UPDATED 2024/2025 MBA ETS MAJOR FIELD TEST
QUESTIONS WITH CORRECT ANSWERS ALREADY PASSED
AND VERIFIED
Balance Sheet Correct Answer a financial statement that reports a company's assets,
liabilities, and shareholder equity at a specific point in time; Assets = Liabilities +
Shareholder's Equity
Income Statement Correct Answer AKA profit and loss statement; primarily focuses on
the company's revenues and expenses during a particular period;
Net Income = (Total Revenue + Gains) - (Total Expenses + Losses)
Statement of Retained Earnings Correct Answer AKA Statement of Equity; outlines the
changes in retained earnings for a company over a specified period;
Retained Earnings Correct Answer profits held by a company in reserve in order to
invest in future projects rather than distribute as dividends to shareholders
Statement of Cash Flows Correct Answer summarizes the amount of cash and cash
equivalents entering and leaving a company; includes operating, investing, and
financing activities
cash flow Correct Answer $$$ that goes in/out of a business
profit Correct Answer $$$ leftover after Revenues - Expenses
cash from operating activities Correct Answer receipts from sales of goods/services,
interest payments, income tax payments, salaries/wages, rent
ALSO depreciation, inventory, accts receivable, payable
cash from investing activities Correct Answer changes in equipment, assets, or
investments
cash from financing activities Correct Answer cash from investors/banks, dividends,
repayment of debt,
Direct Cash Flow Method Correct Answer determines changes in cash receipts and
payments, which are reported in the cash flow from the operations section.
Indirect Cash Flow Method Correct Answer takes the net income generated in a period
and adds or subtracts changes in the asset and liability accounts to determine the
implied cash flow
liquidity Correct Answer the ease with which an asset, or security, can be converted into
ready cash without affecting its market price; cash is the most liquid of assets
Accrual Basis Accounting Correct Answer revenue or expenses are recorded when a
transaction occurs; follows the matching principle, which says that revenues and
expenses should be recognized in the same period
Cash Accounting Correct Answer recognizes transactions only when payment is
exchanged.
capital stock Correct Answer amount of common and preferred shares that a company
is authorized to issue, recorded on the balance sheet under shareholders' equity;
amount of capital stock is the maximum amount of shares that a company can ever
have outstanding
, asset Correct Answer resource with economic value that an individual, corporation or
country owns or controls with the expectation that it will provide future benefit.
current assets Correct Answer all the assets of a company that are expected to be
sold/used as a result of standard biz ops over the next year;
includes cash/cash equivalents, accts receivable, inventory, prepaid expenses,
marketable securities
non current assets Correct Answer long-term investments not easily converted to cash
or are not expected to become cash within the year; includes investments, intellectual
property, real estate, and equipment
Theory of Constraints Correct Answer every process/op is a series of activities, and
there is a WEAK LINK (aka bottleneck) that hinders output
Special Order Decisions Correct Answer focus on whether a specially priced order
should be accepted or rejected; fixed costs excluded from special orders
make or buy decisions Correct Answer whether or not to manufacture a product in
house or purchase it from 3rd party
transfer pricing Correct Answer allows for estab. of prices for goods/services exchanged
btwn legal entities of the same group
sell or process further decision Correct Answer choice of selling a product now or
processing it further to earn more revenue
forecasting Correct Answer using current and historic cost data to predict future costs
cash budget Correct Answer estimates cash inflows/outflows over a specific period of
time
variance analysis Correct Answer study of deviations of actual behavior vs. forecasted
behavior and how it affects biz performance
cost behavior Correct Answer the ways in which costs react to changes in biz activity
variable costs Correct Answer costs that vary with the quantity of output produced;
include direct labor costs, costs of raw materials used, utility costs
fixed costs Correct Answer Costs that DO NOT vary with the quantity of output
produced; includes interest payments, rent, salaries
break-even analysis Correct Answer tells you how many units of a product must be sold
to cover the fixed and variable costs of production
break-even point Correct Answer the level of production at which the costs of production
= the revenues for a product
target profit Correct Answer expected amount of profit achieved by the end of
designated accounting period; comes from the budgeting process, compared to actual
profit in income statement
absorption costing Correct Answer AKA "full costing"; includes all direct costs assoc. w/
manufacturing a product; allocates fixed overhead costs to all units produced
variable costing Correct Answer includes variable costs directly incurred in production,
no fixed costs
direct cost Correct Answer price that can be directly tied to the production of a
good/service; does not need to be allocated to a product;, direct labor/materials,
manufacturing supplies, wages, fuel/power consumption
indirect cost Correct Answer a cost that cannot be easily/conveniently traced to a
specified cost object; accting/legal expenses, admin salaries, office expenses, utilities,
