2008 DECA Ontario Provincials
Test 957
FMDM
FINANCIAL ANALYSIS
1
1. What is one way that international banking impacts the financial services industry throughout the world?
A. Controls interest rates
C. Eliminates regulations
B. Affects services and fees
D. Increases value of investments
2. Which of the following is an example of an embargo:
A. A country refusing to negotiate trade agreements
B. A country placing a tax on certain imports
C. A country limiting the amount of monthly imports
D. A country banning exports to another country
3. Mr. Jones operates a small business serving several states. He needs to communicate with his customers but does not
need an immediate response. The most economical method of delivering his messages would be through
A. fax.
C. e-mail.
B. business letters.
D. telephone.
4. What do business employees often need to do before they are able to write proposals?
A. Evaluate technical skills
C. Contact the customer
B. Analyze personal biases
D. Research the problem
5. A request made by an employee to a supervisor is an example of what type of communication?
A. Grapevine
C. Upward
B. Downward
D. Horizontal
6. When conducting staff meetings, what might managers do to make sure they cover all of the topics on the agenda?
A. Limit discussion time
C. Schedule an all-day session
B. Present information in visual form
D. Ask for written feedback
7. Businesses whose employees demonstrate a customer-service mindset often benefit from
A. rapid employee turnover.
C. reduced complaints.
B. increased costs.
D. decreased employee morale.
8. "I buy only the most expensive brands" is a statement that characterizes the __________ customer.
A. domineering/superior
C. suspicious
B. disagreeable
D. slow/methodical
9. What should salespeople avoid doing when handling customer complaints?
A. Empathizing with the customer
C. Discussing the problem
B. Listening carefully
D. Arguing politely
10. Which of the following is a characteristic of a tight money supply:
A. Employment increases.
C. Businesses expand.
B. Consumers spend more.
D. Credit is expensive.
11. The federal government oversees the charter, examination, and regulation of all national banks through the
A. Supreme Court.
C. Federal Reserve.
B. Federal Deposit Insurance Corporation.
D. Office of the Comptroller of the Currency.
12. What is the monetary policy of the Federal Reserve System sometimes intended to do?
A. Guarantee a minimum wage
C. Pay for national defense
B. Monitor government spending
D. Slow down the economy
Copyright © 2008 by Marketing Education Resource Center®, Columbus, Ohio
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
2
13. The dollar value of all goods and services produced each year within a country's geographic boundaries is referred to
as the
A. gross domestic product.
C. consumer price index.
B. leading indicator.
D. consumer catalog.
14. Which of the following is an example of a government making an economic decision that affects financial institutions:
A. Monitoring exports
C. Storing money
B. Paying tariffs
D. Raising taxes
15. Which of the following factors does not seriously affect fluctuating stock prices in the financial community:
A. Stable economy
C. Fear
B. Time of year
D. Positive or negative publicity
16. When the price of a product is high, consumer demand will usually be
A. high.
C. unchanged.
B. low.
D. about average.
17. Who decides how the economic questions will be answered in a communist command economy?
A. Individuals
C. Businesses
B. Government
D. Venture team
18. A government's fiscal policies that are intended to encourage economic growth are known as __________ policies.
A. realistic
C. appropriate
B. complementary
D. expansionary
19. Tom runs a company which produces pencils. In order to stay in business, Tom must
A. employ a sales force.
C. make a profit.
B. order more machinery.
D. have a distribution plan.
20. One advantage of labor specialization by job task is that workers'
A. morale improves.
C. dependency increases.
B. transfers within the industry are easier.
D. pride in the finished product increases.
21. Which of the following is an economic factor that often causes consumers to reduce spending:
A. Family issues
C. Low prices
B. Personal needs
D. Interest rates
22. People having job skills but being out of work because the jobs that require those skills do not currently exist is an
example of __________ unemployment.
A. structural
C. organizational
B. national
D. industrial
23. What should a person always do when adapting to a new situation?
A. Learn from another person's mistakes
C. Resolve a difficult problem
B. Control undesirable circumstances
D. Make a choice
24. You have been asked to form a team of employees to identify the company's image among current customers. As a
laissez-faire leader, you will work best with team members who are
A. creative, somewhat independent, and empathetic.
B. patient, accepting, and cooperative.
C. dependent, quiet, and withdrawn.
D. creative, self-confident, and self-disciplined.
25. Team building within an organization often includes
A. recruiting.
B. training.
C. staffing.
D. interviewing.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
26. Recognition is most effective if it
A. is something everyone can use, such as money or a gift certificate.
B. is something the giver would like to receive.
C. informs others of the accomplishment.
D. matches the person's cultural background.
27. A person with vision for the future wants to
A. avoid making mistakes.
B. create positive change.
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C. make important decisions.
D. set specific goals.
28. What is one factor that businesses take into consideration when determining the creditworthiness of customers?
A. Retirement plan
C. Payment record
B. Marital status
D. Education level
29. One reason customers who pay for products with a credit card usually want to know the interest charges is because
those charges
A. add to the cost of the purchase.
C. are calculated on a yearly basis.
B. increase the retail price.
D. generate the profit for the business.
30. Which of the following speculative risks would most likely increase a business's income:
A. Offering health benefits to employees
C. Buying inexpensive liability insurance
B. Investing in developing a new product
D. Receiving a settlement for fire damage
31. Developing an efficient system to locate, gather, process, and use information for marketing decisions is one way that
businesses can reduce
A. taxes.
C. sales.
B. debts.
D. risks.
32. Which of the following is a characteristic of a profit-and-loss statement:
A. Lists assets and liabilities
B. Is the same as a balance sheet
C. Shows the owner's financial position
D. Summarizes expenses and revenue from sales
33. Sales forecasters must consider changes in the competition, the market, and the economy, which are types of
__________ changes.
A. internal
C. marketing
B. operational
D. external
34. As a business owner, you are trying to decide whether to expand. Cost/benefit analysis would tell you to expand
A. as long as additional benefits exceed additional costs.
B. only when additional benefits are twice as much as additional costs.
C. as long as additional benefits match additional costs.
D. when you can see a break-even point within five years time.
35. When interpreting financial statements, a business determines that a loss occurs if the statements indicate
A. revenue is greater than expenses.
C. sales exceed expenses.
B. expenses are less than sales.
D. sales are less than expenses.
36. What is the rate of return on common stock that currently sells for $30, pays an annual dividend of $2.50, and is
expected to sell for $32 at the end of the year?
A. 15%
C. 8%
B. 21%
D. 13%
37. One way to optimize the rate of return on an investment is by investing in
A. savings accounts.
C. certificates of deposit.
B. government securities.
D. aggressive growth funds.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
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38. With a retirement annuity, financial-service providers cannot distribute annuity payments by which of the following
methods:
A. Capital expenditure
C. Annuitization
B. Lump sum payment
D. Systematic withdrawals
39. When the success of a project's financial plan requires achieving a specific profit margin, the manager can keep track
of a margin increase or decrease by
A. writing in a checkbook.
C. using a software program.
B. operating a cash register.
D. reading an odometer.
40. Calculate the tax liability of a single client based on the following information: had adjusted gross income of $42,560,
was entitled to the standard deduction of $7,000 and an exemption of $3,300, and earned $275 in interest.
A. $32,535
C. $32,260
B. $31,985
D. $31,720
41. When making estimated tax payments, individuals usually base the amount they pay on
A. the difference between profit and loss.
C. predictions of long-term income.
B. the funds available at the time.
D. what they paid in taxes last year.
42. Why do tax preparers often complete various tax schedules for clients?
A. To calculate exemptions
C. To list allowances
B. To itemize deductions
D. To determine wage rates
43. When determining a client's financial situation, financial planners calculate the value of assets and liabilities to estimate
A. total debt.
C. cash flow.
B. net worth.
D. living expense.
44. Asset-management services often involve managing a client's
A. investments.
C. will.
B. medical care.
D. housing needs.
45. Financial institutions develop a system to maintain and report information about income and expenses in order to
A. follow an investment strategy.
C. eliminate the possibility of risk.
B. adhere to a compliance plan.
D. determine a way to diversify.
46. Which of the following is a factor that businesses consider when determining the overall cost of raising capital by
obtaining a bank loan:
A. Interest rates
C. Trade credit
B. Legal fees
D. Cash flow
47. After developing a budget, businesses usually implement the budget by
A. calculating costs.
C. estimating revenues.
B. paying expenses.
D. generating sales.
48. When evaluating future cash flows from a particular asset, businesses do which of the following:
A. Rank the cash flows from least to greatest.
B. Assign a probability to each cash flow.
C. Assess the importance of each cash flow to the business.
D. Release the cash flows currently retained.
49. In order to forecast your company's financing needs, you've prepared a pro forma balance sheet for the coming year
that includes assets of $1.25 million, liabilities of $450,000, and retained earnings of $525,000. How much outside
financing will your company need in the coming year?
