet certain criteria. SOURCE: FM:014 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: South-

Western Cengage Learning. 61. A

Queries. Businesses store their financial information in databases. Businesses can retrieve, manipulate, and analyze different types of financial information. To obtain specific information from a computer system, the business must input the type of data and parameters for the data it wants. This process is setting the queries. The query is the mechanism used to obtain the desired information from the database. Symbols might be used to set the query, but not always. Tabs are tools used to indent words and phrases in a word-processing program. Businesses do not set panels to obtain financial data from databases. SOURCE: FM:015 SOURCE: Chapple, M. (2009). What is a database? Retrieved August 13, 2009, from

http://databases.about.com/od/specificproducts/a/whatisadatabase.htm 62. D

Relational. A relational database contains tables of separate, yet related, files or data organized in a computer system. Businesspeople can obtain various types of financial information from the relational database to compare with other information. Abstract, decisive, and ordinal are not types of databases that businesses use to compare financial data. SOURCE: FM:015 SOURCE: HowStuffWorks.com. (1998-2009). What are relational databases? Retrieved August 13,

2009, from http://computer.howstuffworks.com/question599.htm 63. A

Useful information to investors. Investors often rely on the financial information that businesses provide when making decisions about investing in a business. Therefore, a business should accurately report its financial position so investors will be able to makes decisions based on correct information. If a business misrepresents its financial position, investors may lose money because the business is not as profitable as they were led to believe. Misrepresenting financial information on purpose also is a violation of several government rules and regulations. Businesses do not accurately report their financial position to provide summaries of economic indicators, industry forecasts to the media, or price quotations on securities. SOURCE: FM:004 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (pp. 498-501). Boston: Addison

Wesley.


Purchase office equipment. A business monitors its cash flow to determine how much money is flowing into and out of the business. Monitoring cash flow helps the business plan how and when it will pay its bills. If the business is making more sales and the cash inflows are steadily increasing, it may decide to use the cash surplus to buy office equipment (e.g., computers, printers, etc.). Businesses usually want low-interest loans. The business might sell assets or buy less inventory if it experiences a severe or ongoing cash inflow shortage. SOURCE: FM:005 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: South-

Western Cengage Learning. 65. C

Management. Businesses often prepare financial reports that are intended for internal use, or use by the management of the business. These reports are used to make day-to-day operating decisions. The management accounting system reports financial information that helps businesses to decide if they have funds to hire more employees and increase production, or if they need to reduce costs and improve the rate of collections. The financial accounting system is used to report a business's financial position to external users. Computerized and manual are ways of recording the accounting information. SOURCE: FM:006 SOURCE: Guerrieri, D.J., Haber, F.B., Hoyt, W.B., & Turner, R.E. (2007). Accounting: Real-world

applications & connections (First-Year Course) [pp. 34-35]. New York: Glencoe/McGraw-Hill. 66. D

Accrual. The accrual accounting system records transactions at the time they occur even if no money changes hands at the time. Most businesses use this method because it reflects the business's current financial position based on what has been earned and expenses that have been incurred. For example, the business records a sale when it is made even though the business will not be paid until a later date. The cash accounting method records income and expenditures at the time the money changes hand. SOURCE: FM:006 SOURCE: Guerrieri, D.J., Haber, F.B., Hoyt, W.B., & Turner, R.E. (2007). Accounting: Real-world

applications & connections (First-Year Course) [p. A-26]. New York: Glencoe/McGraw-Hill. 67. D

Fewer sales. Cash inflow is the movement of funds into the business. Cash flows into the business from a variety of sources, but the primary source of cash inflow is from sales. The amount of cash that a business has flowing into the business usually increases when it sells more goods and services. Outflows are the funds that move out of the business, which are usually expenses. Common business expenses include payroll, rent, inventory, equipment purchases, and utilities. Because its cash inflow is steadily decreasing, the MIB Company needs to determine why sales are falling off, and take steps to improve the situation. These steps may include reducing spending or correcting problems with the business's product. SOURCE: FM:008 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: South-


Offer credit to the prospective customer. Credit is the arrangement by which businesses or individuals can purchase now and pay later. Before offering credit options to a prospective customer, the business should review the customer's borrowing and repayment history by obtaining a credit report. The credit report, which is generated by a credit-rating agency, indicates the prospect's borrowing and repayment history and provides a credit rating. The credit rating indicates the extent to which the business or individual pays its debts in a timely manner. The government, rather than businesses, sets the prime lending (interest) rate and establishes sales-tax rates. Various jurisdictions have laws that require businesses to collect sales tax from customers on certain purchases. SOURCE: FM:009 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 267-268). Mason, OH: South-

Western Cengage Learning.


