Finance Cluster Exam

Transcription

1 Competency-Based Competitive Events *Written Exam* Test: ST-FIN-10B Booklet Number Finance Cluster Exam INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have minutes to complete all questions. Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at Punitive financial awards will be shared. For special permissions, including all inter- and intranet postings, Service@MBAResearch.org

2 Sample B FINANCE CLUSTER EXAM 1 1. One of the main parts of the United States' judicial system is the system. A. parole C. police B. criminal D. court 2. Joan borrowed $10,000 from a relative to start her own business. Assuming she takes all responsibility for the company's financial risks, the company is most likely a A. corporation. C. sole proprietorship. B. limited partnership. D. partnership. 3. John is a recent college graduate with very little experience in operating a business, but he wants to own a business that has a well-known trade name. If he has sufficient capital to invest, what type of business ownership should he consider? A. Sole proprietorship C. Limited liability company B. Business-format franchise D. General partnership 4. One of the main provisions of the Gramm-Leach-Bliley Act requires financial institutions to A. assist consumers who have had their identity stolen. B. provide consumers with information about their credit rating. C. offer credit to any individual who is currently employed. D. protect the privacy of consumers' personal financial information. 5. Capital gains taxes may be imposed on A. stocks, bonds, and real estate. C. stocks, real estate, and financial gifts. B. stocks, bonds, and financial gifts. D. bonds, real estate, and financial gifts. 6. Compliance in the finance industry involves financial institutions operating within A. regulatory guidelines. C. organizational plans. B. specific territories. D. different relationships. 7. Which of the following is considered the primary incentive for starting a business: A. Profit motive C. Competition B. Supply and demand D. Private property 8. At the end of the last accounting period, the XYZ Company's virtual auditor reported that an expense account used to purchase gifts for clients had an erroneous credit balance rather than the anticipated debit balance. Which of the following reasoning techniques did the virtual auditor use to identify the noncompliant account: A. Cross-source reasoning C. Temporal reasoning B. Incremental reasoning D. Comparative reasoning 9. Which of the following adds meaning to the words a speaker uses: A. Accuracy C. Tone of voice B. Tempo D. Economy of speech 10. What does a group's leader do? A. Follows up with everyone C. Makes sure the group members agree B. Takes the meeting minutes D. Puts the group on a certain course 11. When preparing to deliver an oral presentation, the most important step is A. writing useful note cards. C. practicing the delivery. B. conducting research. D. choosing the best visual aid. 12. What is the most important component of an effective business letter? A. Address C. Message B. Opening D. Heading Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

3 Sample B FINANCE CLUSTER EXAM What is usually the tone of a simple written report? A. Imprecise C. Dramatic B. Solemn D. Informal 14. Which of the following is a type of information that supervisors often communicate to employees in writing: A. Company policies C. Community news B. Personal opinions D. Workplace rumors 15. One of the purposes of having business policies is to A. ensure that the business makes a profit. B. encourage customers to make frequent exchanges. C. make sure the business's actions are consistent. D. allow employees to make decisions regarding customers. 16. What type of customer typically requires the salesperson to exert extra effort in order to close the sale within a reasonable period of time? A. Disagreeable C. Dishonest B. Domineering/Superior D. Slow/Methodical 17. Which of the following is the best course of action to take if a financial client reports a problem with her/his portfolio: A. Waive the client's fees for his/her next five transactions B. Call the client back later after s/he has calmed down C. Ask the manager to return the client's call D. Apologize and resolve the problem immediately 18. Which of the following is typically an effective method to build trusting relationships with financial clients: A. Explaining the benefits and drawbacks of different financial products B. Using precise technical language when explaining financial products C. Asking others in the organization to follow up after sales transactions D. Contacting clients only when problems arise with their accounts 19. The King Investment Company is developing a data-mining model to forecast customer profitability. What type of prediction would be most appropriate for this study? A. Regression C. Algorithm B. Classification D. Futuring 20. Georgia peanuts that are available at a grocery store in Colorado is an example of a product that has utility. A. form C. place B. time D. possession 21. Which of the following is not a way that businesses contribute to society: A. By supporting the arts C. By creating jobs B. By developing new products D. By minimizing profits 22. When financial institutions follow government regulations pertaining to the industry, the institutions are A. being ethical. C. being independent. B. in compliance. D. in mediation. 23. Which of the following is a public good that is provided by the government: A. New automobiles C. Interstate highways B. Marketing research D. Private schools

4 Sample B FINANCE CLUSTER EXAM The amount of work that an individual can produce in a given period of time is a measure of A. division of labor. C. worker productivity. B. job simplification. D. specialization. 25. A worker who completes a transaction in which money changes hands but no receipts are kept and the income is not reported to the government is participating in A. the underground economy. C. accuracy in counting. B. double counting. D. an uncounted production. 26. Which of the following is an essential element of responsible behavior: A. Honesty C. Flexibility B. Determination D. Leadership 27. One of Megan's coworkers frequently makes critical comments about Megan's computer skills. Megan can use self-control in this situation to help her A. learn aggressive behavior. C. file a formal complaint. B. avoid an angry response. D. get back at her coworker. 28. Which of the following comments by a supervisor is an example of destructive criticism: A. "Try both methods, and decide which works better." B. "You're a real dummy if you don't know how to do that by now." C. "I would prefer that you do the job this way." D. "If you try to work when you have such a cold, you may give it to customers." 29. The effect of empathic behavior on interpersonal communication among employees is to make communication A. more difficult. C. more effective. B. complicated. D. awkward. 30. Being persuasive is a characteristic of a(n) A. effective leader. C. loyal follower. B. domineering person. D. authority figure. 31. When you ask coworkers for help and they aren't able to help you, which of the following responses would be most appropriate: A. "I guess you don't remember when I helped you." B. "I don't know how I'll ever get done." C. "Thanks anyway; I won't bother you again." D. "Thanks anyway; maybe another time." 32. What is often the result when a business's employees practice good human relations skills? A. Reduced loyalty C. Increased cooperation B. Decreased communication D. Improved benefits 33. Credit for which a buyer signs a contract, makes a down payment, has interest and carrying charges added, and makes equal periodic payments until the amount due is paid in full is known as credit. A. installment C. budget B. revolving D. coupon 34. If you are 17 right now, what is the best age to begin investing? A. 17 C. 27 B. 32 D. 25

