Finance Cluster Exam

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 800.448.0398. Punitive financial awards will be shared. For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

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

Sample B FINANCE CLUSTER EXAM 2 13. 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

Sample B FINANCE CLUSTER EXAM 3 24. 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

Sample B FINANCE CLUSTER EXAM 4 35. 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.

Sample B FINANCE CLUSTER EXAM 5 46. 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.

Sample B FINANCE CLUSTER EXAM 6 57. 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.

Sample B FINANCE CLUSTER EXAM 7 67. 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.

Sample B FINANCE CLUSTER EXAM 8 77. 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

Sample B FINANCE CLUSTER EXAM 9 90. 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

Sample B FINANCE CLUSTER EXAM 10 100. 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.

Sample B FINANCE CLUSTER EXAM KEY 11 1. 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. 38-41]. 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 http://www.ftc.gov/privacy/privacyinitiatives/glbact.html 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 http://www.investopedia.com/articles/00/102300.asp

Sample B FINANCE CLUSTER EXAM KEY 12 6. 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. 23-27). 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 http://viewer.bitpipe.com/viewer/printdocument.do?accessid=9320939&pagestoprint=1,2,3, 4,5,6,7&gotoPage=1&pageNum=1&method=record&resourceId=1218734668_712 9. 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. 74-76]. 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

Sample B FINANCE CLUSTER EXAM KEY 13 11. 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. 308-309]. 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. 241-242). 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

Sample B FINANCE CLUSTER EXAM KEY 14 17. 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 http://www.javelinmarketing.com/blog/2008/08/01/how-to-retain-accounts-in-a-bear-market/ 18. 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 http://www.javelinmarketing.com/blog/2008/08/01/how-to-retain-accounts-in-a-bear-market/ 19. 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 http://www.twocrows.com/intro-dm.pdf 20. 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)

Sample B FINANCE CLUSTER EXAM KEY 15 22. 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. 23-27). 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. 288-289). 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)

Sample B FINANCE CLUSTER EXAM KEY 16 28. 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. 685-686). 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

Sample B FINANCE CLUSTER EXAM KEY 17 35. 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. 5-106, 5-107). Columbus, OH: Author.

Sample B FINANCE CLUSTER EXAM KEY 18 39. 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 http://www.ffiec.gov/nicpubweb/nicweb/top50form.aspx 40. 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. (1998-2009). Business cycle and stock performance. Retrieved July 20, 2009, from http://personal.fidelity.com/products/funds/content/sector/cycle.shtml 41. 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 http://economics.about.com/cs/businesscycles/a/economic_ind.htm 42. 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. 5-156). Columbus, OH: Author.

Sample B FINANCE CLUSTER EXAM KEY 19 43. 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. 294-295). 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 http://dictionary.bnet.com/definition/risk+management.html 47. 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.

Sample B FINANCE CLUSTER EXAM KEY 20 49. D Collected. Only collected money is recorded under cash receipts. For example, if a business expects to make $5,000 from cash sales and $2,000 from credit sales, it records only the $5,000 in the cash receipts column. The $2,000 in credit sales is referred to as accounts receivable and should not be recorded until it is actually collected; otherwise, the business will appear to have more money on hand than it actually does. Expenses are listed in the cash payments column rather than in the cash receipts column. SOURCE: FI:091 SOURCE: FI LAP 6 Count the Cash (Cash Flow) 50. A Owners. Stockholders have part ownership of a business and use the income statement to monitor the business's profit levels. Stockholders have money invested in the business and monitor how much profit the business is making to determine if they are getting a good return on their investment. Employees, customers, and managers are not stockholders of the business unless they have also invested money in the business. SOURCE: FI:094 SOURCE: FI LAP 4 Watch Your Bottom Line (Income Statements) 51. A Providing benchmarks of past performance. A budget helps a business evaluate long-term performance by providing benchmarks of past performance. Examining previous budgets clarifies how the business has performed over time. Budgets do not help evaluate long-term performance by creating a trail of management decisions, by comparing current budget amounts to current actual amounts, or by providing details of related activities. SOURCE: FI:106 SOURCE: FI LAP 3 Money Tracks 52. C Variances. Businesses analyze their financial information to determine the differences between what they had forecast and what actually happened. By doing this, they can account for those differences and improve future forecasts. In this scenario, equipment costs were not a factor. The business could not determine from its financial information whether the supply of raw materials decreased or demand increased. Forecasts are estimates based on information known at the time the forecast was made and will not be exactly what actually happens. In this scenario, therefore, the variances would not be considered forecasting errors. SOURCE: FM:001 SOURCE: Consoli, A. (2006, June 23). Entrepreneurs know how to use financial information. Retrieved July 20, 2009, from http://ezinearticles.com/?entrepreneurs-know-how-to-use-financial- Information&id=228042 53. D To identify trends. Through financial-information analysis, businesses can recognize what products are selling well and in what colors, styles, models, and sizes. Over time, this helps businesses spot trends in customer buying habits so that the businesses provide more of the products customers are buying and less of those that are not selling well. Selling strategies are largely determined by the nature of the product being sold rather than by financial information. Focus groups are used to collect customer reactions to and opinions about product features or company image. Businesses function in economic systems rather than creating them. SOURCE: FM:001 SOURCE: Marketing and Sales Standards Setting Body. (2006, January). Knowledge and understanding requirements. Retrieved July 20, 2009, from http://www.ukstandards.org/admin/db/0034/o34ns3.3.pdf

