Business Degree Business Education Basic 3 — Questions and Answers
Question 1: What is 'working capital' in business finance?
- Total assets minus total liabilities
- Current assets minus current liabilities (Correct answer)
- Net income minus dividends
- Fixed assets minus depreciation
Correct answer: Current assets minus current liabilities
Working capital is current assets minus current liabilities, measuring a company's short-term liquidity and operational efficiency.
Question 2: Which business structure provides limited liability to all owners while avoiding double taxation?
- C-corporation
- Sole proprietorship
- Limited Liability Company (LLC) (Correct answer)
- General partnership
Correct answer: Limited Liability Company (LLC)
An LLC offers limited liability protection to its members while allowing profits to pass through to personal tax returns, avoiding corporate double taxation.
Question 3: What is 'gross profit'?
- Net income after all expenses
- Revenue minus cost of goods sold (Correct answer)
- Total sales before any deductions
- Operating income after depreciation
Correct answer: Revenue minus cost of goods sold
Gross profit is revenue minus the cost of goods sold (COGS), representing profit before operating expenses are deducted.
Question 4: In marketing, what does the '4 Ps' framework include?
- Profit, People, Productivity, Performance
- Product, Price, Place, Promotion (Correct answer)
- Planning, Positioning, Packaging, Profit
- Process, Policy, Price, Product
Correct answer: Product, Price, Place, Promotion
The 4 Ps of the marketing mix are Product, Price, Place (distribution), and Promotion, forming the foundation of marketing strategy.
Question 5: What is 'depreciation' in accounting?
- An increase in asset value over time
- The allocation of an asset's cost over its useful life (Correct answer)
- A reduction in inventory value
- Interest expense on borrowed funds
Correct answer: The allocation of an asset's cost over its useful life
Depreciation systematically allocates the cost of a tangible asset over its expected useful life, matching the expense to the periods benefited.
Question 6: What does 'market segmentation' mean?
- Splitting a company into divisions
- Dividing a broad market into distinct groups with similar needs (Correct answer)
- Analyzing competitor market share
- Setting different prices in different regions
Correct answer: Dividing a broad market into distinct groups with similar needs
Market segmentation divides a heterogeneous market into smaller, homogeneous groups so businesses can target each segment more effectively.
Question 7: Which document summarizes all assets, liabilities, and equity at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (Correct answer)
- Budget report
Correct answer: Balance sheet
The balance sheet presents a company's financial position at a single date, showing assets equal to liabilities plus shareholders' equity.
Business Degree Business Education Basic 3
What is 'working capital' in business finance?