5 Sample B FINANCE CLUSTER EXAM How do finance companies commonly raise capital? A. Investing funds from premium payments B. Issuing notes, bonds, and other obligations C. Investing deposits from savers D. Establishing mutual funds and investment banks 36. Which of the following international financial institutions provides financing and advice to countries to encourage economic development: A. Small Business Administration C. Commonwealth of Nations B. World Bank Group D. Liberty Institute 37. The primary function of the foreign exchange market is to A. sell stocks. C. buy bonds. B. trade currency. D. underwrite policies. 38. Convergence and consolidation in the finance industry have resulted in a(n) A. more accurate picture of financial firms' financial condition. B. highly compartmentalized finance industry. C. one-stop shopping environment for consumers. D. single supervisory agency to regulate the finance industry. 39. Bank of America Corporation owns most or all of the shares of thousands of different companies. Some of these companies are in the finance industry, but others are not. Bank of America Corporation is an example of a(n) A. cooperative bank. C. universal bank. B. fully integrated financial provider. D. financial holding company. 40. Stocks in which of the following industry sectors are least likely to be affected by changes in the business cycle: A. Healthcare C. Technology B. Energy D. Capital goods 41. Stock market returns are commonly considered to be economic indicators A. coincident C. leading B. lagging D. exploratory 42. One factor that contributed to financial globalization was the shift of many developed countries from exchange rates to exchange rates. A. fixed, floating C. pegged, declining B. floating, fixed D. declining, pegged 43. To obtain reliable information about securities, a potential investor might speak with a A. loan officer. C. colleague. B. trusted friend. D. stockbroker. 44. Which of the following is not a standard financial statement: A. Income statement C. Shareholder sheet B. Balance sheet D. Cash flow statement 45. The numbers listed in a stock table's 52-week high and low column tell you A. the best prices for the stock. B. if the stock price is overvalued. C. the range of prices for the year. D. the range of where the stock price should be.

6 Sample B FINANCE CLUSTER EXAM To reduce the number of bad checks, businesses are turning to check verification companies that guarantee to pay each check that they approve. This is an example of A. risk management. C. economic risks. B. natural risks. D. risk retention. 47. Riley is an employee of the federal government who studies the financial reports of major businesses in a specific industry. The government's purpose in assigning this task to Riley is to A. identify trends in the industry. C. verify compliance with laws. B. calculate the businesses' income taxes. D. analyze employment statistics. 48. Which of the following is a legal consideration that pertains to accounting: A. Entertaining C. Tax reporting B. Gift giving D. Computer hacking 49. What type of money is recorded in the cash receipts column of a cash flow statement? A. Expenses C. Credit B. Receivables D. Collected 50. Stockholders monitor a business's income statement because they are the business's A. owners. C. employees. B. customers. D. managers. 51. A budget helps a business evaluate long-term performance by A. providing benchmarks of past performance. B. creating a trail of management decisions. C. comparing what is currently budgeted to what is actually being earned and spent. D. providing details of all related activities. 52. The price of raw materials used in manufacturing a product was double what had been projected for the year. Which of the following could the business determine by analyzing its financial information: A. Supply and demand C. Variances B. Equipment costs D. Errors in forecasting 53. Which of the following is a way that businesses can use financial information: A. To create an economic system C. To conduct focus groups B. To select selling strategies D. To identify trends 54. Which of the following is a financial-information management problem that businesses often encounter: A. Incompatible information systems B. Same chart of accounts C. Single source of financial data D. Aggregated financial-information management 55. Which of the following situations could be prevented through the use of a financial-information management system: A. Customer service sending brochures about the company's loans to people who've just taken out loans with the company B. A financial institution's server crashing and preventing employees from entering customer payments C. Different versions of a database application being incompatible so that financial information cannot be shared D. Elimination of mergers and acquisitions in the finance industry 56. To guard against intentional ethical violations, such as deliberate financial data tampering, an organization should maintain A. an accounts receivable schedule. C. audit trails of data changes. B. hard copies of all documents. D. daily balance sheets.