A. $62,500
C. $275,000
B. $975,000
D. $375,000
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
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50. Businesses need to have accurate information about the level of sales, anticipated profits, and the industry growth rate
in order to determine the business's financial
A. policies and procedures.
C. accounts and investments.
B. strengths and weaknesses.
D. stocks and bonds.
51. Which of the following represents a similarity between a trend analysis and an industry comparison:
A. Providing clues about probable financial improvement or decline
B. Showing possible financial outcomes
C. Demonstrating the need for a balanced budget
D. Giving reasons why a business succeeds or fails
52. When determining the optimal mix and type of assets to acquire, businesses consider their long-term financial needs
as well as the need to
A. issue stock dividends.
C. access cash quickly.
B. purchase property.
D. calculate income taxes.
53. When evaluating alternative financing plans, a business should look for the plan that
A. implements the company's mission statement.
B. encourages the company to grow.
C. promotes loyalty to the company.
D. fulfills the company's specified requirements.
54. Deciding how to raise funds for a business usually involves considering whether it will be more effective to use
__________ financing.
A. public or private
C. venture or angel
B. bank or credit union
D. debt or equity
55. What is the appropriate use of a large cash surplus?
A. It should be issued to shareholders as a dividend.
B. It should be set aside for unexpected events such as fires.
C. It should remain in the cash budget for future operations.
D. It should be used for profitable projects or invested, even for the short term.
56. Which of the following is a factor that businesses usually consider when deciding when to spend cash:
A. Required loan schedule
C. Projected interest rate
B. Estimated capital budget
D. Preferred cash balance
57. One reason why some businesses decide to factor accounts receivable is to obtain
A. needed cash.
C. equity financing.
B. trade credit.
D. leverage.
58. Which of the following is a source of short-term financing that is often easier for new businesses to obtain than
traditional bank loans:
A. Trade credit
C. Private investors
B. Venture capital
D. Public offerings
59. When managing inventory by the "just-in-time" system, which of the following is necessary for success:
A. Effective sales performance
B. Effortless transportation logistics
C. Seamless coordination between manufacturers and suppliers
D. Clear communication between executives and employees
60. When computing the cost of inventory, businesses include the cost of purchasing the items as well as the cost of
A. shipping and transporting.
C. preparing visual displays.
B. handling and storing.
D. marking prices.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
61. When projecting future operations, it is important for businesses also to develop projected
A. stock options.
C. financial plans.
B. tax schedules.
D. inventory methods.
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62. When selecting sources of capital, businesses consider their mix of debt and equity, also called their capital
A. structure.
C. risk.
B. budget.
D. model.
63. A business comparing standard costs with actual costs is an example of
A. predicting returns.
C. estimating payables.
B. calculating expenses.
D. analyzing variances.
64. When interpreting a quarterly report, investors should note that the financial statements provided are usually
A. not audited.
C. intended to clarify the annual report.
B. written in a non-financial way.
D. not meant for individual investors.
65. Which of the following is an expense source that businesses evaluate to control costs:
A. Receivables
C. Inventory
B. Credit
D. Interest
66. One important similarity between horizontal and vertical financial data analyses is the comparison of figures
A. within the same time period.
C. from different time periods.
B. from different categories.
D. within the same category.
67. The gain or loss associated with an investment is the
A. dividend.
C. capital.
B. risk.
D. return.
68. Accelerated depreciation methods, such as sum-of-the-year's-digits, produce higher initial tax savings and
A. may make a given investment more attractive.
B. may make a given investment less attractive.
C. have no effect on the attractiveness of a given investment.
D. should be the determining factor in choosing an investment.
69. "Debt and equity financing" can be restated as the difference between
A. investing and financing.
C. capital and borrowing.
B. lending and owning.
D. assets and liabilities.
70. A characteristic of a good pre-employment test is that it should be
A. easy.
C. reliable.
B. biased.
D. personal.
71. Information about an employee's current home address as well as information about pay level and benefits are
maintained in the employee's
A. insurance document.
C. performance review.
B. job application.
D. personnel record.
72. Which of the following is a reason for presenting an overview of the company to new employees:
A. It helps them feel a part of the company.
B. It lets them know what is expected of them.
C. It gives them a detailed explanation of their jobs.
D. It provides them with specific product information.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
73. A manager who coaches his/her employees should remember that
A. critical feedback is the most important element of coaching.
B. most employees need a lot of guidance and time.
C. employees have different learning styles.
D. employee productivity rates improve quickly because of coaching.
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74. Complaints regarding job evaluations could be categorized as complaints about
A. coworkers.
C. supervision/management.
B. physical surroundings.
D. pay.
75. Marketing is many interrelated activities whose main purpose is to
A. meet consumers' noneconomic needs.
C. direct the flow of goods and services.
B. serve large businesses.
D. follow the steps in the marketing concept.
76. Why is it important for businesses to maintain records about the quantities and types of products that customers are
purchasing?
A. To plan credit programs
C. To forecast future sales
B. To develop new displays
D. To organize special events
77. Companies obtain internal information about the various business activities they need to operate effectively by
monitoring
A. government statistics.
C. industry trends.
B. trade publications.
D. internal records.
78. The most important reason why workplace accidents which do not result in injuries should be reported to supervisors is
because
A. the next accident could result in an injury.
C. the report prevents future liability.
B. this is required by state law.
D. this is an OSHA requirement.
79. Before analyzing potential products to purchase for a firm, the industrial buyer should first
A. calculate the quantity needed.
C. search for qualified sources.
B. choose an order routine.
D. determine the product needed.
80. A company that makes one specialty item at a time is using what type of production system?
A. Assembly line
C. Mass
B. Batch
D. Unit
81. A primary reason for a business to analyze and update its procedures is to
A. boost its spending levels.
C. decrease its inventory.
B. reduce its outputs.
D. increase its efficiency.
82. Why do managers continually evaluate the progress of a project?
A. To stay on target
C. To send a message
B. To prepare charts
D. To organize the group
83. What was a business's net profit for last year if it had income from sales of $936,500, operating expenses of $278,150,
depreciation of $14,750, and cost of goods sold was $505,250?
A. $138,350
C. $431,250
B. $153,100
D. $416,500
84. An operating expense incurred by a business when it fails to collect its receivables is called __________ expense.
A. advertising
C. bad debt
B. interest
D. administrative
85. Which of the following techniques for developing ideas is especially useful for project planning:
A. Concept mapping
C. Role-playing
B. Brainstorming
D. Redefining
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
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86. After a job interview, you realize that you forgot to mention something important during the interview. What action
should you take?
A. Phone the interviewer to explain it.
C. Fax an urgent message to the interviewer.
B. Mention it in a follow-up letter.
D. Go back to the business to tell the interviewer.
87. What is an important quality that all résumés should possess?
A. Creativity
B. Length
C. Neatness
D.
Complexity
88. A three-day exhibition in a convention hall featuring the most up-to-date computer equipment, software, and related
goods is an example of which of the following:
A. Warehouse club
C. Floor plan
B. Central market
D. Trade show
89. Which of the following is an example of a financial institution that provides deposit services:
A. Investment firm
C. Credit union
B. Mortgage company
D. Insurance agency
90. In order to decide which tasks are most important and the order in which the tasks are to be completed, planners can
use the
A. GDP Factor.
B. ABC Principle.
C. RH Factor.
D.
XYZ Principle.
91. Two primary factors in determining what financial goods or services to offer are consumer demand and
A. product longevity.
C. staff acceptance.
B. product likeability.
D. product profitability.
92. The minimum length of time a customer who purchased a government savings bond after February, 2003 must hold
the bond before it is redeemable is __________ months.
A. 6
B. 12
C. 18
D.
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93. What is a financial plan intended to help individuals achieve?
A. Financial goals
C. Social status
B. Significant wealth
D. Financial careers
94. When obtaining financial product information from appropriate individuals, financial advisers usually
A. provide clients with a number of portfolio options.
B. retrieve a mutual fund's performance data from a reliable source.
C. analyze the trends of a particular industry.
D. expand the capabilities of the financial firm.
95. Which of the following is one way that businesses can benefit from substitute selling:
A. More contentment
C. Improved reputation
B. Increased satisfaction
D. Added convenience
96. What should salespeople try to establish if customers object to buying products they want?
A. Purpose
B. Motive
C. Cost
D.