Sample B FINANCE CLUSTER EXAM KEY 21 54. A Incompatible information systems. Businesses work with a variety of information systems that do not share information with or feed information into each other. This results in businesses taking risks with the accuracy of their financial information. Since effort is required to pull the financial information together and to verify its accuracy, financial operations run less productively than they could with compatible information systems. Using the same chart of accounts, having a single source of financial data, and having aggregated financial-information management would increase productivi ty in finance operations rather than being problems. SOURCE: FM:002 SOURCE: Ventana Research. (2009). Finance plagued by fragmented information systems. Retrieved July 15, 2009, from http://www.ventanaresearch.com/research/printer_friendly.aspx?id=2986 55. A Customer service sending brochures about the company's loans to people who've just taken out loans with the company. Financial-information management systems tie financial transaction data with nonfinancial transaction data so that money is not wasted on promoting financial products to those who've just obtained the financial product. They encompass both processes and technologies to manage data about finances, internal operational information, and external market and competitive indicators. Use of a financial-information management system will not keep a company's computer from crashing nor will it keep different versions of a database application from being incompatible. Mergers and acquisitions present a challenge to the finance industry in terms of financial-information management; however, its use will not eliminate mergers and acquisitions from happening. SOURCE: FM:002 SOURCE: Ventana Research. (2009, January). Financial information management benchmark research. Retrieved July 16, 2009, from http://www.ventanaresearch.com/executive_summaries/_espdfs/ventana_research_financi al_information_management_benchmark_research_executive_summary_2009.pdf 56. C Audit trails of data changes. An organization should maintain audit trails to record the details of any financial data tampering and/or erasures. After the organization discovers tampering and/or erasures, the data in question can be recovered and/or restored to its original state. It is not necessary to keep hard copies of every document. An accounts receivable schedule and daily balance sheets do not guard against deliberate financial data tampering or erasures. SOURCE: FM:003 SOURCE: de Jager, P. (2002, September/October). Ethics: Good, evil, and moral duty. Retrieved June 1, 2009, from http://findarticles.com/p/articles/mi_qa3937/is_200209/ai_n9143308/pg_2/?tag=content;col1 57. C Provides real-time reporting and analysis. Many financial services organizations are revamping their data management infrastructure to improve their operational efficiencies, as well as to satisfy mandates for processing and compliance monitoring. Since many applications access and update a common body of data, it makes sense to consolidate that common data in a central repository. Having one source for critical data ensures that the information used by distinct applications within the enterprise is both consistent, and up to date. This will result in decisions being made on current rather than historical data and reducing the time spent verifying data consistency across systems. Using centrally stored financial data will improve the business's ability to process a high volume of data rather than eliminating it. A central data repository should also reduce the response time utilized in data queries. SOURCE: FM:011 SOURCE: InterSystems. (1996-2009). Caché and data management in the financial services industry. Retrieved April 6, 2009, from http://www.intersystems.com/cache/whitepapers/datamanagement_wp.html

