Which of the following is a disadvantage of franchising for a franchisee?

	a.	The Dunning-Kruger effect
	b.	The endowment effect
	c.	The false-consensus effect
	d.	The negative halo effect

5 points

QUESTION 2

Tania starts a bookstore with her friend. However, owing to other commitments, Tania is unable to help with the daily operations of the bookstore. Therefore, Tania proposes that she would not actively participate in managing the business but would provide financial support to the business. By doing this, she would be sharing the profits equally with her friend, without incurring any of the business debts personally. In this scenario, Tania is a(n) _____.

	a.	limited partner
	b.	quasi partner
	c.	general partner
	d.	active partner

5 points

QUESTION 3

Matisse and Oliver own an antique furniture business. They are in a form of partnership where Oliver is only a dormant partner who contributes financially to the business, whereas Matisse actively manages the business and takes care of imports and exports. Matisse and Oliver are bound by an agreement where, unlike Oliver, Matisse is personally responsible for all the debts incurred by the business. In the given scenario, Matisse and Oliver have a _____.

	a.	general partnership
	b.	limited liability partnership
	c.	joint liability partnership
	d.	limited partnership

5 points

QUESTION 4

Ronnie is the owner of a pet store and manages the store by himself. Any profit that Ronnie's store earns is:

	a.	treated as Ronnie's personal income.
	b.	not subjected to any form of taxation.
	c.	taxed only if Ronnie has taken a loan.
	d.	used to purchase preferred stocks of the store.

5 points

QUESTION 5

Maurice wants to make a documentary film on the unequal distribution of money in the world and its effect on different social classes. Instead of approaching a production house, he creates a website for the project where he pitches his idea through a short video and requests the viewers to donate any amount of money to cover the production cost. In the given scenario, which of the following is Maurice using to get the capital for his film?

	a.	Seed money
	b.	A venture capital firm
	c.	An angel investor
	d.	Crowdfunding

5 points

QUESTION 6

Robert wants to start an independent recording studio. In order to finance his start-up, Robert seeks help from Esther, a successful business magnate. Esther agrees to fund Robert's venture as long as she receives a 20% share of the profits made by Robert. In the given scenario, Robert receives the financial resources to start his business:

	a.	through crowdfunding.
	b.	from a venture capital firm.
	c.	from an angel investor.
	d.	though a commercial loan.

5 points

QUESTION 7

Loren LLC is a small bicycle store that competes effectively with much larger companies as its focus lies exclusively on selling bicycles for senior citizens and patients with orthopedic ailments. The company has been successful as it has:

	a.	attracted the best talent in the bicycle market.
	b.	acquired a patent for its bicycles.
	c.	worked to undercut larger competitors.
	d.	exploited a small but profitable market niche.

5 points

QUESTION 8

Luis runs a bakery that offers only takeaway service. His customers visit his residence and watch him prepare their order. They also get an opportunity to bring their cake designs and help Luis prepare the desired cake. As a result, he knows most of his customers well. The opportunity of _____ is highlighted in the given scenario.

	a.	exploiting market niches
	b.	providing personal customer service
	c.	having lower overhead costs
	d.	using technology

5 points

QUESTION 9

In order for CPA firms to perform audits with integrity, they must be tied to the firms they audit.

True

False

5 points

QUESTION 10

The owners' equity of Senesta Corp., an event management company, adds up to $23 million, and its liabilities add up to $17 million. Based on the accounting equation, the assets of Senesta Corp. are worth _____.

	a.	$7 million
	b.	$40 million
	c.	$1.35 million
	d.	$391 million

5 points

QUESTION 11

In the context of managerial accounting,__________are costs that are incurred as the result of some specific cost object.

	a.	direct costs
	b.	indirect costs
	c.	implicit costs
	d.	fixed costs

5 points

QUESTION 12

Prenora Inc., a newly established company, is set to prepare its first budget. The top management of the company decides to use a budgeting approach that will seek active participation from the middle and supervisory managers of the company. In the given scenario, Prenora Inc. will most likely use the _____ to budgeting.

	a.	incremental approach
	b.	top-down approach
	c.	bottom-up approach
	d.	zero-based approach

5 points

QUESTION 13

The purpose of _____ is to protect creditors by preventing the borrower from pursuing policies that might undermine its ability to repay the loan.

	a.	retained earnings
	b.	covenants
	c.	factors
	d.	corporate bonds

5 points

QUESTION 14

In financial management, risk is referred to as the:

	a.	various strategies implemented by managers to increase returns.
	b.	environmental factors that may affect a business adversely.
	c.	internal factors that may disrupt the smooth functioning of a company.
	d.	degree of uncertainty about the actual outcome of a decision.

5 points

QUESTION 15

Maude Shade, a fashion apparel manufacturing company, wants to invest in research before finalizing the production of its proposed product. In order to do so, it approaches Ruemen Bank and takes a loan of $80,000 in the form of bonds. Which of the following financing options is being used by Maude Shade in the given scenario?

	a.	A line of credit
	b.	A revolving credit agreement
	c.	Long-term debt
	d.	Commercial paper

5 points

QUESTION 16

Dora works for PowTran Corp. Her primary responsibilities include managing the firm's working capital and analyzing long-term investment opportunities for the firm. Dora is most likely a part of the firm's _____ team.

	a.	logistics management
	b.	financial management
	c.	administrative management
	d.	production management

5 points

QUESTION 17

Paula wants to buy stocks in a publicly traded company that deals in networking equipment. However, the company is not listed on any of the major stock exchanges. Paula should, therefore, purchase the stocks of the company in the _____.

	a.	private-player market
	b.	over-the-counter market
	c.	free market
	d.	money market

5 points

QUESTION 18

Jack receives a considerable sum of money by selling his property. He decides to invest this sum in a diversified set of securities. He plans to invest in these securities and retain them for a long time. He is optimistic that eventually the overall market conditions will rise, thus giving him a high return sometime in the future. Jack is using the _____ investment strategy.

	a.	buy-and-hold
	b.	value investing
	c.	investing for growth
	d.	market timing

5 points

QUESTION 19

The rationale behind why the Glass-Steagall Act mandated the ban on commercial banks from dealing in securities markets and selling insurance was that such activities:

	a.	encouraged the banks to engage in fraudulent activities.
	b.	reduced the banks' funds to create loans for their customers.
	c.	exhausted the business assets of investment banks and insurance companies.
	d.	exposed banks and their depositors to higher levels of risk.

5 points

QUESTION 20

Tony is facing a financial crisis in his business. Instead of applying for a loan from a commercial bank, he takes a loan from the cooperative that he partly owns with some of his friends. This cooperative acts as a depository institution where all the members deposit their savings on a higher interest rate than that offered by commercial banks. Being a member of this cooperative, he gets the advantage of being charged lower interest rate on his loan. Based on the information given in the scenario, the cooperative owned by Tony and his friends exemplifies a(n) _____.

	a.	private equity firm
	b.	savings and loan association
	c.	investment bank
	d.	credit union