Chapter 1
Nature of Business
1. A business is an organization that strives for by providing goods and services desiredby its
customers.
a. Profit
b. Satisfaction
c. Efficiency
d. All of the above
2. Which of the following is a Natural resource?
a. Farmhouse
b. Electricity
c. Coal
d. Building
3. The Board of Directors are the most powerful decision makers of a business. If this is true, what factor can influence
the decision of the Board of directors. Choose the best answer from the following:
a. Opinion of customers
b. Knowledge of the business
c. Employee feedback
d. Opinion of shareholders
4. Which of the following are not considered as External Stakeholders of a company?
a. lenders
b. shareholders
c. both correct
d. both incorrect
5. Which of the following is a reason why the government has an interest in all business organizations?
a. Businesses pay tax on profits, so government has an interest in company profitability.
b. Government wants to encourage business investments.
c. The government is interested in regulating business activity
d. All of the above
6. Business organizations buy goods and services from suppliers. Suppliers will usually agree to allow their
customers some credit only if:
a. Customer will pay what is owed and will not become bad debt
b. supplier has customer’s personal information
c. The government allows sales on credit.
d. The government gives a guarantee that it will provide subsidy on credit sales
7. Firms typically require financial support beyond the capital injected by the owners or their personal assets being used
in the business. Which stakeholder could be a source of funding for a new business?
PRC-5 Question Bank by Shahbaz Saeed ACA|1
, a. Lenders and creditors
b. Banks
c. Both correct
d. Both incorrect
8. Which of the following are the advantages that a government of a free-market economy wouldrecognize and
allow businesses to be set up?
a. businesses serve consumers
b. businesses create work for the business owners and employees
c. businesses reduce the country’s unemployment
d. All of the above
9. Which of the following are the main concerns of shareholders in a business?
a. Falling profits and a falling share price
b. A proposal to invest in a major project where the business risk is high
c. A proposed takeover bid for another company or from another company
d. All of these
10. Managers in the middle and junior ranks of a management hierarchy might have ambitions to become senior
managers. Which of the following may be the interests of junior managers and other employees?
a. pay and working conditions
b. job security and satisfaction
c. Both correct
d. Both incorrect
11. Within a business organization, internal stakeholders can be categorized into groups. Which of the following are
NOT internal stakeholders?
a. Mr. Masood who owns 20% shares of the company
b. executive directors and senior managers
c. finance managers
d. Supplier of machinery
12. By using the ________________efficiently, a company can produce more goods and services with the same
resources.
a. Machinery
b. Human resources
c. Factory space
d. Factors of production
13. What is the key question to answer when developing a mission statement?
a. What is our business?
b. What is our value to the customer?
c. What will our business be?
d. All of the above
e. None of the above
14. _____________________ are the people who combine the inputs of natural resources, labor, and capital to
PRC-5 Question Bank by Shahbaz Saeed ACA|2
, produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.
a. Factory labor
b. Employees
c. Directors
d. Entrepreneurs
15. What is the single element that sets a mission statement apart from a vision statement?
a. mission statement is present focused while vision statement is the future outlook
b. Mission statement is longer than a vision statement
c. Mission statement is shorter than a vision statement
d. Vision statements are considered to be more important than mission statements
16. Identify the correct hierarchy of Organizations’ goals:
a. Vision, Goals, Mission, Objectives
b. Mission, Vision, Goals, Objectives
c. Vision, Mission, Goals, Objectives
d. None of these
17. How many factors of production are there in a business?
a. Three
b. Four
c. Five
d. None of these
18. Which of the following are not internal stakeholders?
a. Board of directors
b. Shareholders
c. Non-executive directors
d. Employees
19. To prevent a company from being dominated by the personal interests of the executive directors, what kind of
stakeholders are added to the organization?
a. Non-executive director
b. Government
c. Both correct
d. Both incorrect
20. Customer buys a product/ service because he/ she believes to receive ___________ against the money.
a. Value
b. Respect
c. Convenience
d. Quality
21. Repayment installments of a loan comprise of:
a. Principal and interest
b. Principal and dividend
c. Both correct
PRC-5 Question Bank by Shahbaz Saeed ACA|3
, d. Both incorrect
22. Generally, the Mission statement is issued by____________
a. Board of Directors
b. Government
c. SECP
d. General public
23. Machines, equipment, plant etc. are which kind of factor of production?
a. Capital
b. Natural resource
c. Goods
d. None of these
24. The investors who purchase stock are called _______
a. stockholders
b. shareholders
c. Both correct
d. Both incorrect
25. Shares are also called __________________
a. Stock
b. Securities
c. Both correct
d. Both incorrect
26. As per Mendelow's "power-interest matrix", the stakeholders who have low power but high interest in business,
should be:
a. Monitored only
b. Keep informed
c. Managed closely
d. Ignored
27. What kind of plans deal with day-to-day activities and targets?
a. Strategic
b. Tactical
c. Operational
d. Visionary
28. Labor unions have power to influence the business because they have:
a. Huge funds
b. Foreign investments
c. Claim on human resources
d. CEO in their pockets
29. Which one of the followings is not a connected stakeholder?
a. Non-executive directors
PRC-5 Question Bank by Shahbaz Saeed ACA|4
Nature of Business
1. A business is an organization that strives for by providing goods and services desiredby its
customers.