rent
QUESTIONS WITH CORRECT ANSWERS ALREADY PASSED
AND VERIFIED
Balance Sheet Correct Answer a financial statement that reports a company's assets,
liabilities, and shareholder equity at a specific point in time; Assets = Liabilities +
Shareholder's Equity
Income Statement Correct Answer AKA profit and loss statement; primarily focuses on
the company's revenues and expenses during a particular period;
Net Income = (Total Revenue + Gains) - (Total Expenses + Losses)
Statement of Retained Earnings Correct Answer AKA Statement of Equity; outlines the
changes in retained earnings for a company over a specified period;
Retained Earnings Correct Answer profits held by a company in reserve in order to
invest in future projects rather than distribute as dividends to shareholders
Statement of Cash Flows Correct Answer summarizes the amount of cash and cash
equivalents entering and leaving a company; includes operating, investing, and
financing activities
cash flow Correct Answer $$$ that goes in/out of a business
profit Correct Answer $$$ leftover after Revenues - Expenses
cash from operating activities Correct Answer receipts from sales of goods/services,
interest payments, income tax payments, salaries/wages, rent
ALSO depreciation, inventory, accts receivable, payable
cash from investing activities Correct Answer changes in equipment, assets, or
investments
cash from financing activities Correct Answer cash from investors/banks, dividends,
repayment of debt,
Direct Cash Flow Method Correct Answer determines changes in cash receipts and
payments, which are reported in the cash flow from the operations section.
Indirect Cash Flow Method Correct Answer takes the net income generated in a period
and adds or subtracts changes in the asset and liability accounts to determine the
implied cash flow
liquidity Correct Answer the ease with which an asset, or security, can be converted into
ready cash without affecting its market price; cash is the most liquid of assets
Accrual Basis Accounting Correct Answer revenue or expenses are recorded when a
transaction occurs; follows the matching principle, which says that revenues and
expenses should be recognized in the same period
Cash Accounting Correct Answer recognizes transactions only when payment is
exchanged.
capital stock Correct Answer amount of common and preferred shares that a company
is authorized to issue, recorded on the balance sheet under shareholders' equity;
amount of capital stock is the maximum amount of shares that a company can ever
have outstanding
, asset Correct Answer resource with economic value that an individual, corporation or
country owns or controls with the expectation that it will provide future benefit.
current assets Correct Answer all the assets of a company that are expected to be
sold/used as a result of standard biz ops over the next year;
includes cash/cash equivalents, accts receivable, inventory, prepaid expenses,
marketable securities
non current assets Correct Answer long-term investments not easily converted to cash
or are not expected to become cash within the year; includes investments, intellectual
property, real estate, and equipment
Theory of Constraints Correct Answer every process/op is a series of activities, and
there is a WEAK LINK (aka bottleneck) that hinders output
Special Order Decisions Correct Answer focus on whether a specially priced order
should be accepted or rejected; fixed costs excluded from special orders
make or buy decisions Correct Answer whether or not to manufacture a product in
house or purchase it from 3rd party
transfer pricing Correct Answer allows for estab. of prices for goods/services exchanged
btwn legal entities of the same group
sell or process further decision Correct Answer choice of selling a product now or
processing it further to earn more revenue
forecasting Correct Answer using current and historic cost data to predict future costs
cash budget Correct Answer estimates cash inflows/outflows over a specific period of
time
variance analysis Correct Answer study of deviations of actual behavior vs. forecasted
behavior and how it affects biz performance
cost behavior Correct Answer the ways in which costs react to changes in biz activity
variable costs Correct Answer costs that vary with the quantity of output produced;
include direct labor costs, costs of raw materials used, utility costs
fixed costs Correct Answer Costs that DO NOT vary with the quantity of output
produced; includes interest payments, rent, salaries
break-even analysis Correct Answer tells you how many units of a product must be sold
to cover the fixed and variable costs of production
break-even point Correct Answer the level of production at which the costs of production
= the revenues for a product
target profit Correct Answer expected amount of profit achieved by the end of
designated accounting period; comes from the budgeting process, compared to actual
profit in income statement
absorption costing Correct Answer AKA "full costing"; includes all direct costs assoc. w/
manufacturing a product; allocates fixed overhead costs to all units produced
variable costing Correct Answer includes variable costs directly incurred in production,
no fixed costs
direct cost Correct Answer price that can be directly tied to the production of a
good/service; does not need to be allocated to a product;, direct labor/materials,
manufacturing supplies, wages, fuel/power consumption
indirect cost Correct Answer a cost that cannot be easily/conveniently traced to a
specified cost object; accting/legal expenses, admin salaries, office expenses, utilities,
rent