7 Sample B FINANCE CLUSTER EXAM What is a benefit of being able to centrally store financial data? A. Provides multiple sources for critical data B. Eliminates the need to process a high volume of data C. Provides real-time reporting and analysis D. Increases response time to data queries 58. Which of the following technologies is frequently used to provide a source for master data management in the finance industry: A. SutiExpense Application C. Databases B. Accounting systems D. ERP (Enterprise Resource Planning) 59. The primary reason that businesses use data mining techniques to obtain various types of financial information is to A. develop their financial goals. B. identify relationships and patterns among data. C. manage their working capital effectively. D. analyze the accuracy of their accounting records. 60. Before implementing data mining procedures, a business must first identify how the financial information is A. categorized. C. viewed. B. analyzed. D. internalized. 61. Which of the following capabilities would be most useful when using budgeting applications: A. Creating unlimited scenarios to depict the impact of decisions B. Deleting files from the prior year automatically C. Selecting records to audit at random D. Allowing overspent budgets to smoothly move through the system 62. Use of budgeting applications that provide real-time data help companies to A. respond quickly to changes in the business environment. B. provide information annually to decision-makers. C. secure departmental data from other departments. D. increase the amount of line-items in the budget. 63. Which of the following questions should the user of financial analysis applications be able to answer: A. Why are products being added to the company's product mix? B. Which projects are business priorities? C. What will the company's actual amount of profit margin be next year? D. What is the change in the company's liquidity? 64. What does the SQL statement "FROM" do at the beginning of a database clause? A. Retrieves fields C. Designates tables B. Identifies filter criteria D. Sorts query results 65. Why do businesses need to accurately report a business's financial position? A. So that executives receive performance bonuses based on actual company results B. So that business operations can expand as quickly as possible C. So that the government is aware of possible financial difficulties D. So that investors trust the information presented in financial statements 66. When a small business experiences a steady increase in cash inflow over an extended period of time, the business might decide to A. sell unnecessary assets. C. purchase office equipment. B. obtain a high-interest loan. D. buy less inventory.

8 Sample B FINANCE CLUSTER EXAM Which of the following is a financial report that financial institutions often review to decide if they will approve applicants' requests for business loans: A. Petty-cash summary C. Cash-flow statement B. Corporation charter D. Payment voucher 68. What type of accounting system is used for internal decision-making, is not governed by generally accepted accounting principles, and emphasizes the future? A. Double entry C. Financial B. Tax D. Managerial 69. Given financial information, how could you identify trends in the data? A. By comparing the financial information with the economic decision at hand B. By comparing data across time periods to determine similarities and differences C. By ensuring that the financial information is neutral, prudent, and complete D. By ensuring that the financial information is presented in the simplest manner so that it'll be easily understood by its readers 70. What is the primary reason that creditors analyze their customers' financial information? A. To understand the type of accounting method customers use B. To know whether they're making a good investment C. To determine how often their customers' inventory turns over D. To determine the likelihood of getting paid 71. By analyzing a customer's financial information, a finance professional should be able to A. protect the security of the customer's financial information. B. declare Chapter 11 bankruptcy for the customer. C. develop a financial strategy to help the customer. D. determine the customer's newest target market. 72. Which of the following is a reason to analyze financial data: A. To understand accounting treatment B. To identify products which need to be recalled C. To determine a business's qualitative characteristics D. To develop financial models 73. Businesses often ask a new employee's coworkers to help the new employee. A. supervise C. test B. train D. question 74. The American Heart Association's promoting healthy diets is an example of marketing by a organization. A. medical C. safety B. nonprofit D. service 75. What feature do many word-processing software programs contain that enables businesses to prepare accurate written documents? A. Flowchart C. Dictionary B. Calculator D. Encyclopedia 76. One of the advantages to businesses of using spreadsheet software is its ability to A. create visuals. C. do calculations. B. store information. D. write brochures.

9 Sample B FINANCE CLUSTER EXAM Justin's company is keeping documents regarding the accidental death of an employee while on the job. In case the employee's family sues the company, the business should have records on hand. A. payroll C. asset B. legal D. promotional 78. What do most businesses maintain to help them plan future sales and promotional activities? A. Customer records C. Inventory systems B. Advertising proofs D. Operating procedures 79. What is one way that the trend towards protecting the environment has a negative effect on many businesses? A. Increases costs C. Promotes growth B. Reduces pollution D. Decreases prices 80. Businesses often monitor internal inventory records to obtain the information needed to A. organize new displays. C. evaluate vendors. B. plan special sales. D. create safety rules. 81. Businesses keep records of accidents and injuries in order to identify unsafe situations and to A. correct hazards. C. answer questions. B. complete paperwork. D. administer first-aid. 82. Why do some businesses install electronic video monitor systems for surveillance of the premises? A. For security C. For management B. For communication D. For maintenance 83. A reason that many companies update or alter existing products is to A. create new products to put on the market. C. make them competitive with similar products. B. be able to plan production quantities. D. use a familiar production process. 84. Many businesses have eliminated free services in order to A. be more competitive. C. reduce operating expenses. B. control inventory shrinkage. D. increase customer satisfaction. 85. An employee who charges a customer less than the actual price for a good or service creates a for the business. A. gain C. loss B. leader D. profit 86. Which of the following is considered a business maintenance activity: A. Protecting against shoplifting C. Selling goods and services B. Receiving and checking goods D. Cleaning equipment and fixtures 87. Using an orderly and systematic approach to jobs should make a worker more A. careless. C. productive. B. open minded. D. tense. 88. Most people can achieve their personal goals if they A. think about their goals regularly. C. take steps to reach their goals. B. discuss their goals with others. D. pursue their goals when convenient. 89. John frequently lists or ranks the things he needs to do in the order of their importance. John is his activities. A. categorizing C. grouping B. prioritizing D. classifying