Sample B FINANCE CLUSTER EXAM KEY 22 58. D ERP (Enterprise Resource Planning). Master data management is made up of processes and tools that define and manage non-transactional data entities. In other words, it collects, pulls together, matches, consolidates, and distributes data throughout an organization. ERP is an example of a system that's intended to integrate all data and processes into a unified system. A key ingredient of most ERP systems is the use of a unified database that stores data for the system. Accounting systems do not provide a source for master data management. Their focus is on collecting and storing financial data for the accounting department. SutiExpense is a mobile expense management application used to monitor, manage, and simplify travel and expense recordkeeping. Users are able to attach receipts "on the go" from their smart phones, enabling them to save both time and money. SOURCE: FM:011 SOURCE: Ventana Research. (2009, January). Financial information management benchmark research. Retrieved April 6, 2009, from http://www.ventanaresearch.com/executive_summaries/_espdfs/ventana_research_financi al_information_management_benchmark_research_executive_summary_2009.pdf 59. B Identify relationships and patterns among data. Data mining is the process of searching computer databases to look for patterns and relationships among information. Businesses use the information they obtain from data mining to make business decisions, such as determining which customers may qualify for credit. Businesses do not use data mining techniques to develop financial goals, manage their working capital, or analyze the accuracy of their accounting records. SOURCE: FM:012 SOURCE: Hair, J.F., Bush, R.P., & Ortinau, D.J. (2009). Marketing research in a digital information environment (4 th ed.) [pp. 98-100]. New York: McGraw-Hill Irwin. 60. A Categorized. Data mining is the process of searching computer databases to look for patterns and relationships among information. Before a business can retrieve certain types of information, it must identify how the data are stored and categorized in the database. After identifying storage and categorization methods, the business decides which approach to use to obtain the information. After the information is obtained, the business views and analyzes it. SOURCE: FM:012 SOURCE: Hair, J.F., Bush, R.P., & Ortinau, D.J. (2009). Marketing research in a digital information environment (4 th ed.) [pp. 98-100]. New York: McGraw-Hill Irwin. 61. A Creating unlimited scenarios to depict the impact of decisions. When using budgeting applications, users can benefit by creating a variety of "what-if" scenarios in order to develop the most realistic budget. Automatic deletion of files would be a disadvantage since the prior year's budget is used in developing future budget. An audit trail should be maintained on all data entries rather than audits occurring at random. An effective budgeting application would set limits on how much over budget an account can go and flag the overage so that steps can be taken to handle the situation. SOURCE: FM:013 SOURCE: Tyler Technologies. (n.d.). Budgeting. Retrieved July 16, 2009, from http://www.tylertech.com/default.aspx?tabid=280 62. A Respond quickly to changes in the business environment. The use of budgeting applications can provide decision makers with real-time data on an ongoing basis so that they can make changes in response to what is impacting the business. To be effective, decision makers cannot wait a year to make budget revisions when changes occur. One of the goals of budgeting applications is to break down departmental silos by sharing information among departments. Use of real-time data does not automatically create a need to increase the amount budgeted to line items. The availability of real-time data enable a business to be flexible so that it can respond appropriately to changes. SOURCE: FM:013 SOURCE: B&M Conference Consulting. (n.d.). Planning & budgeting. Retrieved July 16, 2009, from http://www.bmconference.com/index.php?id=98