Verify that the information is correct. Businesspeople analyze and review financial information for many reasons. In Mason's situation, the purpose of reviewing the documents is to ensure that all the information is provided and that it is correct. Because the example does not specify the type of financial documents that Mason is reviewing, it is not possible to know if the documents contain loan or forecasting information, or if they identify business's financial resources. SOURCE: FM:010 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: South-

Western Cengage Learning. 70. B

Guide her decision making. Many businesspeople analyze financial data to make business decisions, such as obtaining a loan with the best interest rates and payment plans. Susan is not analyzing the information to correct inaccurate data, nor is she trying to determine her business's profitability. There isn't enough information available to determine if Susan is trying to solve a business problem. SOURCE: FM:010 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: South-


"Starting off on the right foot." Employee orientation is a company's attempt to get its employees off to a good start on the job. It includes job preparation or induction training in which new employees are acquainted with their surroundings, receive general information about the company and its policies, and are given specific information about their jobs. The other alternatives do not reflect the nature of orientation. SOURCE: HR:360 SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10th ed.) [pp. 286-287].

Cincinnati: Thomson/South-Western. 72. A

A company uses recycled materials in its products. Showing concern for the environment is one way that companies demonstrate corporate responsibility. Corporate responsibility involves going above and beyond just following rules and regulations—hiring minority employees and paying taxes on time are actions expected of each and every company by the law. Expanding facilities does not necessarily exhibit concern for the community, the environment, or employees. SOURCE: MK:019 SOURCE: MK LAP 3—Just Do It…Right (Company Actions and Results)

73. D

E-mail inquiry field. Many businesses provide a feedback option on their web sites that enables customers to e-mail the business concerning problems or to ask questions. The e-mail inquiry field is an effective method of providing customer service as long as the business responds in an appropriate amount of time. A portable document format allows users to view files created by another operating system. An electronic file attachment allows a user to send an attachment with an e-mail message. Computer programming code is used to create software, web pages, etc. SOURCE: NF:004 SOURCE: CT-CLIC.com (2007-2009). Online inquiry form. Retrieved August 13, 2009, from

http://www.ct-clic.com/ContactForm/default.asp


Database. Database software programs are designed to sort, arrange, and locate a wide variety of information. Many businesses use database software to store valuable information about customers and arrange it according to various criteria. Businesses can add to this information at any time, sort it alphabetically, or use it to print mailing labels. Spreadsheet software programs are used to organize financial information. Businesses do not use interactive or publishing software to store information about customers. SOURCE: NF:009 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.)

[pp. 163-165]. Woodland Hills, CA: Glencoe/McGraw-Hill. 75. C

Home page. The design and content of the home page is extremely important because many visitors do not go beyond that page. Therefore, it is important to create an home page that provides an overview of the web site and links to other pages on the site. If the goal is to have visitors follow links to access additional information or make a purchase, the home page must generate interest and encourage visitors to continue. A search engine is a software program that automatically crawls the Web looking for information pertaining to specified search terms and displays a list of results. A domain name is a business's web address. A shopping cart is a computer program designed to act as an online catalog and order-processing center. SOURCE: NF:042 SOURCE: Miles, J.E., & Dolce, C. (2006). E-Commerce (p. 192). New York: Glencoe/McGraw-Hill.