10 Sample B FINANCE CLUSTER EXAM Under which of the following circumstances should applicants send interview follow-up letters: A. If they are convinced they are qualified C. When they are sure they will get the job B. Only if they are interested in the job D. After every employment interview 91. Which of the following is an example of the impact of technology on the financial-services industry: A. More walk-in bank customers B. Rising concern about fraud and identity theft C. Greater demand for investment professionals D. Blurring the lines between banking, insurance, and investments 92. Advantages to business owners of reading trade journals are that they contain reports by industry experts and A. current product information. C. very little advertising. B. consumer-oriented material. D. articles about various industries. 93. To become a certified financial planner, an individual must accomplish at least three things: acquire the required education, pay the appropriate fee, and A. solve financial problems. C. recognize the value of certification. B. join a financial planning association. D. pass the certification examination. 94. To build professional relationships, a finance professional might talk with friends, family, and business associates to discuss ways in which s/he can advance in his/her career. This is an activity called A. networking. C. selling. B. socializing. D. coordinating. 95. Sarah is a new employee who works in the finance department of a large firm. When Sarah first started working for the firm, she met Jan, who also works in the finance department. Jan has been with the company for several years, and has been promoted several times. Jan has been helping Sarah by providing her with professional advice, tips for handling office politics, feedback, and encouragement. Jan is Sarah's A. editor. C. mentor. B. supervisor. D. companion. 96. Which of the following is an ethical issue resulting from internal risks: A. Selecting an insurance company that considers paying fines a cost of doing business B. Revealing discounted expenses C. Providing incomplete data for audits D. Boycotting the use of an insurance company that has a reputation for not correcting its mistakes 97. Which of the following technologies has proven very successful in creating "what-if" scenarios in the finance industry: A. Digital dashboards C. Time value of money calculators B. Financial reporting and consolidation D. Account reconciliation 98. To control its risk of financial loss of business assets, such as buildings, equipment, and inventory, the CNP Company should A. obtain adequate property insurance. B. pay insurance premiums on a quarterly basis. C. purchase additional disability insurance. D. borrow funds to reduce the need for insurance. 99. Which of the following actions can the LBS Company take to control risk that is associated with external factors: A. Implement business policies C. Maintain Intranet security B. Update customer data D. Review compliance requirements

11 Sample B FINANCE CLUSTER EXAM Which of the following is not a reason why planning is important to a business: A. Planning helps to unify the efforts of employees. B. Planning is an independent business function. C. The other management functions are based on the business's plans. D. Managers who have a plan to follow are less likely to make mistakes.

12 Sample B FINANCE CLUSTER EXAM KEY D Court. A main part of the United States' judicial system is the court system which includes the federal court system as well as the court system of each state. The courts hear cases involving the law, make decisions, and establish remedies. The criminal system deals with the segment of society that does not follow the law. The policy system and the parole system are not considered parts of the judicial system. SOURCE: BL:068 SOURCE: Miller, R.L., & Jentz, G.A. (2005). Fundamentals of business law (6th ed.) [pp ]. Mason, OH: Thomson/South-Western. 2. C Sole proprietorship. A sole proprietorship is owned and operated by one individual. Although Joan obtained a loan, she is still the sole owner/operator. A partnership is owned and operated by two or more persons. A limited partnership exists when some (but not all) partners have limited legal liability for the business. A corporation is a form of business ownership in which the business is owned by stockholders who have purchased shares of stock. SOURCE: BL:003 SOURCE: BA LAP 7 Own It Your Way 3. B Business-format franchise. A business-format franchise is a franchise arrangement in which the franchisee must operate under the trade name of the parent company which provides continuous assistance in setting up and operating the business. It is a popular type of franchise arrangement that is usually available to most anyone who has the capital to invest. A general partnership is an agreement in which all partners are liable for a business's losses. A sole proprietorship is a business owned by one person. A limited liability company is a form of business ownership in which members of a corporation experience limited liability. SOURCE: BL:003 SOURCE: BA LAP 7 Own It Your Way 4. D Protect the privacy of consumers' personal financial information. The Gramm-Leach-Bliley Act, also known as the Financial Modernization Act of 1999, requires financial institutions to protect the privacy of consumers' personal financial information that is held by the financial institutions. This means that the financial institutions must follow specific rules when collecting and disclosing financial information to protect the privacy of consumers. The Gramm-Leach-Bliley Act does not require financial institutions to provide consumers with information about their credit rating, offer credit to any individual who is currently employed, or assist consumers who have had their identity stolen. SOURCE: BL:133 SOURCE: Federal Trade Commission. (n.d.). The Gramm-Leach Bliley Act. Retrieved September 2, 2009, from 5. A Stocks, bonds, and real estate. When investments such as stocks, bonds, and real estate are sold at a profit, a capital gains tax may be levied. A capital gain is the difference between the purchase price and sales price of an asset. Investors can reduce their capital gains taxes in a number of ways, including selling some investments at a loss to offset the profit generat ed by the sale of other investments. Capital gains taxes can also be reduced by keeping investments for a longer length of time. Short-term capital gains are taxed at a higher rate than long-term and super-long-term capital gains. The capital gain generated by a real estate sale is often not taxed if the seller owned the home for at least two years. A gift tax, not a capital gains tax, may be imposed on financial gifts. SOURCE: BL:134 SOURCE: Investopedia Staff. (2009). A long-term mindset meets dreaded capital-gains tax. Retrieved July 20, 2009, from

