DSST Business 3 — Questions and Answers
Question 1: Which management function involves monitoring performance and taking corrective action to achieve organizational goals?
- Planning
- Organizing
- Leading
- Controlling (Correct answer)
Correct answer: Controlling
Controlling is the management function that measures actual performance against standards and implements corrective actions when needed.
Question 2: A 'sole proprietorship' is best described as:
- A business owned by two or more people who share profits
- An incorporated business with limited shareholder liability
- A business owned and operated by one individual (Correct answer)
- A nonprofit organization governed by a board
Correct answer: A business owned and operated by one individual
A sole proprietorship is the simplest business form, owned and operated by a single individual who has unlimited personal liability.
Question 3: What is 'working capital' in financial management?
- Total assets minus total liabilities
- Current assets minus current liabilities (Correct answer)
- Long-term assets minus long-term debt
- Net income plus depreciation
Correct answer: Current assets minus current liabilities
Working capital is calculated as current assets minus current liabilities and measures a company's short-term operational liquidity.
Question 4: In marketing, the 'product life cycle' describes the stages a product goes through from introduction to:
- Rebranding
- Maturity
- Decline (Correct answer)
- Innovation
Correct answer: Decline
The product life cycle progresses through introduction, growth, maturity, and finally decline as sales fall and the product exits the market.
Question 5: Which type of business organization provides its owners with limited liability while allowing income to be taxed only once at the individual level?
- C corporation
- Sole proprietorship
- General partnership
- S corporation (Correct answer)
Correct answer: S corporation
An S corporation offers limited liability like a corporation but passes income through to shareholders' personal tax returns, avoiding double taxation.
Question 6: What is the primary purpose of a 'break-even analysis'?
- To calculate maximum profit potential
- To determine when total revenue equals total costs (Correct answer)
- To set optimal pricing for new products
- To measure competitor pricing strategies
Correct answer: To determine when total revenue equals total costs
Break-even analysis identifies the sales volume at which total revenue exactly covers total costs, resulting in neither profit nor loss.
Question 7: Which of the following is an example of a 'variable cost'?
- Monthly lease on office space
- Annual insurance premium
- Raw materials used in production (Correct answer)
- Salaried management compensation
Correct answer: Raw materials used in production
Variable costs change in direct proportion to production volume; raw materials increase as more units are produced.
DSST Business 3
Which management function involves monitoring performance and taking corrective action to achieve organizational goals?