Need
97. What type of financial product might an investment company recommend to a business that is establishing a retirement
program for its employees?
A. Promissory notes
C. Demand deposits
B. Certified checks
D. Mutual funds
98. Salespeople should make suggestions for additional purchases before the original item has been
A. paid for.
B. selected.
C. identified.
D.
demonstrated.
99. As president of her large company, which should be Sandra's first priority?
A. Supervising
B. Planning
C. Hiring
D.
Producing
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
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100. A manager who takes credit for the work his/her employees perform without giving credit to the person(s) who actually
did the work is acting in a(n) __________ manner.
A. ethical
B. truthful
C. unethical
D.
successful
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
10
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
11
1. B
Affects services and fees. As a result of the growth of international banking, many large banks now
have foreign branches and operate throughout the world. This means that they have an impact on
the international financial services industry. For example, a large international bank that does
business in several countries affects the services that local banks offer and the fees they charge. If
an international bank offers unique services for free, the local banks often must follow suit or risk
losing business. Also, several international banks operating in the same city, such as New York,
impact each other and increase competition. Most international banks are regulated. Governments
usually control interest rates within their countries. International banking does not increase the
value of investments.
SOURCE: BA:123
SOURCE: Austin, D.V. (1998). The community bank survival guide: Overcoming the challenges of
an increasingly competitive marketplace (pp. 136-139). Boston: Irwin/McGraw-Hill.
2. D
A country banning exports to another country. An embargo is a total ban on specific goods leaving
or entering a country. It usually involves one country, or several countries, banning trade with
another country, often for political reasons. That means that the countries will not export goods to
that country or import goods from that country. Many countries place a tax, or tariff, on imports. A
quota limits the amount of a good that can be imported or exported, but this is not an embargo.
Refusing to negotiate trade agreements is not an example of an embargo.
SOURCE: BL:004
SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.)
[pp. 101-102]. Woodland Hills, CA: Glencoe/McGraw-Hill.
3. C
E-mail. There is no variable expense associated with most routine e-mail. There are expenses
associated with business letters, such as the cost of paper and postage, and with the fax and
telephone.
SOURCE: CO:133
SOURCE: Hyden, J.S., Jordan, A.K., Steinauer, M.H., & Jones, M.J. (1999). Communicating for
success (2nd ed.) [p. 303]. Cincinnati: South-Western Educational.
4. D
Research the problem. Proposals are intended to answer questions or provide recommendations to
solve problems. Business employees often need to research a particular situation or problem
before they are able to write proposals. After employees do research and gather information, they
write proposals that explain the problem and the solutions. The proposal is intended to persuade
the business to follow the recommendations. Employees usually do not need to analyze personal
biases, contact the customer, or evaluate technical skills before they are able to write proposals.
SOURCE: CO:062
SOURCE: Hyden, J.S., Jordan, A.K., Steinauer, M.H., & Jones, M.J. (1999). Communicating for
success (2nd ed.) [pp. 510-511]. Cincinnati: South-Western Educational.
5. C
Upward. Upward communication is defined as communication that moves up the chain of
command, e.g., employee to supervisor. Downward communication moves down the chain from
management to employees. Horizontal communication is communication with someone on the
same level within the business. Grapevine communication is unofficial messages passed among
fellow employees.
SOURCE: CO:014
SOURCE: Adler, R.B., & Elmhorst, J.M. (1999). Communicating at work: Principles and practices
for business and the professions (6th ed.) [pp. 13-16]. Boston: McGraw-Hill College.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
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6. A
Limit discussion time. If there are a lot of important topics on the agenda, a manager might limit
discussion time on each topic in order to cover all of the topics. This might involve opening the floor
for 5 or 10 minutes of discussion or stopping the discussion if it goes on for a long time. If the topic
cannot be resolved in that time period, a manager might table the topic and put it on the next
agenda for continued discussion. The goal is to cover all of the topics while limiting the meeting to a
reasonable length of time. Presenting information in visual form will not ensure that all of the topics
on the agenda are covered. Staff meetings usually are an hour or so in length rather than all day.
After covering all of the topics, a manager might give participants an opportunity to provide
additional feedback in written form.
SOURCE: CO:140
SOURCE: Locker, K.O. (2000). Business and administrative communication (5th ed.) [pp. 349350]. Boston: Irwin/McGraw-Hill.
7. C
Reduced complaints. Handling complaints costs businesses money because of the time involved,
the possible loss of business, and refunds to customers. Customers who receive excellent service
are less likely to have complaints. Rapid employee turnover, increased costs, and decreased
employee morale are not benefits to businesses.
SOURCE: CR:004
SOURCE: HR LAP 32—Customer-Service Mindset
8. A
Domineering/Superior. Domineering/Superior customers often appear overly self-confident and
pushy by boasting about their purchases. Since these customers usually know what they want, they
convince or sell themselves. Disagreeable customers are unpleasant and hard to help because
they are argumentative, complaining, irritable, moody, insulting, impatient, and/or have a leave-mealone attitude. Suspicious customers question everything and want facts and proof before being
convinced to buy. Slow/Methodical customers require a lot of time to make a purchase because of
shyness or difficulty in making a choice or buying decision.
SOURCE: CR:009
SOURCE: EI LAP 1—Making Mad Glad
9. D
Arguing politely. Salespeople should never argue with the customer, not even in a polite manner.
Allowing the person to express dissatisfaction will place the customer in a positive frame of mind.
Therefore, you need to listen carefully, empathize with the customer's problem, and discuss the
problem and possible solutions.
SOURCE: CR:010
SOURCE: HR LAP 23—Handling Customer Complaints
10. D
Credit is expensive. When the money supply is tight, there is less money in circulation which means
there is less money available to loan. As a result, it is expensive to obtain credit because financial
institutions usually charge high interest rates on the money that is available. Many consumers and
businesses put off borrowing money when the money supply is tight. This also causes consumers
to spend less, businesses to cut back on expanding, and employment to decrease.
SOURCE: EC:047
SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 430-431).
Upper Saddle River, NJ: Prentice Hall.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
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11. D
Office of the Comptroller of the Currency. This is a semiautonomous part of the U.S. Treasury
Department, and the office is appointed by the president for five-year terms. The Supreme Court
does not play an ongoing role in the financial services industry. The Federal Deposit Insurance
Corporation (FDIC) provides insurance for deposits in both banks and savings and loans. The
Federal Reserve can issue currency, in addition to other powers, which allows for a somewhat
flexible money supply to best serve the needs of the country.
SOURCE: EC:048
SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies
(16th ed.) [pp. 244-245]. Boston: McGraw-Hill/Irwin.
12. D
Slow down the economy. The monetary policy of the Federal Reserve System has a significant
effect on the economy. If the economy is growing rapidly and inflation is increasing, the Federal
Reserve might try to slow down the economy by decreasing the money supply or increasing the
interest rate it charges banks. The monetary policy of the Federal Reserve System is not intended
to pay for national defense, monitor government spending, or guarantee a minimum wage.
SOURCE: EC:050
SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies
(16th ed.) [p. 275]. Boston: McGraw-Hill/Irwin.
13. A
Gross domestic product. Gross domestic product is the final total value of all the goods and
services produced within a country's geographic boundaries in a year's time. The consumer price
index measures monthly and yearly price changes for selected consumer goods in different product
categories. A leading indicator is a value which gauges the stability of an economic system.
Consumer catalog is a distractor.
SOURCE: EC:017
SOURCE: EC LAP 1—Gross Domestic Product
14. D
Raising taxes. Many of the economic decisions made by governments have a significant effect on
financial institutions. Raising taxes is one of these economic decisions. When governments raise
taxes, individuals pay more money, which reduces the amount of money they have to spend on
other items. This affects financial institutions because individuals will not be able to save or invest
as much, which means that the institutions will also have less money available to invest or loan.
Businesses that import goods from other countries are responsible for paying tariffs. Storing money
and monitoring exports are not economic decisions.
SOURCE: EC:057
SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 433-434).
Upper Saddle River, NJ: Prentice Hall.
15. A
Stable economy. With a stable economy, the fluctuation in stock prices would most likely remain
steady. Fear, time of year, and positive or negative publicity affect the stock market. Fear and
negative publicity cause investors to be cautious and sell off stock. Investors put more money into
stocks at certain times of the year. Positive publicity can encourage investors to buy more stock.