a. Profit
b. Satisfaction
c. Efficiency
d. All of the above
2. Which of the following is a Natural resource?
a. Farmhouse
b. Electricity
c. Coal
d. Building
3. The Board of Directors are the most powerful decision makers of a business. If this is true, what factor can influence
the decision of the Board of directors. Choose the best answer from the following:
a. Opinion of customers
b. Knowledge of the business
c. Employee feedback
d. Opinion of shareholders
4. Which of the following are not considered as External Stakeholders of a company?
a. lenders
b. shareholders
c. both correct
d. both incorrect
5. Which of the following is a reason why the government has an interest in all business organizations?
a. Businesses pay tax on profits, so government has an interest in company profitability.
b. Government wants to encourage business investments.
c. The government is interested in regulating business activity
d. All of the above
6. Business organizations buy goods and services from suppliers. Suppliers will usually agree to allow their
customers some credit only if:
a. Customer will pay what is owed and will not become bad debt
b. supplier has customer’s personal information
c. The government allows sales on credit.
d. The government gives a guarantee that it will provide subsidy on credit sales
7. Firms typically require financial support beyond the capital injected by the owners or their personal assets being used
in the business. Which stakeholder could be a source of funding for a new business?
PRC-5 Question Bank by Shahbaz Saeed ACA|1
, a. Lenders and creditors
b. Banks
c. Both correct
d. Both incorrect
8. Which of the following are the advantages that a government of a free-market economy wouldrecognize and
allow businesses to be set up?
a. businesses serve consumers
b. businesses create work for the business owners and employees
c. businesses reduce the country’s unemployment
d. All of the above
9. Which of the following are the main concerns of shareholders in a business?
a. Falling profits and a falling share price
b. A proposal to invest in a major project where the business risk is high
c. A proposed takeover bid for another company or from another company
d. All of these
10. Managers in the middle and junior ranks of a management hierarchy might have ambitions to become senior
managers. Which of the following may be the interests of junior managers and other employees?
a. pay and working conditions
b. job security and satisfaction
c. Both correct
d. Both incorrect
11. Within a business organization, internal stakeholders can be categorized into groups. Which of the following are
NOT internal stakeholders?
a. Mr. Masood who owns 20% shares of the company
b. executive directors and senior managers
c. finance managers
d. Supplier of machinery
12. By using the ________________efficiently, a company can produce more goods and services with the same
resources.
a. Machinery
b. Human resources
c. Factory space
d. Factors of production
13. What is the key question to answer when developing a mission statement?
a. What is our business?
b. What is our value to the customer?
c. What will our business be?
d. All of the above
e. None of the above
14. _____________________ are the people who combine the inputs of natural resources, labor, and capital to
PRC-5 Question Bank by Shahbaz Saeed ACA|2
, produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.
a. Factory labor
b. Employees
c. Directors
d. Entrepreneurs
15. What is the single element that sets a mission statement apart from a vision statement?
a. mission statement is present focused while vision statement is the future outlook
b. Mission statement is longer than a vision statement
c. Mission statement is shorter than a vision statement
d. Vision statements are considered to be more important than mission statements
16. Identify the correct hierarchy of Organizations’ goals:
a. Vision, Goals, Mission, Objectives
b. Mission, Vision, Goals, Objectives
c. Vision, Mission, Goals, Objectives
d. None of these
17. How many factors of production are there in a business?
a. Three
b. Four
c. Five
d. None of these
18. Which of the following are not internal stakeholders?
a. Board of directors
b. Shareholders
c. Non-executive directors
d. Employees
19. To prevent a company from being dominated by the personal interests of the executive directors, what kind of
stakeholders are added to the organization?
a. Non-executive director
b. Government
c. Both correct
d. Both incorrect
20. Customer buys a product/ service because he/ she believes to receive ___________ against the money.
a. Value
b. Respect
c. Convenience
d. Quality
21. Repayment installments of a loan comprise of:
a. Principal and interest
b. Principal and dividend
c. Both correct
PRC-5 Question Bank by Shahbaz Saeed ACA|3
, d. Both incorrect
22. Generally, the Mission statement is issued by____________
a. Board of Directors
b. Government
c. SECP
d. General public
23. Machines, equipment, plant etc. are which kind of factor of production?
a. Capital
b. Natural resource
c. Goods
d. None of these
24. The investors who purchase stock are called _______
a. stockholders
b. shareholders
c. Both correct
d. Both incorrect
25. Shares are also called __________________
a. Stock
b. Securities
c. Both correct
d. Both incorrect
26. As per Mendelow's "power-interest matrix", the stakeholders who have low power but high interest in business,
should be:
a. Monitored only
b. Keep informed
c. Managed closely
d. Ignored
27. What kind of plans deal with day-to-day activities and targets?
a. Strategic
b. Tactical
c. Operational
d. Visionary
28. Labor unions have power to influence the business because they have:
a. Huge funds
b. Foreign investments
c. Claim on human resources
d. CEO in their pockets
29. Which one of the followings is not a connected stakeholder?
a. Non-executive directors
PRC-5 Question Bank by Shahbaz Saeed ACA|4
