ETS MBA ACTUAL EXAM QUESTIONS AND ANSWERS(VERIFIED BY PROFESSORS)

1. Which of the following organizations is most likely

to use project financing?

(A) A small start-up

(B) A financial services firm with an extensive

client list

(C) A large consumer goods company

(D) A large public utility involved in

infrastructure development

D

2. After an extensive recruitment process to select

well-qualified individuals, a large percent 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?

(A) The training process to prepare the new hires

for their assigned tasks was inadequate.

(B) The health benefits provided by the company

were not competitive with those of the rest

of the industry.

(C) The starting salary for the new hires was not

competitive with that of the rest of the

industry.

(D) The new hires lacked the basic skills required

to learn the job.

A

3. Prosco Ltd. employs a process cost system.

Inspection of units occurs at the 50 percent mark.

Defective units are then removed from the process,

and their cost ($4.50) is absorbed by the good units.

Prosco has recently been approached by a firm

wishing to buy the defective units for a special use.

The firm would require Prosco to modify the

defective units at a unit cost of $2.00. If Prosco

sells the defective units to the firm for $5.00 each,

how would Prosco's reported income be affected?

(A) It would decrease by $4.50 per unit sold.

(B) It would decrease by $1.50 per unit sold.

(C) It would increase by $3.00 per unit sold.

(D) It would increase by $5.00 per unit sold.

C

4. Some companies have little, if any, net income or

earnings, yet they seem to have all the money they

need for capital expenditures. Which of the

following best explains how such companies

operate?

(A) They have good cash flows.

(B) They lease capital equipment that does not

show up on balance sheets.

(C) They have accounts with many different

banks.

(D) They issue warrants to their officers.

A

5. 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?

(A) Management is sending a signal that it

expects the economy to expand.

(B) Management is sending a signal that the

company has good projected future earnings.

(C) While the company was able to pay a higher

dividend, management preferred a more

conservative figure.

(D) The company has overextended its cash

position and may have liquidity problems in

the future.

B

6. Wave Inc. is a telecommunications company that

wants to become involved in e-commerce. It has to

decide whether to develop a business-to-business or

business-to-consumer strategy. As Wave's strategic

planner, you have been asked to develop a business

plan for each opportunity and present these to senior

management. The answer to which of the following

questions is most important to know before starting

your plan?

(A) What are the company's core competencies?

(B) What is the potential market size?

(C) What is the impact on the estimated revenue?

(D) Does the company have e-commerce

capabilities

A

7. If you were 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

(A) $18

(B) $20

(C) $22

(D) $24

D

8. Increased globalization and technological change,

particularly in telecommunications, enable more

organizations to adopt which of the following

organizational structures?

(A) Functional

(B) Matrix

(C) Network

(D) Mechanistic

C

9. A new local Super Store publicly announced that

when more than three people are standing in line

at cash registers, additional checkout-lines will

be opened. After the announcement, customers

quickly noticed that the additional lines were not

opened until six or seven people were standing in

line. This indicates a gap between

(A) customer expectation and management

perception of customer expectation

(B) management perception of customer

expectation and service quality

specifications

(C) customer expectation and internal

management communication

(D) actual service delivery and how service quality

was communicated

D

10. All of the following can be considered in the

evaluation of a business unit EXCEPT

(A) wages paid to labor

(B) projected annual revenues of competitors

(C) the cost of materials used in the production

process

(D) the price at which goods produced are sold

B

11. The sales division of a corporation is considering an

internal product transfer because of excess demand.

What is the lowest acceptable transfer price for the

product?

(A) The amount that the company would have to

pay to acquire a similar product

(B) The variable cost of producing a unit of

product

(C) The full absorption cost of producing a unit of

product

(D) The difference between the market price and the

costs recaptured by transferring internally

D

12. 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

of return

25% 30% 25% 30%

Which security makes the most prudent investment?

(A) W

(B) X

(C) Y

(D) Z

C

13. The Mart, a large retail chain, is considering

whether or not to close down a division. The

division's projected income statement for the next

year follows.

Sales $20,000,000

Cost of goods sold 17,000,000

Gross profit 3,000,000

Operating costs:

Building rents $2,500,000

Store clerk salaries 3,000,000

Store utilities 1,200,000

Allocated home office cost 700,000

Total operating costs 7,400,000

Anticipated loss ($4,400,000)

The building rents arise from long-term leases that

cannot be cancelled. If The Mart closed down this

division, what would be the increase in company

profits?

(A) $700,000

(B) $1,200,000

(C) $3,000,000

(D) $4,400,000

B

14. Using manufacturing-based criteria to measure

product quality, which of the following should

you monitor on a regular basis?

(A) Customers' subjective perceptions of the

reliability of the product when in use

(B) The conformance of the finished product

to agreed-to product specifications

(C) Objective, third-party tests of the

performance of the product

(D) Warranty repair histories of the finished

product

B

15. The common stock of ABC, Inc. has a current

market price of $52 per share. Dividends have

been $5 a share for several years and are not

expected to change. The dividend yield of the

stock of comparable companies is 10%. Which

recommendation would you make regarding

ABC, Inc. stock?

(A) Purchase at $52 per share because that is a

fair price.

(B) Purchase at $52 per share because the

dividend yield will be 10.1%.

(C) Don't purchase, because the dividend yield

will be only 2%.

(D) Don't purchase for more than $50 per share.

D

16. Increasing a regular quarterly dividend payment

may indicate which of the following about a

corporation?

I. Improved earnings prospects for the firm

II. A reduction in agency problems of free

cash flow

III. A reduction in tax payments for shareholders

(A) I only

(B) II only

(C) I and II only

(D) II and III only

C

17. Littleton, Inc., has fixed costs of

$75,000 per month, variable costs of

$5 per unit, and a sales price per unit

of $30. What is the break-even quantity

per month?

(A) 2,143

(B) 2,500

(C) 3,000

(D) 15,000

C

18. Which of the following should be reported net

of tax on a corporation's income statement?

(A) Discontinued operations

(B) Operating income

(C) Gross profit

(D) Gain on sale of delivery truck

A

19. If a multinational company cannot change the

level of political risk in foreign markets, which of

the following tactics would most likely offset

possible losses?

(A) Maintain control of distribution

(B) Use currency futures contracts

(C) Finance debt locally

(D) Maintain control of key inputs

C

20. Blessed Bundles is a regional clicks-and-mortar

retail chain that sells maternity and baby products.

It uses data from past purchases to study

customers' product preferences, and it uses server

tracking logs to study customers' online shopping

behavior. Which of the following correctly

describes the two types of market research data

the company is using?

Past Purchases Server Tracking Logs

(A) Transactional Clickstream

(B) Clickstream Transactional

(C) Private Public

(D) Public Private

A

21. If Fjord successfully implements the new

technology, the move will most likely result in

(A) a decrease in total and variable cost and an

increase in fixed cost

(B) a decrease in total cost, an increase in

variable cost, and a decrease in fixed cost

(C) an increase in revenue and a decrease in

variable cost and fixed costs.

(D) an increase in revenue, a decrease in variable

cost, and an increase in fixed cost

A

22. Biggie Mart is a national chain of hypermarkets

that carries a narrow line of inexpensive, standard

furniture items. Biggie Mart offers to carry some

of Fjord's furniture products if Fjord will provide

several other products at reduced prices that will

be sold under Biggie Mart's Home with Biggie

brand name. Home with Biggie is which

of the following kinds of brands?

(A) Parent

(B) Private

(C) Flanker

(D) Corporate

B