SOURCE: EC:058
SOURCE: Microsoft Corp. (n.d.). Stock prices. Encarta Encyclopedia [Online]. Retrieved
September 25, 2007, from http://encarta.msn.com
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
14
16. B
Low. There is an inverse relationship between consumer demand and the price of the product. In
other words, the higher the price of a product, the lower the consumer demand for it will be.
SOURCE: EC:005
SOURCE: EC LAP 11—It's the Law (Supply and Demand)
17. B
Government. In communist command economies, the government is responsible for determining
what will be produced, how the products will be produced, and how the products will be allocated.
In market economies, individuals and businesses decide how these economic questions will be
answered. A venture team is a group involved in product development.
SOURCE: EC:007
SOURCE: EC LAP 17—Economic Systems
18. D
Expansionary. A fiscal policy is the government policy that sets levels of government spending and
taxation. The type of fiscal policy that a government uses depends on what the government wants
the economy to do. For example, if the economy is slowing down and heading into a recession, a
government would use an expansionary fiscal policy to encourage economic growth. To do this, the
government might spend more and cut taxes to encourage businesses to expand. Complementary,
appropriate, and realistic are not types of fiscal policies that are intended to encourage economic
growth.
SOURCE: EC:074
SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 389-391).
Upper Saddle River, NJ: Prentice Hall.
19. C
Make a profit. A business will not survive unless it makes a profit—the monetary reward a business
owner receives for taking the risk involved in investing in a business. The other alternatives are
steps Tom may take if his business is successful.
SOURCE: EC:010
SOURCE: EC LAP 2—Risk Rewarded
20. B
Transfers within the industry are easier. This is because of the standardized nature of the tasks to
be performed. Workers can easily take the skills learned on one job to another, similar job.
Disadvantages of specialization include decreased morale and enthusiasm for the job, increased
dependency of workers on each other, and decreased pride in work.
SOURCE: EC:014
SOURCE: EC LAP 7—Specialization of Labor
21. D
Interest rates. When interest rates increase, consumers often reduce spending, particularly on
expensive items that they finance or buy on credit. The higher interest rates make these purchases
even more costly. When consumption decreases, there is less demand for goods so production
also decreases. The result often is a downturn in the economy. Therefore, the level of consumer
spending is a good indicator of the health of the economy. Personal needs and family issues are
not economic factors that cause consumers to reduce spending. Low prices often encourage
consumers to increase spending because they think they are getting more for their money.
SOURCE: EC:081
SOURCE: Arnold, R.A. (2004). Economics (6th ed.) [p. 185]. Cincinnati: Thomson/South-Western.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
15
22. A
Structural. Structural unemployment results when people have job skills but the jobs that require
those skills do not currently exist. For example, if new technology eliminates the need for certain
types of jobs, the people who held those jobs may be terminated. These people have skills, but the
structure of the jobs has changed and they are no longer needed. National unemployment affects
workers throughout the country. If a business reorganizes, certain jobs may be eliminated or
combined, which may result in unemployment. Industrial is not a type of unemployment.
SOURCE: EC:082
SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies
(16th ed.) [pp. 136-137]. Boston: McGraw-Hill/Irwin.
23. D
Make a choice. A person facing a new situation must always make a choice by choosing to adapt
or choosing not to adapt. A person cannot always control undesirable circumstances. New
situations do not always involve difficult problems. When adapting to a new situation, it is possible
to learn from another person's mistakes; however, this does not always occur.
SOURCE: EI:006
SOURCE: QS LAP 15—Stuff Happens
24. D
Creative, self-confident, and self-disciplined. Laissez-faire leaders exercise very little or no control.
Therefore, the people they supervise should be creative, self-confident, self-disciplined, assertive,
able to set their own goals, and possess initiative. People who are patient, accepting, cooperative,
dependent, quiet, and/or withdrawn will also need more direction than the laissez-faire leader will
provide.
SOURCE: EI:037
SOURCE: EI LAP 5—Can You Relate?
25. B
Training. Team building within an organization often includes training because all members of the
team may not have the same knowledge or skills. If the team is expected to address a certain
problem or issue, it may be necessary to provide training so all members will understand. To be
effective, the team must be able to work on the same level, which often means some basic training
will be necessary. Team building within an organization usually does not include recruiting, staffing,
or interviewing.
SOURCE: EI:044
SOURCE: Lussier, R.N. (2003). Management fundamentals: Concepts, applications, skill
development (2nd ed.) [pp. 222-223]. Mason, OH: South-Western.
26. D
Matches the person's cultural background. Effective recognition relies on the giver's sensitivity to
the cultures of others, who may or may not share the giver's enthusiasm for certain holidays, music,
or entertainment. Recognition does not have to be something the giver would like to receive; the
focus here is on the receiver's likes and dislikes. It also does not have to inform others of the
accomplishment. It does not have to be something everyone can use, such as money or a gift
certificate. In fact, personalized rewards and recognition are better.
SOURCE: EI:014
SOURCE: QS LAP 13—Gimme Five!
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
16
27. B
Create positive change. Vision is the future you desire to create and involves making positive
changes to make it happen, which requires determination and hard work. A person who has a
vision for the future does not avoid making mistakes and does not start out by setting specific
goals. Visionary people often make important decisions, but this is not the reason why they want to
make positive changes for themselves and for others.
SOURCE: EI:063
SOURCE: QS LAP 11—Picture This!
28. C
Payment record. Whether customers consistently pay their bills on time is an important factor in
determining their creditworthiness. Businesses that are considering making credit available to
customers want to find out if those customers have a history of paying promptly. Customers with
good payment records are more likely to be granted credit because businesses expect that they will
be repaid. Businesses do not consider a customer's marital status, retirement plan, or education
level when determining creditworthiness.
SOURCE: FI:020
SOURCE: Cole, R., & Mishler, L. (1998). Consumer and business credit management (11th ed.)
[pp. 171-173]. Boston: Irwin/McGraw-Hill.
29. A
Add to the cost of the purchase. Using credit can add to the total cost of goods and services. For
example, interest, or finance, charges are added to accounts that are not paid in full at the end of
each payment period. When customers buy products with a credit card, they often pay over a
period of time. Then, each month they pay interest on the unpaid balance. The interest charges add
to the cost of the purchase. Interest charges do not increase the retail price because customers
who pay in cash are not charged interest. Interest usually is calculated monthly rather than yearly.
Interest generates profit for the credit-card company rather than the store.
SOURCE: FI:002
SOURCE: FI LAP 2—Credit and Its Importance
30. B
Investing in developing a new product. Investing in the development of a new product is a
speculative risk because there is a chance of loss, no change, or gain. However, if the new product
is the type that customers want and will buy, selling the new product has the potential of increasing
a business's income. Businesses take risks when they invest in new products, but they do so
because they hope to earn a profit. Offering health benefits to employees is a pure risk because the
business can purchase medical insurance. Buying liability insurance is a way that businesses
manage pure risks. Businesses usually obtain insurance coverage to protect them from loss due to
pure risks such as fire.
SOURCE: FI:080
SOURCE: Meyer, E.C., & Allen, K.R. (2000). Entrepreneurship and small business management:
Teacher's manual (2nd ed.) [p. 387]. New York: Glencoe/McGraw-Hill.
31. D
Risks. Risks are the possibility of financial loss. One way for businesses to reduce risks is to
develop an efficient system to locate, gather, process, and use information for marketing decisions.
Businesses need information systems for use in decision-making in order to effectively identify
alternatives in planning. By gathering and using information, businesses often are able to recognize
trends or potential problems and take steps to reduce risks. Businesses usually want to increase
sales. Debts are financial liabilities. Taxes are part of the expenses of doing business.
SOURCE: FI:084
SOURCE: BA LAP 2—Risk Management
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
17
32. D
Summarizes expenses and revenue from sales. A profit-and-loss statement is a business's financial
picture that lists all revenue and expenses for a certain time period. A profit-and-loss statement is
not the same as a balance sheet. Characteristics of a balance sheet include listing assets and
liabilities and showing the owner's financial position.
SOURCE: FI:094
SOURCE: FI LAP 4—Watch Your Bottom Line (Income Statements)
33. D
External. Businesses have no control over external changes, but forecasters must collect
information about changes in the areas of competition, the market, and the economy. Marketing
changes refers to the way in which a business may change its products or the way it markets those
products. Operational changes refers to changes in the way a business is run, or operates. Internal
changes refers to the changes that are going on within a business and are under the business's
control. Internal changes include marketing, operational, and staff changes.