13 Sample B FINANCE CLUSTER EXAM KEY A Regulatory guidelines. Financial institutions are required to follow governmental rules and regulations. Following these regulatory guidelines is the process of compliance. The purpose of compliance is to make the industry safe for consumers and to maintain the stability of the financial system. Compliance does not involve operating within specific territories, organization plans, or different relationships. SOURCE: CC:003 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (pp ). Boston: Addison Wesley. 7. A Profit motive. The profit motive is the hope of making a profit that serves as an incentive for individuals to assume risks involved in investing in business. It is a goal toward which an individual or a business can work. Competition is the rivalry among two or more businesses to attract scarce customer dollars. Private property is anything of value that is owned by an individual or a business. Supply and demand work together to determine prices. SOURCE: EC:010 SOURCE: EC LAP 2 Risk Rewarded 8. C Temporal reasoning. A virtual auditor, which is a type of compliance technology, uses multiple reasoning processes to review financial transactions and processes to identify errors and/or noncompliance. Temporal reasoning involves considering the timing of a financial transaction or process. In this instance, the XYZ Company's virtual auditor considered the fact that it was the end of the accounting period when reviewing the balance of the expense account. Since that particular account is expected to have a debit balance at the end of each accounting period, the virtual auditor identified the account's credit balance as a potential error or compliance violation to be corrected. Incremental reasoning involves studying a series of seemingly innocent events as they occur to determine if the chain of events as a whole represents a potential compliance violation. Cross-source reasoning is used to compare financial transactions and processes in multiple financial systems. Comparative reasoning is used to identify financial system transactions that are very similar to each other but not exactly alike. SOURCE: CC:004 SOURCE: Oversight Systems, Inc. (2008, August 14). Turn SOX compliance into cash: Link Sarbanes- Oxley requirements to business improvement. Retrieved July 20, 2009, from 4,5,6,7&gotoPage=1&pageNum=1&method=record&resourceId= _ C Tone of voice. People can change the meaning of their words by changing their tone of voice. For example, the same words can be a request or a command depending upon the tone used to deliver them. Tempo is the rate of speed or rhythm the speaker uses. Economy of speech is using as few words as possible to express an idea. Accuracy refers to the correctness of the message. SOURCE: CO:147 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for success (3rd ed.) [pp ]. Mason, OH: Thomson South-Western. 10. D Puts the group on a certain course. Though each person in the group has the ability to influence the others, there's usually a leader who puts the group on a certain course. The leader does not necessarily take the meeting minutes, nor does s/he have to follow up with everyone later. In addition, the group members do not have to agree, though they may. SOURCE: CO:053 SOURCE: QS LAP 29 Put In Your Two Cents

14 Sample B FINANCE CLUSTER EXAM KEY C Practicing the delivery. When preparing to deliver an oral presentation, practicing the delivery is most important because it uncovers any problems with timing, transitions, note cards, visual aids, and even language. Conducting research, writing useful note cards, and choosing the best visual aid are all important steps, but they do not affect other areas as much as practice does. SOURCE: CO:025 SOURCE: QS LAP 9 Well Said! 12. C Message. The message, or body, is the most important component of an effective business letter. The message explains the purpose of the letter and expresses the writer's thoughts to the reader. A business letter is ineffective if the message is not well written and clearly understandable. The opening, address, and heading direct the business letter to the appropriate person. SOURCE: CO:133 SOURCE: Hyden, J. S., Jordan, A. K., & Steinauer, M. H. (2006). Communicating for success (3rd ed.) [p. 308]. Mason, OH: Thomson South-Western. 13. D Informal. Simple written reports are usually informal and friendly in tone. They are intended to transmit information to business colleagues on a less formal basis than is used in complex written reports. Many simple reports take the form of internal memorandums, which are friendly and informal in tone. Complex written reports may be solemn in tone. Written reports should not be overly dramatic, and they should never be imprecise. SOURCE: CO:094 SOURCE: Lesikar, R.V., & Flatley, M.E. (2005). Basic business communication: Skills for empowering the Internet generation (10th ed.) [pp ]. Boston: McGraw-Hill/Irwin. 14. A Company policies. Supervisors and employees need to communicate with each other on a regular basis in order to function effectively. One type of information that supervisors often communicate to employees in writing is information about company policies. Supervisors want to make sure that employees understand company policies so that they will be able to work efficiently and accomplish company goals. Providing this information in writing ensures that it is available to employees at all times. Personal opinions and workplace rumors usually are communicated verbally. Supervisors usually do not communicate community news to employees. SOURCE: CO:014 SOURCE: Hilgert, R.R., & Leonard, E.C. (2001). Supervision: Concepts and practices of management (8th ed.) [p.185]. Cincinnati: South-Western College Publishing. 15. C Make sure the business's actions are consistent. Business policies keep the day-to-day operations running smoothly and consistently. Policies ensure that employees will handle the same situations in the same manner, rather than making decisions regarding each customer, because the policies provide guidelines for employees to follow. Business policies cannot ensure profits. Policies usually set rules for exchanges of goods, but they do not encourage customers to make exchanges frequently. SOURCE: CR:007 SOURCE: Rue, L. W., & Byars, L. L. (2006). Business management: Real-world applications and connections (pp ). Woodland Hills, CA: Glencoe/McGraw Hill. 16. D Slow/Methodical. These customers may require more of your time because they lack confidence and are indecisive they have trouble making the final decision to buy. Domineering/Superior customers are overly confident customers who feel they know more and are better than the average person. Dishonest customers attempt to avoid paying part or all of the price of a good or service. Disagreeable customers are unpleasant and hard to help. SOURCE: CR:009 SOURCE: EI LAP 1 Making Mad Glad