Sample B FINANCE CLUSTER EXAM KEY 23 63. D What is the change in the company's liquidity. By using financial analysis applications, businesses gain insight into its financial health, such as the company's liquidity. These applications also are useful in helping to identify trends. The applications cannot accurately forecast a business's actual amount of profit margin; however, they help to identify trends impacting the profit margin. These applications cannot identify project priorities or tell why products are being added to the product mix. They report financial data. SOURCE: FM:014 SOURCE: MicroStrategy.com. (n.d.). Financial analysis. Retrieved July 16, 2009, from http://latam.microstrategy.com/financial-analysis/ 64. C Designates tables. SQL Structured Query Language is used for building queries and performing database administration tasks. All queries in Access have a SQL statement. SQL statements are made up of clauses with each clause beginning with a keyword that is typically written in all caps. Other key words used in SQL query statements are: SELECT - Retrieves fields WHERE - Identifies filter criteria ORDER BY - Sort order(s) SOURCE: FM:015 SOURCE: Lizmi, M. (2008, Fall). Chapter 8: SQL. Retrieved July 15, 2009, from http://www.montgomerycollege.edu/faculty/~mlizmi/public_html/courses/ca240/wk6/sql.pd f 65. D So that investors trust the information presented in financial statements. Investors need to be confident that the information they read in financial statements is accurate. When they feel that they can trust the financial information they see, investors are more likely to invest. This supports the smooth functioning of a market economy. In many companies, executive bonuses are not tied to company performance. The government would not need to know that businesses are facing financial difficulties. In a market economy, supply and demand impact businesses' financial well-being, not the government (unless the business is a U.S. car manufacturer). Accurate reporting of financials would not impact a business's ability to expand as quickly as possible. SOURCE: FM:004 SOURCE: Glassman, C.A. (2006, May 8). Internal controls over financial reporting Putting Sarbanes - Oxley Section 404 in perspective. Retrieved July 14, 2009, from http://www.sec.gov/news/speech/spch050806cag.htm 66. C Purchase office equipment. A business monitors its cash flow to determine how much money is flowing into and out of the business. Monitoring cash flow helps the business plan how and when it will pay its bills. If the business is making more sales and the cash inflows are steadily increasing, it may decide to use the cash surplus to buy office equipment (e.g., computers, printers, etc.). Businesses usually want low-interest loans. The business might sell assets or buy less inventory if it experiences a severe or ongoing cash inflow shortage. SOURCE: FM:005 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: South- Western Cengage Learning.

Sample B FINANCE CLUSTER EXAM KEY 24 67. C Cash-flow statement. A cash-flow statement is a financial report that contains estimates as to when, where, and how much money will flow into and out of a business in a given timeframe. Lending institutions want to look at loan applicants' cash-flow statements to determine if they have enough money to operate. If an applicant seems to have problems paying bills due to continuous cash shortages, a lending institution may believe it is too risky to process the loan because the applicant may not be able to pay back the loan. A corporation charter is a permit granted by the government to a business that allows the business to operate as a corporation. A petty-cash summary documents a business's small cash transactions. A payment voucher is a receipt. SOURCE: FM:005 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 76-77, 113-114). Mason, OH: South-Western Cengage Learning. 68. D Managerial. Managerial accounting systems are used primarily to aid managers with their decisionmaking, planning, and controlling. Businesses are not required by law to have managerial accounting systems; therefore, there is less emphasis on the precision of data. These systems also do not have to meet generally accepted accounting principles. Tax and financial accounting are governed by generally accepted accounting principles, and they emphasize the business's past financial performance. These systems are designed to provide financial information to external audiences. A double entry accounting system is an accounting concept requiring every accounting transaction to be recorded in two accounts: in one, the transaction is a debit, while in the other account, the transaction is a credit. SOURCE: FM:006 SOURCE: Barr, R. S. (2001). Engineering accounting: An overview. Retrieved July 14, 2009, from http://faculty.smu.edu/barr/acct/2001/01-an01intro.pdf 69. B By comparing data across time periods to determine similarities and differences. For fi nancial information to be useful to decision makers, the information should possess the qualitative characteristics of relevance, reliability, understandability, and comparability. Comparability is the ability to bring together for the purpose of noting likenesses and differences. This characteristic is needed to identify trends in a business's financial position and to compare the performance between/among companies. The characteristic of relevance involves ensuring that the financial information addresses the economic decision at hand. When financial information is neutral, prudent, and complete, it possesses the characteristic of reliability. By presenting financial information in the simplest manner possible, businesses ensure that the information is understandable. SOURCE: FM:008 SOURCE: Webika.com. (2009, May 4). Accounting 101, Lesson #7: The qualitative characteristics of financial information. Retrieved July 14, 2009, from http://www.bukisa.com/articles/85521_accounting-101-lesson-7-the-qualitativecharacteristics-of-financial-information 70. D To determine the likelihood of getting paid. Creditors take risks when extending credit to customers whether they are letting them borrow money or defer payment for product. By analyzing customers' financial information, they have a better idea of whether the customers pay their debts. Stockholders analyze financial information to determine whether they are making good investments. The accounting method customers use indicates when sales and expenses are recorded in the customers' books. Determining how often inventory turns must be compared with other companies in the same industry to determine whether inventory is being held too long. The figure by itself does not communicate anything to creditors. SOURCE: FM:009 SOURCE: Financial statement analysis. (n.d.). Retrieved July 14, 2009, from http://www.mccd.edu/faculty/vilhauerc/financial%20accounting%20files/chapter%2013%20 %20student.ppt