SOURCE: FI:096
SOURCE: IM LAP 4—Forecasting Sales
34. A
As long as additional benefits exceed additional costs. Cost/benefit analysis estimates the cost of
an action and compares it with an estimate of the benefits of that action. As long as the benefits
exceed the costs, the project should be pursued. Cost/benefit analysis does not require benefits to
be twice as much as costs. Additional benefits should exceed, not match, additional costs.
Cost/benefit analysis does not require you to estimate a break-even point in any particular time
period.
SOURCE: FI:357
SOURCE: Miller, R.L. (2005). Economics: Today and tomorrow (pp. 265-267). Columbus, OH:
Glencoe/McGraw-Hill.
35. D
Sales are less than expenses. If a business's expenses are greater than sales, a loss occurs. In the
alternatives, a profit occurred because sales or revenue was greater than expenses.
SOURCE: FI:102
SOURCE: Stull, W.A. (1999). Marketing and essential math skills: Teacher's edition (pp. 234-239).
Cincinnati: South-Western Educational.
36. A
15%. The rate of return on common stock is calculated by dividing the sum of the gains (dividends
and capital appreciation) by the beginning price. In this example, the gains add up to $4.50 ($2.50
in dividends plus $2 in capital gains). Gains of $4.50 divided by the purchase price of $30 equals
15% (4.50 ÷ 30 = .15 or 15%).
SOURCE: FI:171
SOURCE: Shim, J.K., & Siegel, J.G. (2000). Financial management (2nd ed.) [p. 136].
Hauppauge, NY: Barron's.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
18
37. D
Aggressive growth funds. Aggressive growth funds are a type of investment that involves
purchasing stocks whose prices will increase substantially over a short period of time. These funds
usually have a high rate of return; however, they are risky because the price of the stock could drop
suddenly. Those who invest in aggressive growth funds watch the market closely in order to
optimize the rate of return by selling the stocks when they are priced high. Government securities
are a very safe investment; however, the rate of return is usually low. Certificates of deposit have a
set value. Savings accounts are safe investments, but the interest rate may be low.
SOURCE: FI:172
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (p. 331). New York: Glencoe/McGraw-Hill.
38. A
Capital expenditure. Capital expenditure is a term used for the money a business spends on
upgrading its physical assets. Retirement annuities may be distributed, however, by lump sum
payments, by annuitization (payments over a period of time), or by systematic withdrawals (paying
varying amounts as requested).
SOURCE: FI:175
SOURCE: Wachovia. (n.d.). Retirement income annuity. Retrieved September 25, 2007, from
http://www.wachovia.com/personal/page/textonly/0,,326_503_675,00.html
39. C
Using a software program. When the success of a project's financial plan requires achieving a
specific profit margin, the manager can keep track of a margin increase or decrease by using a
software program with tracking capabilities. Operating a cash register may be necessary during the
project; however, it is not involved in tracking profit margin. Writing in a checkbook is not a good
way to keep track of profit margin. Reading an odometer is something an automobile driver might
do, since an odometer tracks miles driven.
SOURCE: FI:178
SOURCE: AllPM.com. (2002, June 13). Modern cost management. Retrieved December 16,
2005,
from http://www.allpm.com/print.php?sid=254
40. C
$32,260. Taxable income is determined by subtracting the standard deduction and any exemptions
from adjusted gross income. In this case, the exemption is $3,300 because the client is single and
entitled to only one exemption. To calculate taxable income, subtract the standard deduction from
adjusted gross income ($42,560 - $7,000 = $35,560), and the exemption from that amount
($35,560 - $3,300 = $32,260). The $275 in interest will have been added to salary and wages to
determine the adjusted gross income.
SOURCE: FI:180
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 390-399). New York: Glencoe/McGraw-Hill.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
19
41. D
What they paid in taxes last year. Individuals who are self-employed usually make estimated tax
payments because they do not have an employer who is withholding taxes on a regular basis.
These individuals are expected to make payments that are as accurate as possible. Therefore, the
amount they pay is usually based on what they paid in taxes last year. If individuals expect their
income to increase significantly, they should increase the amount of estimated tax payments in
order to avoid being charged penalties for underpayment. Individuals do not base estimated tax
payments on the funds available at the time, predictions of long-term income, or the difference
between profit and loss.
SOURCE: FI:182
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 388-389). New York: Glencoe/McGraw-Hill.
42. B
To itemize deductions. By completing various tax schedules, tax preparers are able to itemize
deductions and reduce the amount of the client's tax liability. For example, various schedules allow
tax preparers to itemize medical and dental expenses, property taxes, expenses for home
mortgages, etc. These deductions often are more than the standard deduction allowed so the client
saves money by itemizing and claiming the higher deductions. Tax preparers do not complete
various tax schedules for clients to calculate exemptions, to list allowances, or to determine wage
rates.
SOURCE: FI:183
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 393-394). New York: Glencoe/McGraw-Hill.
43. B
Net worth. When determining a client's financial situation, financial planners usually estimate the
client's net worth or total value. To do this, planners calculate the value of assets such as cash,
investments, and property. Then, they calculate the value of liabilities, or debts, and subtract the
value of liabilities from the value of assets to determine net worth. The goal is to help clients
increase their net worth. Liabilities are debts. Cash flow is the movement of funds. Living expense
includes costs such as rent or a mortgage, food, clothing, etc.
SOURCE: FI:185
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 479-481). New York: Glencoe/McGraw-Hill.
44. A
Investments. Asset-management services involve managing a client's assets, which are anything of
value that the client owns. Assets often include investments such as stocks, bonds, mutual funds,
etc. Managing these assets might involve buying and selling investments to increase the client's net
worth. Asset-management services do not involve managing a client's medical care, will, or housing
needs.
SOURCE: FI:187
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 479-481). New York: Glencoe/McGraw-Hill.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
20
45. B
Adhere to a compliance plan. Financial institutions are required to comply with various
governmental rules and regulations, such as reporting and paying different types of taxes. In order
to comply with these rules and regulations, financial institutions develop a system to maintain and
report information about income and expenses. This information might include payroll withholdings
and required payments for unemployment compensation. Without an effective system in place,
financial institutions may not be able to adhere to a compliance plan. Financial institutions do not
develop a system to maintain and report information about income and expenses in order to follow
an investment strategy or determine a way to diversify. It is not possible to eliminate all risk.
SOURCE: FI:189
SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.)
[pp. 390-391]. Cincinnati: South-Western.
46. A
Interest rates. Businesses often need to raise additional capital, or funds, to cover unexpected
expenses or to make large investments. One way to raise capital is to obtain a bank loan. However,
before obtaining a loan, businesses should consider the interest rates that they will be charged for
the use of those funds. If the current interest rate is high and a business needs a five-year loan, the
overall cost of the capital also will be high. Businesses may decide that the costs are too high and
look for other ways to raise capital. Businesses usually do not pay legal fees when raising capital
by obtaining a bank loan. Trade credit involves obtaining short-term credit from suppliers. Cash flow
is the movement of funds into and out of a business.
SOURCE: FI:191
SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach
(5th ed.) [pp. 429-430]. Mason, OH: South-Western.
47. B
Paying expenses. A budget is an estimate of what income and expenses will be for a specific time
period or for a specific project. Once a businesses develops a budget, it usually implements the
budget by paying expenses. For example, a business budgets $50,000 to complete a specific
project. It needs to purchase $25,000 worth of materials for the project. Once the budget is in place,
the business can pay for those materials, which is an expense. Businesses calculate costs and
estimate revenues during the process of developing a budget. Not all budgets are intended to
generate sales.
SOURCE: FI:193
SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach
(5th ed.) [pp. 259-261]. Mason, OH: South-Western.
48. B
Assign a probability to each cash flow. To evaluate future cash flows from a particular asset,
businesses assign a probability to each cash flow, so they can determine which is most likely to
occur. Ranking the cash flows comes next, although the order is not necessarily from least to
greatest. It can be from "most likely to occur" to "least likely to occur." Assessing the importance of
each cash flow to the business and releasing cash flows currently retained are not functions of the
evaluation activity.
SOURCE: FI:196
SOURCE: Meeting, D.T., Luecke, R.W., & Garceau, L. (n.d.). Future cash flow statements.