15 Sample B FINANCE CLUSTER EXAM KEY D Apologize and resolve the problem immediately. Finance professionals are most likely to build customer loyalty and retention if they resolve any client problems and complaints as soon as possible. Waiting until later to deal with the problem is unwise; while waiting for a call back, the client may become even more upset than s/he already is. Before involving a manager, finance professionals should attempt to resolve their clients' problems themselves. While waiving the client's fees for future transactions can benefit the client, doing so doesn't necessarily resolve the client's problem. SOURCE: CR:012 SOURCE: Javlin Financial Services Marketing. (2008, August 1). How to retain accounts in a bear market. Retrieved July 20, 2009, from A Explaining the benefits and drawbacks of different financial products. One responsibility that finance professionals have is to provide complete product information to clients. This means explaining the benefits as well as the drawbacks of different financial products so that clients can make educated decisions about what to do with their money. When finance professionals communicate openly, their clients are much more likely to trust them. And, when clients trust their finance professionals, they are more likely to become loyal and satisfied customers. Rather than using precise technical language and financial jargon, finance professionals can build more trust by talking to their clients in language that the clients understand. Rather than asking others in the organization to follow up after sales transactions, finance professionals can build trusting relationships with clients by following up with them themselves. Although some clients may only want to be contacted when problems arise, most clients prefer to stay in communication with their finance professionals on a more regular basis. SOURCE: CR:012 SOURCE: Javlin Financial Services Marketing. (2008, August 1). How to retain accounts in a bear market. Retrieved July 20, 2009, from A Regression. Regression and classification are the two types of prediction commonly used in the datamining process. Regression uses existing numerical data to predict other values, such as customer profitability. Classification is used to categorize data based on identified characteristics. Neither algorithm nor futuring is a type of prediction. An algorithm is a formula or set of instructions used to build a datamining model. Futuring involves predicting events yet to occur. However, the term is not usually associated with data mining. SOURCE: CR:024 SOURCE: Two Crows Corporation. (2005). Introduction to data mining and knowledge discovery (3 rd ed.). Retrieved July 20, 2009, from C Place. Products that are available where they are needed have place utility. Making the peanuts available in Colorado where they are not grown gives them place utility. Time utility occurs when products are available when they are needed. Form utility involves altering the shape of a product, and possession utility is created when the ownership of a product is transferred from the seller to the person or business that will use it. SOURCE: EC:004 SOURCE: EC LAP 13 Use It 21. D By minimizing profits. Businesses can show their social responsibility by maximizing their profits. This enables them to have funds to contribute. Socially responsible businesses develop new products that improve the quality of life, provide employment opportunities, and support many different kinds of community cultural activities. Businesses also contribute to society by paying taxes, contributing to charities, participating in community events, and offering job training and retraining programs. SOURCE: EC:070 SOURCE: EC LAP 16 Regulate and Protect (Business and Society)

16 Sample B FINANCE CLUSTER EXAM KEY B In compliance. There are various government regulations pertaining to the finance industry that financial institutions are required to follow. When financial institutions follow the regulations, they are in compliance with the laws and regulations. Many of these laws affect how financial information is reported, and how the privacy of personal financial information is protected. When financial institutions follow government regulations, they are abiding by the law rather than being ethical. Being ethical is voluntary whereas being in compliance is required by law. The financial institutions are not in mediation or being independent. SOURCE: CC:003 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (pp ). Boston: Addison Wesley. 23. C Interstate highways. Public goods are goods and services that are used by all people and cannot be withheld from those who don't help to pay for them. Marketing research, automobiles, and private schools are goods and services provided by private businesses. SOURCE: EC:008 SOURCE: EC LAP 16 Regulate and Protect (Government and Business) 24. C Worker productivity. Worker productivity is often measured by the amount of work produced in an hour or a day. Specialization, job simplification, and division of labor are methods of increasing worker productivity. Specialization is the process of making the best use of resources in the production of goods and services. Division of labor is dividing a large job into units, or job tasks, and assigning an individual to do each of the tasks. Job simplification is the process of making changes in a job task so that the job can be done more easily or quickly. SOURCE: EC:013 SOURCE: EC LAP 18 Make the Most of It (Productivity) 25. A The underground economy. An underground economy is one in which money transactions take place (such as tips received in a restaurant), but since no record is made of the transaction and the income is not reported to the government, the GDP does not reflect the exchange. The underground economy actually reduces the GDP. An uncounted production involves goods and services that are not sold in the marketplace so their value can only be estimated. Double counting involves counting a product or service more than once. Accuracy in counting refers to the vast amount of information that must be collected to calculate GDP which can easily lead to error in the final figure. SOURCE: EC:017 SOURCE: Sexton, R.L. (2003). Essentials of economics (pp ). Mason, OH: South-Western. 26. A Honesty. Responsible behavior is made up of five essential elements honesty, compassion/respect, fairness, accountability, and courage. Determination, flexibility, and leadership are all great characteristics to cultivate, but they are not elements of responsible behavior. SOURCE: EI:021 SOURCE: PD LAP 7 Make the Honor Role (Acting Responsibly) 27. B Avoid an angry response. Megan's coworker is engaging in aggressive behavior. Aggressive people often make remarks intended to aggravate others. Using self-control to avoid making an angry response is a good way to handle such people because it denies them the satisfaction of having upset you. Getting back at the coworker or trying to learn to be aggressive would only make the situation worse. Formal complaints are used in more serious circumstances. SOURCE: EI:025 SOURCE: EI LAP 14 Control Yourself! (Demonstrating Self-Control)

