Business Degree Business Education Basic 2 — Questions and Answers
Question 1: Which financial statement shows a company's revenues and expenses over a specific period?
- Balance sheet
- Income statement (Correct answer)
- Cash flow statement
- Statement of retained earnings
Correct answer: Income statement
The income statement (profit and loss statement) reports revenues, expenses, and net income over a period such as a quarter or year.
Question 2: What does 'accounts payable' represent on a company's balance sheet?
- Money owed to the company by customers
- Money the company owes to suppliers (Correct answer)
- Cash held in bank accounts
- Revenue earned but not yet collected
Correct answer: Money the company owes to suppliers
Accounts payable is a current liability representing amounts a company owes to its suppliers or vendors for goods and services received.
Question 3: In business, what is 'opportunity cost'?
- The direct cost of a business decision
- The value of the next best alternative foregone (Correct answer)
- The cost of a missed sales opportunity
- Overhead expenses not allocated to a project
Correct answer: The value of the next best alternative foregone
Opportunity cost is the potential benefit given up when choosing one option over the next best alternative.
Question 4: What is the primary purpose of a business plan?
- To satisfy government regulatory requirements
- To guide business strategy and attract investors (Correct answer)
- To document daily operating procedures
- To track employee performance metrics
Correct answer: To guide business strategy and attract investors
A business plan outlines goals, strategies, market analysis, and financial projections to guide operations and convince investors or lenders.
Question 5: Which pricing strategy sets a price below competitors to quickly gain market share?
- Price skimming
- Penetration pricing (Correct answer)
- Premium pricing
- Cost-plus pricing
Correct answer: Penetration pricing
Penetration pricing uses a low initial price to attract customers and build market share before gradually increasing prices.
Question 6: What does ROI stand for in a business context?
- Rate of Inflation
- Return on Investment (Correct answer)
- Revenue Over Income
- Risk of Insolvency
Correct answer: Return on Investment
ROI (Return on Investment) measures the profitability of an investment relative to its cost, expressed as a percentage.
Question 7: In a sole proprietorship, who is legally responsible for business debts?
- The business as a separate legal entity
- The owner personally (Correct answer)
- A board of directors
- The state government
Correct answer: The owner personally
A sole proprietor has unlimited personal liability, meaning personal assets can be used to satisfy business debts.
Business Degree Business Education Basic 2
Which financial statement shows a company's revenues and expenses over a specific period?