MBA Sample Questions

Instructions:

This section contains independent questions, as well as questions related to case-based scenarios. Each of the questions consists of incomplete statements and is followed by four suggested answers or completions. Select the one that is best in each case.

1. Which of the following organizations is most likely to use project financing?

A small start-up
A financial services firm with an extensive client list
A large consumer goods company
A large public utility involved in infrastructure development

2. After an extensive recruitment process to select well-qualified individuals, a large percentage of a company's new hires resigned within the first month of the job. Which of the following is the most likely explanation for this situation?

The training process to prepare the new hires for their assigned tasks was inadequate.
The health benefits provided by the company were not competitive with those of the rest of the industry.
The starting salary for the new hires was not competitive with that in the rest of the industry.
The new hires lacked the basic skills required to learn the job.

3. Some companies have little, if any, net income or earnings, yet seem to have all the money they need for capital expenditures and the like. Which of the following best explains how such companies operate?

They have good cash flows.
They lease capital equipment that does not show up on balance sheets.
They have accounts with many different banks.
They issue warrants to their officers.

4. The Sintar Corporation has just announced that it will pay $1.10 per share in dividends to its stockholders in the current quarter. The prior quarter's dividend was $1.00 per share. The announcement indicates which of the following?

Management is sending a signal that it expects the economy to expand.
Management is sending a signal that the company has good projected future earnings.
While the company was able to pay a higher dividend, management preferred a more conservative figure.
The company has overextended its cash position and may have liquidity problems in the future.

5. A call option gives the holder the right, but not the obligation, to buy. If you are the holder of a call option (having cost you $2) on some stock with an exercise price of $20, it would be best for you to exercise your option when the market price is at:

6. Increased globalization and technological change, particularly in telecommunications, enable more organizations to adopt which of the following organizational structures?

Functional
Matrix
Network
Mechanistic

7. Marketing communications can be used to inform customers about a new brand and its relative advantages while promoting that brand's image. It can increase consumer familiarity with a brand and encourage favorable associations with it. Accordingly, the primary purpose of marketing communication is to:

build brand equity
enhance a company's image
produce short-term sales
provide an additional incentive to buy

8. When the selling division considering an internal transfer has excess demand from outside customers for the product that is being transferred, then the lowest acceptable transfer price for the selling division would be which of the following?

The amount that the purchasing division would have to pay an outside seller to acquire a similar product.
The variable cost of producing a unit of the product.
The full absorption cost of producing a unit of the product.
The market price charged to outside customers, less costs saved by transferring internally.

9. You are considering investing in one of the four securities below, characterized only as follows:

Security	W	X	Y	Z
Expected Return	15%	15%	17%	17%
Standard Deviation	25%	30%	25%	30%

Which security makes the most prudent investment?

Questions 10-12 are based on the following:

Bertha Sunshine entered the travel business after having traveled regularly to the Caribbean and becoming familiar with the businesses in the region. She discovered a market need, and in the 1960s started Sunny Fun Destinations, a travel agency that specializes in providing air and ground transportation, as well as hotel and meal arrangements for locations in the Caribbean.

In the 1970s, she started to see a shift in the market for students traveling during their spring break from school, and her agency expanded as she started to capitalize on the growth. Students who used to travel to Florida were increasingly frequenting destinations in the Caribbean.

Until recently, she had never considered segmenting the spring break market. She simply offered the same travel package to all customers, which included an incentive for organizers of trips with 15 people of more: Trip organizers receive their packages free of charge. However, a recent upswing in negative media publicity has taken Bertha and her staff by surprise. The media has exposed heavy drinking by underage high school and college students at unchaperoned parties at destinations in the Caribbean.

Many parents are throwing up their hands. One parent commented, "The kids are going to go, even if we say they can't." While schools do not officially sanction trips, they make weak attempts to dissuade students from going. Coaches, teachers and occasionally a parent will unofficially organize a trip of 15 or more students and receive the free travel package to stay at a nearby hotel. "The kids are going to go anyway, so I figured I could help out by making sure an adult was present," commented one teacher who unofficially sponsored a trip.

