Name: 
 

2001 Florida State Farm Business Management Test


Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 
The most common and least complex form of business organization is the
a.
Non-profit organization
c.
Partnership
b.
Sole proprietorship
d.
Corporation
 

 2. 
On the balance sheet, assets are equal to
a.
Liabilities minus owner’s equity
b.
Current liabilities plus long-term debt
c.
Liabilities plus owner’s equity
d.
Accounts receivable minus accounts pay ables
 

 3. 
Which of the following will be least likely to cause a shift in the demand curve for steak?
a.
An increase in income
b.
An increase in wealth
c.
A decrease in the price of chicken and pork
d.
A decrease in the price of steak
 

 4. 
Assume upward sloping supply curves and downward sloping demand curves. Suppose there is a simultaneous change in supply and demand which causes you to correctly predict that market price will increase but the effect on market quantity is unclear. There must have been:
a.
An increase in income
b.
An increase in wealth
c.
An increase in demand but a decrease in supply
d.
An increase in supply but a decrease in demand
 

 5. 
The demand for food is likely to be more _____________ than the demand for meat.
a.
Inelastic
b.
Elastic
c.
Unit elastic
d.
Flexible
 

 6. 
Which of the following is not a decision faced by a firm in a perfectly competitive industry?
a.
How much to produce?
c.
How to produce?
b.
What price to charge?
d.
How much of each input to use?
 

 7. 
The abbreviation, cwt., is:
a.
For hundredweight
c.
The unit for pricing most livestock
b.
Equal to 100 pounds
d.
All of these are correct
 

 8. 
The beef cattle cycle causes the price for steaks to change due to:
a.
Shifts in supply
b.
Cattle producers adjustment to beef prices
c.
The biological nature of livestock production
d.
All of these are correct
 

 9. 
Marginal input cost, MIC:
a.
Is the increase in total cost resulting from producing one more unit of output
b.
Is the increase in total cost resulting from using an additional unit of input
c.
Will be equal to an increase in VC resulting from producing one more unit of output
d.
Both A) Is the increase in total cost resulting from producing one more unit of output and C) Will be equal to an increase in VC resulting from producing one more unit of output
 

 10. 
Ahigher discount rate implies a _________ present value.
a.
Lower
c.
Negative
b.
Higher
d.
None of these are correct
 

 11. 
A market participant who believed that prices are too low and will increase, (or a market where prices are increasing) is referred to as a (an):
a.
Efficient market
b.
Bull market
c.
Thin market
d.
Bear market
 

 12. 
Current assets minus inventory divided by current liabilities is:
a.
The acid test or quick ratio
b.
The current ratio
c.
A ratio for measuring liquidity
d.
Both A) The acid test or quick ratio and C) A ratio for measuring liquidity
 

 13. 
Which of the following will NOT change the current ratio:
a.
Using cash to purchase equipment.
b.
Using cash to pay accrued taxes.
c.
Using cash to pay dividends.
d.
All of the above will change the current ratio.
 

 14. 
A summary of the financial situation for a business over a period of time, such as an accounting period, is a (an):
a.
Balance sheet
b.
Income statement
c.
Break-even analysis
d.
Benefit-cost ratio.
 

 15. 
All of the following are a member of the “DIRTI 5” EXCEPT:
a.
Taxes
b.
Inventory
c.
Interest
d.
Depreciation
 

 16. 
Gator Pharmer is considering growing lettuce rather than tomatoes. The additional revenue from the lettuce is $16,000 while the reduced revenue from the tomatoes is $14,000. It will cost him $13,450 to raise the lettuce but he will not have to pay the $13,300 needed to raise tomatoes. By using partial budgeting it can be shown that the net change in income:
a.
$3,250
b.
$2,550
c.
$1,850
d.
$700
 

 17. 
An amortized loan payment is an example of a (an):
a.
Fixed future value
c.
Annuity
b.
Net present value
d.
None of these are correct
 

 18. 

The process of estimating the market value of an asset or a group of assets (such as a farm), is:
a.
Appreciation
c.
Accrual accounting
b.
Appraisal
d.
Book value
 

 19. 
A combination of two or more firms at the same stage of production or marketing, for example two firms that transport commodities, is:
a.
Vertical integration
c.
Vertical interdependence
b.
horizontal integration
d.
Horizontal interdependence
 

 20. 

Frank farmer has just harvested and put in storage 10,000 bushels of corn at the same time he sells two 5,000-bushel corn futures contracts, he has:
a.
Speculated on the futures market
b.
A call option for two 5,000-bushel corn futures contract
c.
A hedge
d.
A put position
 

 21. 
Which of the following is NOT a discounted cash flow method for making an investment analysis?
a.
Net Present Value
b.
Average Accounting Rate of Return
c.
Payback Analysis
d.
Both (Average Accounting Rate of Return) and (Payback Analysis)
 

 22. 
An enterprise budget:
a.
Is another name for partial budget
c.
Excludes fixed cash costs
b.
Includes variable cash costs
d.
Includes principle expenses
 

 23. 
The discount rate used to calculate the net present value of an investment for the firm is the:
a.
Internal rate of return
b.
Cost of capital
c.
Prime interest rate
d.
Either (internal rate of return) or (Cost of Capital)
 

 24. 
A written arrangement between two parties that is legally enforceable is:
a.
An inferred contract
b.
Not a recommended management practice
c.
Voided by the death of the individual
d.
An expressed contract
 

 25. 
The basis of a futures contract:
a.
Is the difference between the local cash price and futures contract price
b.
Is the sum of the local cash price and futures contract price
c.
Always positive
d.
Always negative
 



 
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