CBO Business Operations Management 4 — Questions and Answers
Question 1: A business operator is reviewing cash flow and notices a profitable company has a negative operating cash flow. What is the most likely explanation?
- The company is paying excessive dividends
- Rapid growth is consuming cash through rising receivables and inventory (Correct answer)
- The company has overstated revenues
- Tax liabilities have not been accrued
Correct answer: Rapid growth is consuming cash through rising receivables and inventory
Fast-growing profitable companies often have negative operating cash flow because cash is tied up in growing receivables and inventory before collections occur.
Question 2: Which type of market research involves analyzing existing data collected for another purpose, such as government census reports?
- Primary research
- Secondary research (Correct answer)
- Ethnographic research
- Experimental research
Correct answer: Secondary research
Secondary research uses previously collected data from external sources, which is faster and less expensive than primary data collection.
Question 3: A business operator must choose between two equipment options: one with lower upfront cost but higher maintenance, and one with higher upfront cost but lower maintenance. Which analysis tool is most appropriate?
- SWOT analysis
- Total cost of ownership (TCO) analysis (Correct answer)
- Break-even analysis
- Porter's Five Forces
Correct answer: Total cost of ownership (TCO) analysis
TCO analysis calculates all costs over an asset's useful life, including purchase, operation, maintenance, and disposal, enabling a true cost comparison.
Question 4: An employee handbook provision states employees are 'at-will.' What does this legally mean in most U.S. states?
- Employees can only be terminated for cause with documented evidence
- Either the employer or employee may end employment at any time for any lawful reason (Correct answer)
- Employees must provide 30 days notice before resigning
- The employer must offer severance pay upon termination
Correct answer: Either the employer or employee may end employment at any time for any lawful reason
At-will employment means either party can end the employment relationship at any time without cause, as long as the reason is not legally prohibited.
Question 5: A business operator is building a budget and wants to start from zero assumptions rather than adjusting prior year figures. Which budgeting method applies?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Activity-based budgeting
- Rolling budget
Correct answer: Zero-based budgeting
Zero-based budgeting requires every expense to be justified from scratch each period, eliminating automatic carryover of prior spending.
Question 6: Which performance management approach involves employees setting their own goals in collaboration with managers, then being evaluated against those self-set objectives?
- 360-degree feedback
- Management by Objectives (MBO) (Correct answer)
- Forced ranking
- Behaviorally Anchored Rating Scales (BARS)
Correct answer: Management by Objectives (MBO)
MBO is a collaborative goal-setting process where managers and employees jointly define objectives and use them as the basis for performance review.
Question 7: A business owner wants to protect a unique product formula from competitors indefinitely. Which form of intellectual property protection is most appropriate?
- Utility patent
- Trade secret (Correct answer)
- Copyright
- Trademark
Correct answer: Trade secret
Trade secret protection lasts indefinitely as long as the information is kept confidential, unlike patents which expire after 20 years.
CBO Business Operations Management 4
A business operator is reviewing cash flow and notices a profitable company has a negative operating cash flow.
What is the most likely explanation?