Sample B FINANCE CLUSTER EXAM KEY 25 71. C Develop a financial strategy to help the customer. Whether the finance professional works internally or externally, or works with individuals or businesses, s/he should be able to analyze the customer's financial information to recommend an appropriate financial strategy for the "customer." Business management would declare a company in bankruptcy based on information provided by the finance professional. Just having a customer's financial information requires finance professionals to protect its privacy analysis is not required. The customer's marketing department would determine its newest target market, while the finance professional will measure the target market's profitability. SOURCE: FM:009 SOURCE: Mathews, B. (2002, September 14). The financial aspects of consultative selling: Understanding your customer's business. Retrieved July 20, 2009, from http://fisher.osu.edu/~mathews_4/lecture_material.htm 72. A To understand accounting treatment. By reviewing a business's financial data, a finance professional can learn whether the business is using accrual or cash accounting methods. With the accrual method, transactions are recorded at the time they occur, rather than when payment is received or made. With cash accounting, transactions are recorded when payment is received or made. The accrual method is used by most businesses since it allows the current cash flows to be combined with future expected cash flows, thereby giving a more accurate picture of a company's current financial condition. Cash accounting presents a more conservative view of a company's financial situation; therefore, it's important to analyze financial data to determine the accounting treatment that has been used. Marketing and management determine what products need to be recalled. Recalls are generally due to safety issues. Financial data are quantitative data rather than qualitative data. Financial models are used in analyzing financial data rather than being an outcome of the analysis. SOURCE: FM:010 SOURCE: Fadoul, J. (2008, May 21). Accrual basis vs cash basis accounting: The differences. Retrieved July 20, 2009, from http://wickedhowtos.com/index.php/2008/05/21/accrual-basisvs -cash-basis-accounting-the-differences/ 73. B Train. Businesses often assign new employees to work with experienced employees who will be able to help train them. Current employees can help new employees learn their jobs and provide them with information about company procedures. Coworkers would not be asked to supervise, question, or test new employees. SOURCE: HR:360 SOURCE: Dessler, G. (2000). Human resource management (8th ed.) [pp. 257-259]. Upper Saddle River, NJ: Prentice Hall. 74. B Nonprofit. Nonprofit institutions are businesses and organizations whose intent is to make enough money to support their mission. The American Heart Association is an example of a nonprofit organization. Nonprofit organizations are involved in marketing although their goals are very different from those of forprofit businesses. Often, their goals are to provide information and increase public awareness of certain issues, such as the American Heart Association's promoting the benefits of a healthy diet. A service business is a for-profit business that performs intangible activities that satisfy the wants of consumers or industrial users. The American Heart Association is not primarily a medical or safety organization, although it does provide some medical and safety information to the public. SOURCE: MK:001 SOURCE: BA LAP 11 Have It Your Way!