Bertha is faced with an ethical dilemma. Her attorney has cautioned her that she may be more vulnerable than she realizes, at least from a publicity perspective. Bertha wonders how responsible the tour operator should be when she only provides arrangements for transportation, lodgings and food. However, she admits that Sunny Fun Destinations does not check the age of travelers or whether minors are in the company of chaperones.

10. If Sunny Fun Destinations chose to support chaperones on a wide scale, it would not expect to make a profit specifically attributed to this service. Instead, the profit margin would need to be built into the selling price charged to the underage traveler, and the ratio of chaperones to travelers would have to be kept to a level at which the selling price would cover the cost of providing the chaperones. The average cost of airfare is $400 per chaperone and other costs such as the hotel and food allowance amount to $150 per day. All vacation packages are for 6 days, which coincides with the length of the spring break. If a ratio of one chaperone per 15 underage travelers is kept, which amount must be included in the vacation package price charged to each customer in such a group to cover the cost of a cheaper one?

About $27
About $87
$100
$150

11. Bertha has decided to use demographic segmentation to divide her market before she gives any additional consideration to redesigning her product offerings or communications strategies. Which would be the most useful demographic segmentation variable, given Bertha's present situation?

Religion
Education
Age
Socioeconomic status

12. Bertha has concluded that to achieve company growth she must construct a strategic business plan. Her business advisor suggests that the only way to survive is to build a large database of all college students and e-mail them individually about her vacation offerings. Bertha remembers from her MBA program that building a database may be premature and she should do something before investing in the hardware and software. To design her plan, Bertha should first:

conduct a situation analysis
define her field of business
develop a mission statement
stratify the target market

Questions 13-15 are based on the following:

ZAPPY is a manufacturer of hand-held game cartridges. It divides its market into three main market segments: the Americas, Europe and Asia. Financial information for this fiscal year is presented below.

	Americas	Europe	Asia
Sales	$100,000	$70,000	$90,000
Variable costs	$60,000	$42,000	$54,000
Contribution margin	$40,000	$28,000	$36,000
Direct fixed costs	$5,000	$4,000	$3,000
Direct profit	$35,000	$24,000	$33,000
Allocated home office cost	$10,000	$7,000	$9,000
Segment profit	$25,000	$17,000	$24,000

Note that the direct fixed costs refer to entry costs particular to each market, and could be eliminated if ZAPPY exits a market. In addition, the home-office costs have been allocated to the market segments on the basis of division revenue.

Next year, ZAPPY expects sales to be flat in the Americas and in Europe, but expects approximately 20% growth in Asia.

13. The collection period for American and European sales is 30 days, and the collection period for sales in Asia is 45 days. If all markets realize 40% of their total sales during a 2-month winter holiday season and otherwise accrue sales at an even rate during the year, which of the following will be the approximate accounts receivable balance for the company at the end of the next fiscal year? (Assume a 30-day month, 360-day calendar year, and a fiscal year that ends in June.)

$10,000
$16,000
$18,000
$20,000

14. ZAPPY management has seen a recent increase in customer complaints about the game cartridges not fitting into the computer hardware for which they are designed. The problem may arise with a supplier that makes a component of the game cartridge. Each of the following in an appropriate next step for ZAPPY to take EXCEPT:

conduct sampling of the supplier's component before assembly to see whether it meets specifications
check the reliability of the finished ZAPPY product
formally contact the supplier through attorneys, since direct contact is likely to violate antitrust laws
contact customers to have them demonstrate the problems they are having with cartridges

15. Zappy experienced an unusual demand prior to the holiday season and sold out of one of their game cartridge titles in early October. It would not be possible to meet the demand for this particular title in time for the holiday rush. Which of the following should ZAPPY do?

Promote another game title at a lower price.
Offer a rain check and fulfill orders when more cartridges of the sold-out title become available.
Promise to bring in new shipments and hope that customers do not buy another company's game.
Apologize, but do not offer any other options.

Answers

1. D
2. A
3. A
4. B
5. D
6. C
7. A
8. D
9. C
10. B
11. C
12. C
13. D
14. C
15. B