Business Numbers and Decisions — Module Assessment

Question 1

Which statement shows a company's financial position on a single specific day?

Accepted Answer

The balance sheet

Answer

The income statement

Answer

The cash flow statement

Answer

The profit and loss statement

Question 2

Why can a business report a healthy profit yet still be short of cash?

Accepted Answer

Because revenue can be recorded when earned, before the cash is actually received

Answer

Because the balance sheet never has to balance

Answer

Because profit is illegal to report without cash

Answer

Because cash and profit are always identical

Question 3

A product sells for 10 and has a variable cost of 6. What is its contribution margin per unit?

Accepted Answer

4

Answer

10

Answer

6

Answer

16

Question 4

If each sale has a negative contribution margin, what happens as the company grows its sales?

Accepted Answer

Its losses grow larger with every additional sale

Answer

It reaches break-even faster

Answer

It becomes profitable once volume is high enough

Answer

Its fixed costs disappear

Question 5

A bakery finds that when it raises bread prices by 10 percent, sales barely change. This tells us that demand for its bread is:

Accepted Answer

Inelastic, so the price rise will likely increase total revenue

Answer

Elastic, so the price rise will reduce total revenue

Answer

Perfectly balanced, so revenue will stay exactly the same

Answer

Irrelevant, because prices are set only by the seller's costs

Question 6

Which statement best captures Adam Smith's "invisible hand" as economists understand it today?

Accepted Answer

Self-interested exchange can coordinate an economy through prices, but it fails under monopoly, spillover costs, and poor information

Answer

Markets always produce the best outcome for everyone with no exceptions

Answer

A central authority must guide prices for an economy to function

Answer

Businesses acting in self-interest always harm the wider public

Question 7

A founder raises $500,000 from a venture-capital firm in exchange for 20 percent of the company. Compared with taking a bank loan for the same amount, the key difference is that the equity investment:

Accepted Answer

Never has to be repaid, but permanently dilutes the founder's ownership and control

Answer

Must be repaid with interest on a fixed monthly schedule

Answer

Gives the founder more total ownership than before the deal

Answer

Carries no cost of any kind to the founder

Question 8

A profitable, stable manufacturer with steady, predictable orders needs funds to expand. Why might debt be the wiser choice than selling equity?

Accepted Answer

Because its reliable cash flow can service the loan, keeping interest as its only cost and preserving full ownership

Answer

Because debt never has to be repaid, unlike equity

Answer

Because selling equity would guarantee the business fails

Answer

Because lenders take control of the company while investors do not

Question 9

A delivery bike costs 3,000 and is expected to add 1,000 in profit each year. What is its payback period?

Accepted Answer

3 years

Answer

1 year

Answer

30 years

Answer

It cannot be calculated without ROI

Question 10

Which statement best describes what a company valuation is?

Accepted Answer

An estimate of future value that changes as its assumptions change

Answer

A precise, fixed fact that can be looked up like a measurement

Answer

The exact amount of cash a company currently holds in the bank

Answer

A legal figure set by the government that cannot be disputed

Question 11

In a negotiation, what is a party's BATNA?

Accepted Answer

The best alternative they have if no agreement is reached

Answer

The most aggressive opening demand they can justify

Answer

The average price agreed in similar past deals

Answer

The minimum profit margin their company allows

Question 12

A supplier insists on a higher price but really needs steadier orders. Focusing on this underlying need rather than the price illustrates which idea?

Accepted Answer

Looking past positions to the interests behind them

Answer

Choosing pressure over preparation

Answer

Treating the deal as a fixed, zero-sum pie

Answer

Ignoring your BATNA to reach agreement faster

Question 13

A manager can hit this quarter's margin target by cutting the customer support team. Which response best reflects thinking like an owner?

Accepted Answer

Trace the decision through churn, unit economics, valuation and reputation before deciding, since the delayed damage may exceed the immediate saving.

Answer

Make the cut, because the improved reported margin is what matters most.

Answer

Refuse any cost cut, because owners never reduce spending.

Answer

Delay the decision until the quarter closes so the numbers look better either way.

Question 14

In the 2005 survey by Graham, Harvey and Rajgopal, what did a large share of executives say they would do?

Accepted Answer

Sacrifice long-term value, such as by delaying a valuable project, to hit a quarterly earnings target.

Answer

Always prioritise long-term projects regardless of quarterly earnings.

Answer

Refuse to disclose earnings guidance to avoid short-term pressure.

Answer

Allocate all spare capital to research rather than returning it to shareholders.