Sample B FINANCE CLUSTER EXAM KEY 26 75. C Dictionary. Many word-processing software programs contain a dictionary, which enables businesses to check the spelling in their documents. The dictionary feature identifies words that are incorrectly spelled and provides several alternatives. This feature helps businesses to prepare accurately-written documents and avoid sending letters or reports to customers that contain misspelled words. Some word-processing software programs include a calculator, which helps businesses with mathematical tabulations. A flowchart is part of spreadsheet software programs. Businesses with Internet capability have access to online encyclopedias. SOURCE: NF:007 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [p. 162]. Glencoe McGraw-Hill. 76. C Do calculations. Businesses often use spreadsheet software to organize and prepare financial documents, such as budgets and profit statements. One of the advantages of using spreadsheet software is its ability to do mathematical calculations. A business can input columns and rows of dollar amounts or percentages, and the software will complete the computations accurately and quickly. Also, businesses can change various figures to determine the effect a planned price increase would have on profit. Word-processing software is used to write brochures. Graphics software is used to create visuals. Database software is used to store information. SOURCE: NF:010 SOURCE: Eggland, S.A., Dlabay, L.R., Burrow, J.L., & Ristau, R.A. (2000). Intro to business (4th ed.) [pp. 214-216] Cincinnati: South-Western Educational. 77. B Legal. Any lawsuit in which a company is involved requires the business to have legal records. These records can be almost any business document created. Payroll records, asset records, or promotional records may be required in certain legal situations. But in Justin's company's situation, there has been an accidental death of an employee while on the job. This means that legal records should be on hand in case the family sues. SOURCE: NF:001 SOURCE: NF LAP 1 Record It (Business Records) 78. A Customer records. Most businesses maintain customer records that contain information about what customers are buying, when they are buying, and how much they are buying. By analyzing this information, businesses are able to plan future sales and promotional activities that will appeal to customers and encourage them to buy. Without this type of information, businesses might have no idea what customers will want to buy in the future. Businesses do not maintain advertising proofs, inventory systems, or operating procedures to help them plan future sales and promotional activities. SOURCE: NF:002 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western. 79. A Increases costs. Many businesses are spending large sums of money to repair the damage their operating techniques did to the environment. The trend towards protecting the environment is forcing many businesses to correct the problem and find ways of operating that will not be destructive. This trend is expensive for businesses that must now pay for past mistakes. Protecting the environment often involves reducing pollution. Promoting growth would be a positive effect. Many businesses increase prices in order to generate additional funds to use for developing ways of protecting the environment. SOURCE: NF:013 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 41-42]. Cincinnati: South-Western.

Sample B FINANCE CLUSTER EXAM KEY 27 80. B Plan special sales. Businesses monitor internal inventory records to keep track of the type and quantity of products that are in stock. By monitoring this information, businesses can identify an oversupply of certain products, or products that are slow sellers. The inventory records help businesses decide when it would be appropriate to plan a special sale to get rid of excess inventory or slow-selling items. Keeping these items in stock ties up money that the business could use to buy new products that customers want to buy. Businesses do not monitor internal inventory records to obtain the information needed to organize new displays, evaluate vendors, or create safety rules. SOURCE: NF:014 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western. 81. A Correct hazards. Businesses keep a running log or record of work-related accidents in order to identify patterns or trends in workplace accidents. Businesses use this information to correct the hazardous or unsafe situations and help prevent accidents from occurring. Businesses do not keep accident reports for the purpose of completing paperwork. The accident reports may answer certain questions about the incident, although that is not their primary purpose. Accident reports are not needed in order to administer first-aid. SOURCE: OP:009 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 406-410). Tinley Park, IL: Goodheart-Willcox. 82. A For security. Some businesses use electronic video monitor systems to watch the interior and exterior of the property in order to make sure these areas are secure for customers and employees. These systems record on videotape any breakdowns in security and can be used to identify suspects in the event of theft. Communication involves the exchange of information between individuals or groups. Maintenance involves the upkeep and repair of equipment and facilities. Management involves overseeing the operation of a business or a certain aspect of a business. SOURCE: OP:013 SOURCE: Kimiecik, R. C., & Thomas, C. (2006). Loss prevention in the retail business (pp. 66-72). Hoboken, NJ: John Wiley & Sons. 83. C Make them competitive with similar products. Updating or altering an existing product is a good way to compete effectively with similar products produced by other companies. Changing products is usually much less expensive than creating new products. Updated or altered products are not new products but new versions of old products. Changing products does not help the business to plan quantities since it does not know how well the revised product will sell. Being able to use a known production process would not be a valid reason for updating or altering products. SOURCE: OP:017 SOURCE: BA LAP 1 Nature of Production 84. C Reduce operating expenses. Operating expenses, or overhead expenses, are the amounts of money a business pays out in order to produce and/or sell its goods and services. Since operating expenses include salaries and wages, as well as equipment, eliminating free services would reduce operating expenses. The business would save the costs of delivery vans/trucks, the expense of packing for delivery, and the wages paid to delivery personnel. This would not control inventory shrinkage which is caused by employee theft and shoplifting. It would be likely to decrease customer satisfaction and to make the business less competitive if its competitors do offer free delivery. SOURCE: OP:024 SOURCE: Etzel, M.J., Walker, B.J., & Stanton, W.J. (2007). Marketing (14 th ed.) [pp. 325-330]. Boston: McGraw-Hill/Irwin.