17 Sample B FINANCE CLUSTER EXAM KEY B "You're a real dummy if you don't know how to do that by now." Destructive criticism not only points out mistakes but includes a personal attack on the individual. In this case, the supervisor has called the employee a dummy, which is insulting. All of the other comments are examples of constructive criticism given to help an employee improve. SOURCE: EI:003 SOURCE: EI LAP 15 Grin and Bear It (Using Feedback for Personal Growth) 29. C More effective. Empathy is the ability to put yourself in another person's place. Employees who practice empathic behavior understand themselves and each other better; thus, they communicate much more effectively. Communication is less complicated, easier, and not likely to be awkward. SOURCE: EI:030 SOURCE: EI LAP 12 Have a Heart (Empathy) 30. A Effective leader. Being persuasive is a characteristic of an effective leader. A leader is a person who guides or directs the actions of others in a desired manner. Leaders help others make decisions and encourage them to do their best. People often follow leaders because they are persuasive. Leaders also persuade by setting the example. Persuasive people are not domineering. A loyal follower is someone who always goes along with the suggestions of another, usually the leader. An authority figure is someone who has power and is in control. Authority figures are not always persuasive. SOURCE: EI:012 SOURCE: QS LAP 10 Win Them Over 31. D "Thanks anyway; maybe another time." This is an appropriate response because it expresses your thanks for their response and lets them know you understand and will ask them again. Reminding coworkers that you had helped them earlier is attempting to make them feel guilty, which they will probably resent. Saying that you won't bother them again indicates you are offended by their refusal. Saying you don't know how you'll get done (without help) is whining, which is a very negative habit that annoys other people. SOURCE: EI:008 SOURCE: EI LAP 18 Assert Yourself (Assertiveness) 32. C Increased cooperation. When a business's employees practice good human relations skills, increased cooperation usually results because employees are willing to help each other. Practicing good human relations skills usually increases communication and loyalty. Benefits are not affected. SOURCE: EI:037 SOURCE: EI LAP 5 Can You Relate? 33. A Installment. This type of credit is used for large purchases, such as automobiles and major appliances. Revolving, budget, and coupon credit are examples of charge-account or open-account credit. This means the customer can continue to add purchases to his/her account up to a predetermined amount. SOURCE: FI:002 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp ). Woodland Hills, CA: Glencoe/McGraw-Hill. 34. A 17. If you are 17 now, the best age to begin investing is 17! The sooner you begin to take advantage of the compounding growth of the stock market, the better. Compounding is your best friend, because right now, time is on your side. As a teenager, you have more years ahead of you to invest than your grandparents, your parents, and even your older siblings. Waiting until you're 25, 27, or 32 could cost you hundreds of thousands of dollars. SOURCE: FI:270 SOURCE: QS LAP 30 Supersize Your Money

18 Sample B FINANCE CLUSTER EXAM KEY B Issuing notes, bonds, and other obligations. Finance companies, also known as credit companies, are a type of financial institution. Finance companies raise capital by issuing notes, bonds, and other obligations. They use this capital to provide loans to businesses and consumers. Insurance companies raise capital by investing funds from premiums and offering loans to clients. Deposit-taking institutions accept funds from savers and use those funds to offer loans to borrowers. Investment institutions, not finance companies, establish mutual funds and investment banks. SOURCE: FI:336 SOURCE: MBAResearch and Curriculum Center. Introduction to finance course guide (pp. 5-19). Columbus, OH: Author. 36. B World Bank Group. The World Bank Group, which includes the World Bank as well as several other international organizations, is an international financial institution that provides financing and advice to impoverished countries to encourage economic development and eliminate poverty. The Small Business Administration is a U.S. government financial institution that provides financial assistance and advice to American small businesses. The Commonwealth of Nations and the Liberty Institute are not financial institutions. The Commonwealth of Nations is an international organization that promotes world peace, democracy, and free trade. The Liberty Institute is an international organization based in the country of Georgia that advocates civil liberties as well as public accountability and effective governance. SOURCE: FI:336 SOURCE: MBAResearch and Curriculum Center. Introduction to finance course guide (pp. 5-20). Columbus, OH: Author. 37. B Trade currency. There are many types of currencies in the world the yen (Japan), the U.S. dollar (United States), the Euro (European Union), the Peso (Mexico), etc. Each currency's value fluctuates. The foreign exchange market trades one currency for another currency, and determines each currency's conversion rate into other currencies. Stock exchanges buy and sell stocks. The bond market buys and sells bonds or debt securities. Insurance companies underwrite insurance policies. SOURCE: FI:337 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 56, 388). Mason, OH: South- Western Cengage Learning. 38. C One-stop shopping environment for customers. Convergence, which is the merging of financial providers from different financial sectors, and consolidation, which is the merging of financial providers within the same institutional category, have created a one-stop shopping environment for consumers. Rather than having to go to different financial providers for different financial products and services, customers can find all of the financial products that they need banking services, insurance policies, brokerage services, etc. in one place, from one company. Rather than creating a highly compartmentalized finance industry, convergence and consolidation have created finance companies that want to be everything to everybody. Rather than specializing in any one service, many of today's financial firms offer a vast array of products and services. As financial firms merge and grow in size, it becomes more difficult for financial experts and the government to get an accurate picture of the firms' current financial condition. As finance corporations expand their product offerings to encompass several financial sectors, it becomes increasingly difficult to determine which agency should oversee the companies. There is no single supervisory agency to regulate the entire finance industry. SOURCE: FI:573 SOURCE: MBAResearch and Curriculum Center. Introduction to finance course guide (pp , 5-107). Columbus, OH: Author.