76. B

Accessed when needed. Businesses need to organize their records in a systematic manner so that information can be accessed when it is needed. This is what record keeping is all about—managing the information a business needs in order to make operational and financial decisions. Some business records contain confidential information and should not be distributed freely, available to everyone, or published in newsletters. However, this information should be organized so that employees who are supposed to use it can access it when needed. SOURCE: NF:001 SOURCE: NF LAP 1—Record It (Business Records)

77. A

Migration. Migration is a population trend that indicates movement of people throughout the country as well as into and out of the country. Migration trends are important to businesses because businesses need to know where their customers are located. For example, many people are leaving colder climates and migrating to what is considered the Sunbelt. This movement affects businesses because the types of products they sell and the way they sell them will change. Also, the increased migration of ethnic groups into the country creates a need for new goods and services that meet the needs of a multicultural population. Lifestyle, consumption, and behavior are not population trends; however, these factors also affect how businesses market their goods and services. SOURCE: NF:013 SOURCE: OECD. (2004, January 21). Trends in international migration reflect increasing labour-related

immigration and persistent integration problems. Retrieved August 13, 2009, from http://www.oecd.org/document/50/0,2340,en_2649_201185_24968882_1_1_1_1,00.html

78. A

Make decisions about future operations. Companies keep many types of internal records about their various business activities. These records might contain information about sales, agreements with vendors, financial status, etc. Management and employees use the records to make decisions about day-to-day and future actions. For example, records that indicate that sales are increasing and the company is profitable might encourage the business to decide to expand. Monitoring internal records does not help a business to track the activities of competitors or understand global economic conditions. Businesses do not use internal records to handle employee problems and complaints. SOURCE: NF:014 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western.


Changes in regulation. An environmental scan is an analysis of external forces that influence a business's success. By examining political, economic, socio-cultural, and technological factors that affect the business, it can take steps to ward off the threats and to take advantage of the opportunities based on the information that the scan provides. Political factors that a business might examine include changes in regulation (laws) that govern how the business operates. The fluctuation of unemployment rates is an economic factor. Shifts in consumer lifestyles are socio-cultural factors. Widespread use of wireless devices is a technological factor. SOURCE: NF:015 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 30-32, 84-86).

New York: Glencoe/McGraw-Hill. 80. C

Business risk. The firm's business risk increased because of the chance of accident or injury, which could result in lawsuits, medical expenses, and other losses. Economic risks are risks caused by changes in the market that force a lowering of prices, a change of product, or failure of businesses. Increased sales and employment would be positive outcomes of a business's policy. SOURCE: OP:007 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 399-402). Tinley Park,

IL: Goodheart-Willcox. 81. A

Protection. Business security provides protection for the business and/or its property. The goal is to prevent financial loss. Employee safety is a concern in specific situations, such as robbery or shoplifting. Risk management is a business activity, rather than a marketing function, which involves managing marketing activities to optimize the relationships of potential loss to gain. Gross profit is money left after cost-of-merchandise expense is subtracted from total income. SOURCE: OP:013 SOURCE: Stutts, A. T., & Wortman, J. F. (2006). Hotel and lodging management: An introduction

(2nd ed.) [pp. 198-201, 205-206]. Hoboken, NJ: John Wiley & Sons. 82. D

A back-up plan. A back-up plan is an alternate way to carry out a project. When unforeseen events change the project, if you have a back-up plan, the project can still be completed. The back-up plan might call for doing the project on another day or asking for help from people outside the project. Having self-control and patience will help the project manager deal effectively when unforeseen events occur. However, a back-up plan is still needed for the project to proceed. One aspect of a back-up plan might involve asking volunteers to help. SOURCE: OP:002 SOURCE: QS LAP 18—Make It Happen

83. A

Their stores are geographically distant. Some retail chains have grown so large that central buying can no longer effectively purchase for geographically distant stores. In response to this development, many large retail firms have decentralized their purchasing operations by dividing the country into districts and delegating part of central buying's responsibility to district managers who are more familiar with local stores. Businesses usually obtain lower prices for large orders. Businesses do not decentralize their purchasing operations because buyers prefer to be independent. Both centralized and decentralized purchasing operations are able to maintain a wide variety of suppliers. SOURCE: OP:015 SOURCE: OP LAP 2—Buy Right (The Nature of Purchasing)


Creates form utility. One of the benefits of production is that it creates form utility—usefulness created by altering or changing the form or shape of a good to make it more useful to the consumer or user. Without production, many resources would be of little use to consumers. All of the other alternatives are benefits of production to businesses. SOURCE: OP:017 SOURCE: BA LAP 1—Nature of Production