Sample B FINANCE CLUSTER EXAM KEY 28 85. C Loss. When any employee charges a customer less than the actual price, the business does not make enough money on the sale to cover the cost of providing the good or service. Therefore, the business loses money on that transaction. If employees undercharged customers on a regular basis, the loss might be large enough to put the company out of business. Undercharging a customer does not create a gain or a profit for the business. A leader, or loss leader, is a price that the business has set low to attract customers. SOURCE: OP:025 SOURCE: Kimiecik, R. C., & Thomas, C. (2006). Loss prevention in the retail business (pp. 184-185). Hoboken, NJ: John Wiley & Sons. 86. D Cleaning equipment and fixtures. Maintenance schedules are established to ensure that these activities are completed on a regular basis. Protection against shoplifting is a security responsibility. The receiving department is responsible for receiving and checking goods, and the sales department is responsible for selling goods and services. SOURCE: OP:032 SOURCE: Spears, M.C., & Gregoire, M.B. (2004). Foodservice organizations: A managerial and systems approach (5th ed.) [pp. 320-323]. Upper Saddle River, NJ: Prentice Hall. 87. C Productive. Organized workers tend to be more productive because they plan ahead and can do their work at a relaxed pace. Being organized does not necessarily make an individual open minded. Orderly and systematic workers are more likely to be careful than careless, and they are less likely to be tense because they have reduced stress. SOURCE: PD:009 SOURCE: Wallace, H.R., & Masters, L.A. (2006). Personal development for life & work (9 th ed.) [p. 300]. Mason, OH: South-Western Cengage Learning. 88. C Take steps to reach their goals. When people set goals which are important to them, they should take steps to achieve those goals. Thinking about goals and discussing them with others are part of the steps for goal achievement. Pursuing the goals only when it is convenient is not likely to lead to achievement of the goals. SOURCE: PD:018 SOURCE: PD LAP 16 Go For the Goal (Goal Setting) 89. B Prioritizing. Prioritizing is determining the order for completion of activities based on their importance. It is a helpful way to manage time. Classifying, categorizing, and grouping activities are sorting techniques in which the importance of each activity is not a factor. SOURCE: PD:019 SOURCE: OP LAP 1 About Time (Time Management in Business) 90. D After every employment interview. Job applicants should send follow-up letters after every employment interview in order to thank the interviewer for considering them. Sending follow-up letters is a common courtesy to interviewers, but it also benefits the applicant. Even if the applicants are not hired at that time, they have created a favorable impression in the event that they apply for other positions with that business in the future. Applicants should always send follow-up letters, not only if they are interested in the job, sure they will get the job, or convinced they are qualified. SOURCE: PD:029 SOURCE: Bailey, L.J. (2003). Work ing: Career success for the 21st century (3rd ed.) [pp. 71-72]. Mason, OH: South-Western.

Sample B FINANCE CLUSTER EXAM KEY 29 91. B Rising concern about fraud and identity theft. One of the impacts of technology on the financial-services industry is rising concern about fraud and identity theft since so many financial products and services are now bought and sold online. Encryption technology helps guard against fraud and theft. Banks have fewer walk-in customers when they offer online banking. Blurred lines between the banking, insurance, and investment industries is the result of deregulation. Greater demand for investment professionals is the result of changing demographics. SOURCE: PD:152 SOURCE: QS LAP 51 Careers in the Money 92. A Current product information. One of the values of trade journals is the up-to-date product and technology information that they provide. Trade publications keep business owners and their employees informed about their industry. Advertising in trade journals is extensive and provides additional information. Trade journals are written for specific groups of workers/industries and do not have articles about other industries or articles directed to consumers. SOURCE: PD:036 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 614). Woodland Hills, CA: Glencoe/McGraw-Hill. 93. D Pass the certification examination. Passing the exam verifies that the individual is qualified to be a financial planner. It is not necessary to join an association first. Recognizing the value of certification is something you might do before you seek certification. Solving financial problems is something you intend to do after certification. SOURCE: PD:082 SOURCE: Certified Financial Planner Board of Standards, Inc. (n.d.) Steps to initial CFP certification. Retrieved September 03, 2009, from http://www.cfp.net/become/steps.asp 94. A Networking. When people connect with others who might help them accomplish their personal career and professional goals, they are networking. Finance professionals might learn about employment and continuing education opportunities as well as prospective clients (selling opportunities) through the networking process. Socializing involves personal activities rather than professional activities. Coordinating is linking activi ties together in a systematic or organized way. SOURCE: PD:153 SOURCE: Dalton, M., Hoyle, D.G., & Watts, M.W. (2006). Human relations (3 rd ed.) [pp. 407, 528]. Mason, OH: South-Western Cengage Learning. 95. C Mentor. A mentor is an experienced worker who can act as a guide or helper to less experienced workers. Mentors can be supervisors or coworkers; or, they can be experienced professionals who work in the same industry, but for other companies. A companion is someone who accompanies another person to an event or activity. There is not enough information provided to determine if Jan is Sarah's supervisor, if Jan works as an editor, or if Jan has accompanied Sarah to an activity or event. SOURCE: PD:153 SOURCE: Dalton, M., Hoyle, D.G., & Watts, M.W. (2006). Human relations (3 rd ed.) [pp. 407, 528]. Mason, OH: South-Western Cengage Learning. 96. C Providing incomplete data for audits. Ethical risk management must be implemented by everyone in an organization to protect the company's credibility with its stakeholders. By providing incomplete data for audits, employees are acting unethically and risking the company's future existence. Revealing discounted expenses is an ethical action. Using or not using insurance companies represents external risks for a business. SOURCE: RM:041 SOURCE: Carris, R. & Duska, R. (2001, April 3). Ethics and the risk manager. Retrieved July 20, 2009, from http://www.accessmylibrary.com/coms2/summary_0286-22863226_itm