Retrieved January 4, 2006, from http://www.aicpa.org/pubs/jofa/oct2001/meeting.htm
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
21
49. C
$275,000. The formula for a balance sheet is assets - liabilities = stockholders' equity. The formula
can be rearranged to forecast required outside financing. That formula is outside financing = assets
- liabilities - retained earnings. With assets of $1.25 million, liabilities of $450,000, and retained
earnings of $525,000, outside financing required in the coming year is $275,000 ($1,250,000 $450,000 = $800,000 - $525,000 = $275,000).
SOURCE: FI:198
SOURCE: Shim, J.K., & Siegel, J.G. (2000). Financial management (2nd ed.) [pp. 20, 61-64].
Hauppauge, NY: Barron's.
50. B
Strengths and weaknesses. A business's financial strengths and weaknesses can be both internal
and external. Therefore, having accurate information about the level of sales and anticipated profits
will help the business determine its internal strengths and weaknesses. For example, a high level of
sales is a strength, but low profit is a weakness. Also, having information about the industry growth
rate will help the business determine its external strengths and weaknesses. If the industry has a
steady growth rate, that is a strength for the business because it can anticipate that its sales will
continue to increase as the industry grows. Having accurate information about the level of sales,
anticipated profits, and the industry growth rate will not help to determine a business's financial
policies and procedures, accounts and investments, or stocks and bonds.
SOURCE: FI:199
SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach
(5th ed.) [pp. 469-473]. Mason, OH: South-Western.
51. A
Providing clues about probable financial improvement or decline. Trend analysis involves plotting a
ratio over time to discover clues about probable financial improvement or decline. In a similar way,
an industry comparison provides clues as to whether there's an increase or decrease on the
earnings horizon. Neither trend analysis nor an industry comparison shows possible financial
outcomes, demonstrates the need for a balanced budget, or gives reasons why a business
succeeds or fails.
SOURCE: FI:202
SOURCE: Brigham, E.F., Gapenski, L.C., & Ehrhardt, M.C. (1999). Financial management:
Theory and practice (9th ed.) [pp. 85-86]. Fort Worth, TX: The Dryden Press.
52. C
Access cash quickly. Businesses acquire a variety of assets over a period of time. These assets
include equipment, property, investments in other companies, and cash. When determining the
optimal mix and type of assets to acquire, businesses consider their long-term financial needs
because certain investments increase in value over time and add to the net worth of the business.
Businesses also consider the need to access cash quickly because some assets are easier to
convert to cash than others. For example, savings accounts are assets that businesses can access
quickly in order to obtain cash. Businesses want to develop the right mix of assets so they can
access cash when necessary and also increase their net worth. Property is an asset. Not all
businesses issue stock dividends, but if they do, dividends are expenses paid to others.
Businesses do not determine the optimal mix and type of assets to acquire in order to calculate
income taxes.
SOURCE: FI:203
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 66-67). New York: Glencoe/McGraw-Hill.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
22
53. D
Fulfills the company's specified requirements. An alternative financing plan must meet the criteria
established by the company. If it does not meet the specified requirements, that particular plan
does not suit the company's purpose. Alternative financing plans are not expected to encourage the
company to grow, promote loyalty to the company, or implement the company's mission statement.
SOURCE: FI:208
SOURCE: DCWatch. (2005, March 15). CFO releases evaluation of alternative financing plans for
the baseball stadium. Retrieved September 25, 2007, from
http://www.dcwatch.com/govern/sports050315.htm
54. D
Debt or equity. There are two types of financing—debt and equity. Debt financing involves
borrowing money and paying it back with interest. Equity financing involves raising funds by selling
some of the ownership in the business. When deciding how to raise funds, a business considers
which type of financing will be more effective. If the business needs additional funds for a short
period of time, it is more effective to use debt financing and pay back the loan rather than give up
some of the ownership. However, if the business needs a lot of capital, it may be more effective to
use equity financing. Businesses weigh the advantages and disadvantages of both types of
financing before deciding which one to use. Banks and credit unions are sources of debt financing.
Venture and angel are forms of equity financing. Both debt and equity financing may be either
public or private.
SOURCE: FI:209
SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach
(5th ed.) [pp. 428-434]. Mason, OH: South-Western.
55. D
It should be used for profitable projects or invested, even for the short term. A large cash surplus is
not productive for a company, and is best put to good use in profitable projects or external
investment opportunities. Unexpected events, such as fires, are usually covered by insurance. A
large cash surplus should not remain in the cash budget for future operations because it will be idle.
The decision to issue dividends is made by a company's board of directors and is a planned event
built in to a cash budget.
SOURCE: FI:211
SOURCE: Cunningham, B.M., Nikolai, L.A., and Bazley, J.D. (2000). Accounting: Information for
business decisions (pp. 99-100). Orlando, FL: Harcourt.
56. D
Preferred cash balance. Businesses usually establish a preferred cash balance which is the
amount of cash that the business always wants to have on hand. Cash in excess of that amount is
available for the business to spend. If the business estimates that it will have expenses that will
cost more than the available cash, it usually decides to begin financing activities in order to borrow
money and maintain the preferred cash balance. When deciding when to spend cash, businesses
usually do not consider the estimated capital budget, projected interest rate, or required loan
schedule.
SOURCE: FI:212
SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000). Accounting: Information for
business decisions (pp. 99-101). Orlando, FL: Harcourt.
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
23
57. A
Needed cash. Factoring is a type of debt financing that involves selling accounts receivable for a
discounted amount to another company. The factoring company buys a business's accounts
receivable for less than they are worth and then collects the receivables. The business that sells its
accounts receivable receives needed cash quickly rather than waiting for customers to pay their
accounts. Some businesses factor accounts receivable if they are experiencing a cash-flow
problem and need to obtain cash. Trade credit is another type of debt financing but it does not
involve factoring accounts receivable. Equity financing involves selling part of the ownership of a
business to acquire capital. Leverage is borrowing money to acquire an asset that will have more
value than the cost of borrowing the money.
SOURCE: FI:214
SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach
(5th ed.) [p. 431]. Mason, OH: South-Western.
58. A
Trade credit. Obtaining short-term financing is sometimes difficult for new businesses because they
do not have an established credit history. Therefore, those businesses that buy goods from
suppliers are often able to take advantage of trade credit which makes it possible for them to pay
for the goods at a later date, such as in 90 days. This amounts to short-term financing because the
business has the goods and also has time to generate the revenue to pay for the goods in the
future. Suppliers often are willing to grant trade credit to new businesses because it is a way of
attracting new customers. Venture capital, private investors, and public offerings are examples of
equity financing that are long term.
SOURCE: FI:216
SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach
(5th ed.) [p. 431]. Mason, OH: South-Western.
59. C
Seamless coordination between manufacturers and suppliers. With "just-in-time" inventory
management, supplies often arrive only a few hours before they are needed. This cuts down on
storage costs, causing the company to rely heavily on a seamless coordination between
manufacturers and suppliers. Although transportation logistics is important, it is not the main factor
in "just-in-time" inventory management. Sales performance and executive-to-employee
communication are also not central to the "just-in-time" inventory management system.
SOURCE: FI:218
SOURCE: Brigham, E.F., Gapenski, L.C., & Ehrhardt, M.C. (1999). Financial management:
Theory
and practice (9th ed.) [p. 811]. Fort Worth, TX: The Dryden Press.
60. B
Handling and storing. The cost of inventory includes more than the cost of purchasing the items. It
also includes the cost of handling and storing the items, insuring the items, paying taxes on the
items, etc. When businesses compute the cost of inventory, they include all of these costs to obtain
an accurate dollar figure for the costs associated with maintaining an inventory. Shipping and
transporting costs are included in the cost of purchasing inventory items. The cost of inventory does
not include the cost of preparing visual displays or of marking prices.
SOURCE: FI:219
SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000). Accounting: Information for
business decisions (pp. 511-512). Orlando, FL: Harcourt.
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61. C
Financial plans. Projecting future operations involves forecasting the condition of the business in
the future. This might include projecting that sales will increase by a certain percentage, or that the
size of the company will double, or that the workforce will increase, etc. When projecting these
operations, businesses also need to develop projected financial plans in order to be prepared to
fund the operations. If the size of the company will double, then there will be additional expenses to
pay. The business must plan to pay those expenses. When projecting future operations,
businesses do not develop projected tax schedules, stock options, or inventory methods.
SOURCE: FI:221
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 671-675). New York: Glencoe/McGraw-Hill.