85. C

Control its expenses. Most businesses have a petty cash fund from which employees withdraw small sums of money to buy such items as stamps, pens, note pads, or tape that are needed unexpectedly or in a hurry. Employees should record each of these purchases so that the business knows what was purchased and can control the amount spent if necessary. Keeping a record also helps to protect the petty cash fund from employee theft. There is no law that a business must record petty cash purchases. Keeping a record of the petty cash does not improve cash flow, the movement of funds in and out of the business, or reduce major spending since all petty cash purchases are small. SOURCE: OP:025 SOURCE: Think Big. (2009, April 29). Steps for reducing business expenses. Retrieved August 13,

2009, from http://www.associatedcontent.com/article/1682579/steps_for_reducing_business_expenses.html?cat=3

86. D

True, the appearance of a business affects the customer's overall impression. From the minute customers enter a business, they are aware of its appearance. Although important to business image, appearance is not necessarily the most important factor. It depends on the type of business as to whether price or appearance is the more important factor affecting image. With a discount business, price is more important than appearance, as compared to a high-fashion boutique, where an attractive decor is essential. SOURCE: OP:032 SOURCE: Stutts, A. T., & Wortman, J. F. (2006). Hotel and lodging management: An introduction

(2nd ed.) [pp. 88, 99-101]. Hoboken, NJ: John Wiley & Sons. 87. D

Praise. When you work in an efficient, effective manner, you are more likely to receive such rewards as praise, raises, and promotions. A response to orderly behavior that is critical or indifferent may damage employee morale. Favoritism should be avoided since it gives an employee an unfair advantage over other employees. SOURCE: PD:009 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 722-733). Tinley Park,

IL: Goodheart-Willcox. 88. B

It moves the world along. Without creativity, we would still be living in caves. Everything in our existence is based on something that was once a new idea. Without creativity, we'd have no new goods or services. Many highly intelligent people are not creative. Creative people think in abstract terms so that they are able to see what is not readily apparent. Creative people prefer variety and change to routine. SOURCE: PD:012 SOURCE: PD LAP 2—Creativity

89. B

Unsatisfied. These are needs which have not yet been fulfilled. Usually, lower level needs such as those for food and shelter must be satisfied before we are motivated by higher level needs. SOURCE: PD:013 SOURCE: Lussier, R.N., & Achua, C.F. (2010). Leadership: Theory, application, & skill development

(4th ed.) [pp. 81-83]. Mason, OH: South-Western Cengage Learning.

ST-FIN-10A FINANCE CLUSTER EXAM – KEY 27 90. D

Technological developments. Entrepreneurs who do not keep up with their industry's technological developments run the risk of falling behind their competitors. As a result, the competitors who keep up with the latest developments might be able to provide products that those who do not keep up with technology cannot. Consumers do not establish pricing strategies; businesses create them. Personal distribution policies for companies are important in regard to serving customers but do not necessarily relate to the industry's technological developments. Watching their suppliers' buying trends does not necessarily help businesses stay competitive in their industries. SOURCE: PD:066 SOURCE: PD LAP 4—Own Your Own (Career Opportunities in Entrepreneurship)

91. C

"I was seeking a more responsible job." This is a positive response which indicates that the applicant is interested in getting ahead and is willing to accept additional responsibility. A job applicant should not make negative remarks about his/her previous employer(s) or coworkers. Even though all of the other alternatives could be true statements, they are negative and will reflect poorly on the job applicant. SOURCE: PD:027 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [p. 47]. Mason,

OH: South-Western. 92. A

Someone who works in financial services is limited to working at an investment firm, a bank, or an insurance company. The financial-services industry includes a wide range of career possibilities across many kinds of companies, not simply investment firms, banks, and insurance companies. People who work in financial services can expect to earn higher-than-average salaries. They include real estate brokers, fund managers, and auditors. SOURCE: PD:152 SOURCE: QS LAP 51—Careers in the Money

93. A

Treasurer. A treasurer is a title for a type of financial manager, or a person who is responsible for overseeing part or all of an organization's finances. Treasurers are responsible for an organization's financial goals and objectives. They oversee investments, cash management, and capital raising. Bill and account collectors, procurement clerks, and billing clerks are all types of financial clerks who are responsible for financial recordkeeping. SOURCE: PD:152 SOURCE: QS LAP 51—Careers in the Money

94. C

Education, experience, and position. A professional organization is a group of persons in the same profession who form a society to further their common interests. While education, experience, and/or position may be entry requirements for some professional organizations, the disclosure of confidential information such as income is not usually required. Race is not a valid consideration among entry requirements. SOURCE: PD:036 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 789-790).