19 Sample B FINANCE CLUSTER EXAM KEY D Financial holding company. A financial holding company, also known as a parent company, is usually a banking company that owns most or all of the shares of multiple individually incorporated, independently funded subsidiaries that engage in other types of financial activities such as insurance and securities. A financial holding company is also permitted to own a controlling interest in non-financial firms, but the parent company can only act as a passive investor in such firms. Bank of America Corporation is a good example of a financial holding company. A fully integrated financial provider is a company that offers multiple types of financial products using one pool of capital. A universal bank offers retail/business and investment banking products directly but also sells other financial products through subsidiaries that the universal bank owns. A universal bank typically does not own nonfinancial companies. A cooperative bank is a state-chartered savings association. SOURCE: FI:573 SOURCE: National Information Center. (2009, June 30). Top 50 bank holding companies. Retrieved July 20, 2009, from A Healthcare. Healthcare, food, drink, and tobacco are generally considered to be non-cyclical industries, meaning that they are not greatly impacted by changes in the business cycle. The demand for such products and their stocks remains fairly steady regardless of the stage of the business cycle. Stocks in industry sectors such as energy, technology, and capital goods, on the other hand, often change in response to changes in the business cycle. The energy sector is affected by supply and demand of energy around the world, and political unrest can impact the industry considerably. Energy stocks seem to perform best late in the business cycle. Technology stocks are also affected by the business cycle, often in direct relation to the demand for capital goods. Technology stocks and capital goods stocks do well during business cycle expansion. SOURCE: FI:574 SOURCE: Fidelity Investments. ( ). Business cycle and stock performance. Retrieved July 20, 2009, from C Leading. Stock market returns are commonly considered to be leading economic indicators because they often decline in advance of an economic decline and improve prior to positive movement in the overall economy. Lagging economic indicators such as the unemployment rate do not change direction until after the general economy improves or declines. Coincident economic indicators move simultaneously with the overall economy. Exploratory economic indicators are fictitious. SOURCE: FI:574 SOURCE: Moffatt, M. (2009). A beginner's guide to economic indicators. Retrieved July 20, 2009, from A Fixed, floating. To enable capital to flow more freely internationally, countries around the world have reduced or eliminated many regulations and restrictions. For example, many developed countries shifted their exchange rates from being fixed to floating. Fixed exchange rates are set by the government, while floating exchange rates are determined by market supply and demand for currency. Although fixed exchange rates are still popular in some parts of the world, most developed countries have floating exchange rates. A pegged exchange rate is a fixed exchange rate. Declining exchange rates have not significantly contributed to financial globalization. SOURCE: FI:575 SOURCE: MBAResearch and Curriculum Center. Introduction to finance course guide (p ). Columbus, OH: Author.

20 Sample B FINANCE CLUSTER EXAM KEY D Stockbroker. Securities refer to the legal owning or lending agreements between individuals, businesses, or governments. Securities include investments such as stocks, bonds, and mutual funds. A stockbroker is a licensed person who has the authority and expertise to buy and sell securities on behalf of a client. Unless they are stockbrokers, trusted friends, colleagues, and loan officers may not be the most reliable sources of securities information. SOURCE: FI:274 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (pp ). New York: Glencoe/McGraw-Hill. 44. C Shareholder sheet. There is no such thing as a shareholder sheet. The balance sheet, income statement, and cash flow statement are three standard financial statements that are found in annual reports. SOURCE: FI:274 SOURCE: QS LAP 36 The Source Is With You 45. C The range of prices for the year. The numbers in a stock table's 52-week high and low column tell you the range of the prices for the year. But, the numbers simply give the range for the year. Alone they do not tell an investor if the stock is overvalued, what the best price for the stock is, or where the range should be. SOURCE: FI:275 SOURCE: QS LAP 37 Table Talk 46. A Risk management. Risk management is reducing and managing the risks of doing business. Natural risks are risks from natural causes, such as floods, tornadoes, fires, and earthquakes. Economic risks occur from changes in overall business conditions, such as inflation, recession, or government regulation. Risk retention occurs when a business retains a risk and the company must assume the loss. SOURCE: FI:084 SOURCE: BNET. (2009). Business definition for: Risk management. Retrieved September 2, 2009, from A Identify trends in the industry. Various governmental offices study businesses' accounting reports in order to obtain information about industry trends and to make economic forecasts. Information related to employment statistics and compliance would be obtained from other sources. Businesses calculate the amount of tax they owe based on their financial records. Government would use the records only if the businesses' tax returns are being audited. SOURCE: FI:085 SOURCE: FI LAP 5 Show Me the Money (Nature of Accounting) 48. C Tax reporting. All businesses are required by law to report and pay a variety of taxes. Tax reporting is a legal consideration that pertains to accounting because income and expenses can be reported in different ways. For example, it is illegal for a business to misrepresent financial information to indicate a loss for the purpose of not paying taxes. It is also illegal for a business to fail to report and pay sales tax and payroll withholding tax for employees. Businesses need to be aware of legal issues to avoid potential problems. Gift giving, entertaining, and computer hacking are usually ethical considerations rather than legal considerations. SOURCE: FI:353 SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000). Accounting: Information for business decisions (pp. 9-11). Orlando, FL: Harcourt.