Sample B FINANCE CLUSTER EXAM KEY 30 97. A Digital dashboards. Digital dashboards are being used in the finance industry to deliver "what-if" scenarios, based on handpicked combinations of monthly data such as line of business, FICO band, county, loan amount, and loan status. The dashboard is fed by a business intelligence and data warehousing environment, supported by Microsoft products. They can review the amounts and number of loans funded or in the pipeline, and then view them by criteria selected by the user. Time value of money calculators are financial software that enables the user to calculate present value, future value, interest rate, payments, net present value, etc. Account reconciliation technology matches and compares figures from accounting records against external sources and reconciles internal account balances to subledgers. Financial reporting and consolidation technology is useful for large companies and overseas operations and is used to combine financial data from the company's subsidiaries. SOURCE: RM:042 SOURCE: Jepson, K. (2008, November 8). Risky business: CU uses dashboard tool to dive more deeply into data and manage its risk. Retrieved July 20, 2009, from http://www.accessmylibrary.com/coms2/summary_0286-35926361_itm 98. A Obtain adequate property insurance. Businesses purchase various types of insurance to transfer risk. To minimize its risk, a business must ensure that it obtains adequate insurance coverage. For one premium amount, a business can obtain comprehensive property insurance that covers losses associated with building damage and equipment and inventory theft or damage. Businesses can select the appropriate coverage based on their specific needs. If the business does not purchase enough insurance, the insurance payout amount may not cover all of the business's losses, which would be more costly to the business. To maintain insurance coverage, businesses need to pay premiums when they are due, which may be on a monthly, quarterly, or annual basis. Disability insurance is a type of insurance that pays a percentage of employees' salaries if they are unable to work for an extended period of time. Lenders often require that businesses carry certain types and levels of insurance before they will loan them money. SOURCE: RM:058 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 312-313). Mason, OH: South- Western Cengage Learning. 99. D Review compliance requirements. Risk is the possibility of loss. Many internal and external factors affect the business's level of risk. Because risk affects the business's financial well-being, it must take steps to minimize risk. The government implements regulations, which are external factors that affect the business. It is important for the business to understand and keep up with the regulations that affect the way the business operates. If the business fails to comply with the regulations, it could be subject to penalties and fines, which can be very costly to the business. Updating customer data, maintaining Intranet security, and implementing business policies are ways that the business controls its internal risks. SOURCE: RM:058 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 22-23, 298-301). Mason, OH: South-Western Cengage Learning. 100. B Planning is an independent business function. Planning affects all areas of the business because it lays the groundwork for the other management functions of organizing, staffing, directing, and controlling. Planning can help to prevent mistakes, and it enables employees to see how their efforts fit into the business's overall plan. SOURCE: SM:001 SOURCE: SM LAP 3 Manage This! (Concept of Management)