Woodland Hills, CA: Glencoe/McGraw-Hill. 95. D

License. Depending on location, many financial services providers are required to complete specific training and obtain a license to practice. The license guarantees that the provider has the necessary education and training to advise clients about financial products and offer other types of financial planning services. The purpose of completing specific training in the area of financial services is to obtain a license rather than a promotion, a bonus, or a referral. SOURCE: PD:082 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal

finance (pp. 260-261). New York: Glencoe/McGraw-Hill.


Networking. Networking is the exchange of information with others for the purpose of professional or business development or advancement. Because the financial-services marketplace is very competitive, financial-services professionals and businesses need to communicate with other individuals and businesses to build clientele and promote their products. By participating in groups and speaking with other professionals, financial-services professionals can build new business relationships, obtain referrals, and acquire leads to increase clientele. Product development is the process of creating new goods and services. Brainstorming is a creative-thinking technique. Market segmentation is dividing a large market into small markets. SOURCE: PD:153 SOURCE: Futrell, C.M. (2000). ABC's of relationship selling (6th ed.) [pp. 184-185]. Boston:

Irwin/McGraw-Hill. 97. B

Withholding information from insurance underwriters. In the insurance industry, underwriters assess the risks of insuring an applicant and approve compensation for loss under the terms of an insurance policy. Withholding information that may affect the approval of the applicant or the compensation associated with a claim is unethical behavior. Requesting documents to process a loan, issuing bonds to raise funds for a corporation, and using third-party debt collectors to obtain overdue payments are ethical activities. SOURCE: RM:041 SOURCE: Head, G. (2005, February). Why link risk management and ethics. Retrieved August 13,

2009, from http://www.irmi.com/expert/articles/2005/head02.aspx 98. B

No, the employee may be jeopardizing the business's financial well-being without first obtaining permission from management. Business policies are the rules or guidelines that employees must follow. One reason that businesses develop credit policies is to protect the business from financial losses. Offering credit to a customer who does not meet the business's credit criteria may be costly to the business because the customer may not be able to make installment payments for the product. Employees who bypass these types of policies without proper authorization from management are breaking company rules, are not behaving ethically, and are, in many situations, fired for such behavior. Although some businesses have flexible policies, not all businesses do. Governments regulate credit practices, but they do not require businesses to offer credit to individuals and businesses that have poor credit scores or do not meet basic criteria. SOURCE: RM:041 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 267-268). Mason, OH: South-

Western Cengage Learning. 99. C

Contingency plans. A contingency plan is an alternative course of action. A contingency plan states specific guidelines that a business uses when responding to undesirable circumstances. Businesses often use computer software programs to obtain numerical data about their levels of risk in different areas of the business. They use this information to make business decisions and to help them develop alternative action plans when circumstances occur that increase or decrease risk at a given time. Content theories are theories of motivation that focus on internal needs, drives, and incentives that cause people to behave in a certain manner. An endorsement is approval by a reputable external source. Governments develop monetary and fiscal regulations. Risk management software programs do not help businesses develop content theories, endorsement records, and fiscal policies. SOURCE: RM:042 SOURCE: McIntosh, J. (2007, November 14). Plan for crisis at work: Risk assessment and contingency

planning in business. Retrieved August 13, 2009, from http://strategic-business-planning.suite101.com/article.cfm/plan_for_crisis_at_work


Implement and monitor safety policies. Businesses can take many actions to control their level of risk. Developing, implementing, and monitoring specific safety policies is one way to lower risks associated with accidents in the workplace. Accidents can be costly to the business, especially if it does not carry sufficient comprehensive property insurance to cover these types of situations and the severe injuries that may result. Crime insurance policies protect businesses from losses associated with theft. Health insurance is a benefit that businesses offer to their employees to help offset medical expenses. A business plan is the written business model, which shows how the business works now and how it is intended to work in the future. SOURCE: RM:058 SOURCE: SCORE. (n.d.). Risk management. Retrieved August 13, 2009, from http://www.ct-

clic.com/Newsletters/customer-files/riskmanagement.pdf

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