Business Degree Business Administration 3 — Questions and Answers
Question 1: Which inventory valuation method assumes that the most recently purchased items are sold first?
- FIFO
- LIFO (Correct answer)
- Weighted average
- Specific identification
Correct answer: LIFO
LIFO (Last-In, First-Out) assumes the most recently acquired inventory is sold first, which can affect cost of goods sold and taxable income.
Question 2: In project management, the critical path is best defined as:
- The most expensive sequence of project tasks
- The sequence of tasks that determines the minimum project duration (Correct answer)
- The riskiest set of activities in a project
- The path most frequently used by project managers
Correct answer: The sequence of tasks that determines the minimum project duration
The critical path is the longest sequence of dependent tasks that determines the earliest possible project completion date.
Question 3: A sole proprietorship differs from a corporation primarily because:
- It cannot earn a profit
- The owner has unlimited personal liability for business debts (Correct answer)
- It must file separate tax returns from the owner
- It requires at least two shareholders
Correct answer: The owner has unlimited personal liability for business debts
In a sole proprietorship, there is no legal separation between owner and business, meaning the owner is personally liable for all business debts and obligations.
Question 4: Which pricing strategy involves setting a high initial price and gradually lowering it over time?
- Penetration pricing
- Price skimming (Correct answer)
- Cost-plus pricing
- Value-based pricing
Correct answer: Price skimming
Price skimming captures maximum revenue from early adopters willing to pay a premium before lowering the price to attract more price-sensitive customers.
Question 5: Which document summarizes a company's revenues and expenses over a specific period?
- Balance sheet
- Cash flow statement
- Income statement (Correct answer)
- Statement of retained earnings
Correct answer: Income statement
The income statement (also called profit and loss statement) reports revenues, costs, and net profit or loss over a defined accounting period.
Question 6: Horizontal integration occurs when a company:
- Acquires a supplier to control raw material costs
- Merges with or acquires a competitor in the same industry (Correct answer)
- Expands into a completely unrelated business sector
- Purchases a distributor to control its supply chain
Correct answer: Merges with or acquires a competitor in the same industry
Horizontal integration involves acquiring or merging with competitors at the same level of the supply chain to increase market share and reduce competition.
Question 7: What is the purpose of a non-disclosure agreement (NDA) in a business context?
- To prevent employees from leaving the company
- To protect confidential information shared between parties (Correct answer)
- To establish profit-sharing arrangements
- To limit a company's liability in lawsuits
Correct answer: To protect confidential information shared between parties
An NDA is a legal contract that obligates parties to keep specified information confidential, commonly used to protect trade secrets and proprietary business information.
Business Degree Business Administration 3
Which inventory valuation method assumes that the most recently purchased items are sold first?