62. A
Structure. A business can select either debt or equity as a source of capital—or a mix of both. The
agreed-upon selection or mix is called the firm's capital structure. A budget is an estimate of
upcoming expenses listed by expense category. Risk is the possibility of (financial) loss. "Capital
model" is not a term used to describe a company's mix of debt and equity. The Capital Asset
Pricing Model is a tool used to analyze how risk and rates of return are related.
SOURCE: FI:222
SOURCE: Brigham, E.F., Gapenski, L.C., & Ehrhardt, M.C. (1999). Financial management:
Theory
and practice (9th ed.) [pp. 178, 579]. Fort Worth, TX: The Dryden Press.
63. D
Analyzing variances. Standard costs are those costs that should be incurred if activities take place
under normal circumstances. Businesses use standard costs as a benchmark when comparing
costs to determine if actual costs varied from the standard. This process is known as analyzing
variances. For example, if actual costs are higher than standard costs, a variance exists. This might
indicate a problem that the business should identify and correct in order to bring actual costs in line
with standard costs. Comparing standard costs with actual costs is not an example of calculating
expenses, estimating payables, or predicting returns.
SOURCE: FI:227
SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000). Accounting: Information for
business decisions (p. 344). Orlando, FL: Harcourt.
64. A
Not audited. The financial statements in a quarterly report may be unaudited. Quarterly reports are
not necessarily written in a non-financial way. It's helpful to have the annual report handy when
reviewing a quarterly report—so you can put the quarterly information into perspective. Individual
investors are considered part of the intended audience for a quarterly report.
SOURCE: FI:230
SOURCE: Shim, J.K., and Siegel, J.G. (2000). Financial management (2nd ed.) [pp. 38-39].
Hauppauge, NY: Barron's Educational Series.
65. C
Inventory. Inventory is often a major expense for a business because there is cost involved in
buying and maintaining an inventory of goods. Businesses evaluate inventory on a regular basis to
control costs while keeping an adequate supply of goods in stock. Businesses do not want to invest
more in inventory than is necessary because that ties up cash that could be used for other
purposes. Credit, receivables, and interest are often sources of revenue.
SOURCE: FI:231
SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000). Accounting: Information for
business decisions (pp. 511-513). Orlando, FL: Harcourt.
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66. D
Within the same category. Both horizontal and vertical financial data analyses compare figures
within the same category. Ratio analysis is used to compare figures from different categories.
Horizontal financial analysis typically compares one or more years' worth of data. Vertical financial
analysis can compare data within one fiscal year.
SOURCE: FI:235
SOURCE: Shim, J. K., & Siegel, J. G. (2000). Financial management (2nd ed.) [p. 42].
Hauppauge,
NY: Barron's.
67. D
Return. Return is the gain or loss. Risk is the possibility of loss. Capital is a term used for financial
assets. A dividend is the regular payment from a stock.
SOURCE: FI:245
SOURCE: Investopedia.com. (n.d.). Return. Retrieved September 25, 2007, from
http://www.investopedia.com/terms/r/return.asp
68. A
May make a given investment more attractive. Tax savings that result from accelerated
depreciation methods result in higher present values for the tax savings, therefore making a given
investment more, not less, attractive. Accelerated depreciation methods can indeed affect the
attractiveness of a given investment, but they are unlikely to be large enough to be the determining
factor.
SOURCE: FI:252
SOURCE: Shim, J.K., & Siegel, J.G. (2000). Financial management (2nd ed.) [p. 163].
Hauppauge,
NY: Barron's.
69. B
Lending and owning. Debt financing occurs when a corporation raises capital by borrowing money
(from a bank, for example) or by issuing bonds. In either case, someone is lending money to the
corporation. Equity financing occurs when a corporation raises capital by selling stock, or shares of
ownership. Investing and financing, capital and borrowing, and assets and liabilities do not
accurately describe this activity.
SOURCE: FI:260
SOURCE: Tyson, E. (2003). Investing for dummies (3rd ed.) [pp. 14, 18]. New York: Wiley
Publishing.
70. C
Reliable. A test is considered reliable when it provides the same or similar results each time it is
administered. Pre-employment tests should also be valid, relevant, and fair. The tests should not be
personal but job-related. They should also not be biased since that would favor one applicant over
another. Whether the test is easy would depend upon the kind of job for which the test is being
given.
SOURCE: HR:356
SOURCE: MN LAP 51—Selecting New Employees
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71. D
Personnel record. Businesses maintain various types of information in an employee's personnel
record because information on each employee is vital to the business. Addresses must be kept
current. Payroll records contain information about the number of hours worked; regular and
overtime earnings; and deductions for federal, state and local taxes, Social Security, Medicare, and
any other deductions. Job applications and performance reviews are documents that usually are
kept in an employee's personnel record. If the business provides insurance to the employee, that
type of information would be in the personnel record. Businesses often need to refer to the
information in personnel records for a variety of reasons such as considering an employee for a
promotion, or in the event that an employee was injured on the job.
SOURCE: HR:359
SOURCE: Dessler, G. (2000). Human resource management (8th ed.) [pp. 54-58]. Upper Saddle
River, NJ: Prentice Hall.
72. A
It helps them feel a part of the company. To accomplish this, you should describe the entire
company by summarizing its origin, objectives, development, growth, product/service line,
outstanding or significant company achievements, future of the business, priorities for business and
community involvement, company problems, trends for the industry, and a review of the company's
organizational chart. In discussions of job-specific assignments, you can let employees know what
is expected of them, provide an explanation of their jobs, and give them specific product
information.
SOURCE: HR:361
SOURCE: MN LAP 44—Orienting New Employees
73. C
Employees have different learning styles. A coach is a person who enables other people to reach
their true potential by helping them to overcome the barriers that are keeping them from doing
something they want to achieve. Managers often take on the role of a coach to help their
subordinates to reach their career goals, to increase their productivity, and to solve problems.
Because employees have different skills and personalities, they learn information in different ways.
An effective coach realizes these differences and works to tailor a coaching relationship that works
best for the employee. Often, coaching requires that the manager spend more time with one
employee than with another employee. Increases in an employee's productivity rates do not always
happen quickly when a manager uses coaching in the workplace. Positive feedback is as important
as constructive criticism when a manager coaches his/her employees.
SOURCE: HR:364
SOURCE: Campbell, M. (n.d.). Ten keys for successfully coaching employees. Retrieved
September 25, 2007, from http://www.spconsultants.org/articles/mcampbell.htm
74. C
Supervision/Management. Employees often complain about the management of an organization
and the ways in which employees are supervised. Evaluation is the responsibility of
management/supervisors. Complaints about employee compensation deal with pay. Complaints
about work environments are categorized as physical surroundings complaints. Complaints about
coworkers may be job related, not work related, or about the habits of other employees.
SOURCE: HR:366
SOURCE: MN LAP 45—Handling Employee Complaints
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75. C
Direct the flow of goods and services. Marketing is a process that enables goods, services, and
ideas to get from producers to consumers. It serves businesses of all sizes and helps to meet
consumers' economic needs. The marketing concept is a philosophy based on the belief that
business activities should be aimed toward satisfying consumers, not a process with specific steps.
SOURCE: MK:001
SOURCE: BA LAP 11—Have It Your Way!
76. C
To forecast future sales. Businesses maintain a variety of records about the quantities and types of
products that customers are purchasing. These records are usually known as sales records. By
analyzing past sales records, businesses can determine what customers are buying, when they are
buying, and how much they are buying. This helps a business forecast future sales so it can be
prepared to offer the products that customers want. Businesses do not maintain records about what
customers are purchasing to develop new displays, plan credit programs, or organize special
events.
SOURCE: NF:002
SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western.
77. D
Internal records. Companies keep many types of internal records about their various business
activities. These records might contain information about sales, agreements with vendors, financial
status, etc. Management and employees use the records to make decisions about day-to-day and
future actions. For example, records that indicate that sales are increasing and the company is
profitable might encourage the business to decide to expand. Businesses monitor their activities on
an internal basis. Therefore, they would not monitor trade publications, industry trends, or
government statistics in order to keep track of what they are doing in the business.
SOURCE: NF:014
SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western.
78. A
The next accident could result in an injury. The fact that one accident does not result in an injury
does not ensure that the next accident will have the same results. An accident that does not cause
an injury should be reported to a supervisor so that the circumstances causing the accident can be
corrected if possible. This may save someone else from injury. Government regulations vary from
state to state and for different industries. Reporting a noninjurious accident does not prevent future
liability.
SOURCE: OP:009
SOURCE: RM LAP 3—Handling Accidents
79. D
Determine the product needed. The buyer should anticipate or recognize problems that need to be
solved and determine what product would best meet the firm's need. The other alternatives are
steps in the buying process that occur after the need has been determined and possible products
have been examined.
SOURCE: OP:015
SOURCE: PU LAP 1—Purchasing
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80. D
Unit. The system that produces one item at a time or small quantities of an item at one time is unit
production. This system also is known as job shop or jobbing and is used by businesses such as
custom-car manufacturers and made-to-order clothiers. Batch production is the system of making
small batches of a product at one time, such as several gallons of a certain color of paint. Mass
production is the system of making large quantities of a standard product, such as televisions and
radios. Assembly line is the system of specialized machines or work stations placed in a certain
order to make large quantities of a specific product.
SOURCE: OP:017
SOURCE: BA LAP 1—Nature of Production
81. D
Increase its efficiency. A procedure is a step-by-step process for performing a specific task. A
company must conduct many tasks to keep the business running. To make sure that the business
is operating efficiently, it may evaluate its procedures to see if the business should make
improvements so it can reach its various goals. Outputs are goods and services that result from
combining inputs. Most businesses want to increase outputs rather than reduce them. Not all
businesses carry inventory. Although spending can improve a business's efficiency, spending more
money is not the primary purpose for analyzing and updating its procedures.
SOURCE: OP:022
SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.)
[pp. 288, 330]. Cincinnati: South-Western.
82. A
To stay on target. Managers should evaluate the progress throughout the life of the project. This
means reviewing the project goals to make sure the project is on target. If the project starts to get
off track, the manager needs to react and get the project refocused so all the members are working
for the same goal. Coordinating the project often involves developing charts that list each project
activity, who is responsible for the activity, and when the activity should be completed. The first step
in project management involves organizing the group. Sending a message is a communication
function.
SOURCE: OP:002
SOURCE: QS LAP 18—Make It Happen
83. B
$153,100. Net profit is calculated by subtracting operating expenses and cost of goods sold from
income. To determine net profit, first calculate gross profit by subtracting cost of goods sold from
income ($936,500 - $505,250 = $431,250). Then, subtract operating expenses from the gross profit
figure to calculate net profit ($431,250 - $278,150 = $153,100). Depreciation is not a factor in
determining net profit.
SOURCE: OP:024
SOURCE: MN LAP 57—Operating Expenses
84. C
Bad debt. Interest expense is money a borrower must pay for the use of the borrowed money.
Expenses incurred in the general operation of the business are called administrative expenses.
Advertising expenses include radio and television commercials, newspaper and magazine
advertisements, etc.
SOURCE: OP:029
SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2003). Small business management:
An entrepreneurial emphasis (12th ed.) [pp. 416-417]. Cincinnati: Thomson/SouthWestern.
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85. A
Concept mapping. Concept mapping is a method of clarifying and organizing ideas by using a
graphic format to show relationships. This technique involves drawing a map of your ideas so that
you can see how one idea relates to another. Concept mapping can be used for developing ideas
for many purposes, but it is especially useful for project planning. Redefining involves looking at a
problem from a different angle if no solution seems apparent. Brainstorming is a technique used to
produce a lot of ideas in a short period of time. Role-playing involves acting out a situation.
SOURCE: PD:012
SOURCE: PD LAP 2—Creativity
86. B
Mention it in a follow-up letter. Applicants should send follow-up letters to interviewers after
interviews to thank them for the opportunity to interview, to reinforce key points mentioned during
the interview, to express interest in the position, and to mention important topics that were omitted
during the interview. Phoning or going back to the business requires interviewers to stop what they
are doing, thus taking unnecessary time away from their jobs. The follow-up letter could be faxed if
the interviewer is planning to make an immediate hiring decision; however, the omission should be
addressed as part of a follow-up letter rather than being sent as a separate, urgent document.
SOURCE: PD:029
SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [p. 71].
Mason, OH: South-Western.
87. C
Neatness. All résumés should be neatly prepared. Neat résumés make a good first impression on
prospective employers who often form opinions of applicants based on their résumés. A neat
résumé indicates that the person will be careful and thorough on the job. Also, employers are more
likely to read neat résumés than those that are sloppy or contain errors. Résumés should not be
creative but should contain exact information. Résumés should be brief rather than long. They
should not be complex but easy to read and understand.
SOURCE: PD:031
SOURCE: Daggett, W.R., & Miles, J.E. (1998). The dynamics of work: Introduction to occupations
(2nd ed.) [p. 54]. Cincinnati: South-Western Educational.
88. D
Trade show. Trade shows usually are held for only a few days in convention centers or exhibition
halls in large cities. Trade shows feature the latest goods and related items in a specific product
category, and are good sources of information that can contribute to professional development.
They often are held on an annual basis. A three-day exhibition of computer equipment, software,
and related goods is an example of a trade show. A central market is a city where many major
suppliers of a product are located. A floor plan is a layout or design for a space. A warehouse club
offers large quantities of consumer items, usually at discounted prices.
SOURCE: PD:036
SOURCE: CD LAP 1—Trade Associations and Professional Organizations
89. C
Credit union. A characteristic of many financial institutions is that they provide deposit services.
This means that businesses and individuals can deposit funds into checking and savings accounts
and access those funds at will. An example of a financial institution that provides deposit services is
a credit union, which is a financial cooperative set up to provide savings and credit services to its
members. However, some financial institutions do not provide deposit services. These include
mortgage companies, investment firms, and insurance agencies.
SOURCE: PD:085
SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal
finance (pp. 128-131). New York: Glencoe/McGraw-Hill.
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90. B
ABC Principle. The ABC Principle is a time-management technique in which planners assign each
task to an "A," "B," or "C" category according to the time needed to complete the task and its
importance. Category "A" items are the most important and should be completed during workers'
high-energy times. Category "B" items follow "A" items and can be used to provide relief from the
concentration required by "A" items. "C" items are routine items that can be done during waiting
time or free time. GDP, or gross domestic product, is a measure of the nation's economy. RH
Factor is a medical term. XYZ Principle is a distractor.
SOURCE: PD:019
SOURCE: OP LAP 1—About Time
91. D
Product profitability. Consumer demand and product profitability go hand-in-hand in determining
what goods or services to offer. First, financial institutions must know their markets and what
consumers want and need to buy. But offering the most wanted product in the world would be
useless if the product itself is not profitable for the organization. So, the product must also be priced
in a way as to be attractive to consumers but also cover expenses and deliver a profit margin.
Sometimes, financial institutions get distracted by the overall "likeability" of a product or whether the
staff will accept it. The staff will accept any product that is sound and that customers respond to.
Product longevity is another factor financial institutions fall prey to in determining products to offer.
Simply having been around for a long time is not a good reason for continuing to offer the product.
SOURCE: PM:125
SOURCE: Austin, D.V. (1998). The community bank survival guide: Overcoming the challenges of
an increasingly competitive marketplace (pp. 88-90). Boston: Irwin/McGraw-Hill.
92. B
12. In order for a bond purchased after February, 2003 to be eligible for redemption, the purchaser
must have owned the bond for 12 months. Bonds purchased before that date may be redeemed
after six months. The teller compares the issue date to the Table of Redeemable Values in order to
determine the bond's value at redemption.
SOURCE: SE:191
SOURCE: American Bankers Association (2005). Today's teller: Developing basic skills (pp. 134137). Washington: Author.
93. A
Financial goals. A financial plan is a road map, of sorts, that guides individuals from Point A to Point
B, or from where they are to where they want to be financially. Financial plans begin with
establishing clear and measurable objectives, such as having sufficient income to pay for college or
retirement. Once goals are established, a financial plan then outlines steps for achieving those
goals and measuring progress along the way. Significant wealth could possibly be one of the goals
an individual wishes to accomplish, but it is not, in and of itself, the purpose of a financial plan.
Financial plans are not designed to help individuals achieve a financial career. Financial plans are
not intended to increase social status.
SOURCE: SE:193
SOURCE: CCH Inc. (n.d.). The financial planning toolkit: The financial planning process.
Retrieved September 26, 2007, from http://www.finance.cch.com/text/c10s00d010.asp
2008 DECA Ontario Provincials
Test 957
FINANCIAL ANALYSIS
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94. B
Retrieve a mutual fund's performance data from a reliable source. When obtaining financial product
information from appropriate individuals, financial advisers usually retrieve performance data from a
reliable source—whether the data is for a fund or for an individual stock. Analyzing the trend of a
particular industry may or may not take place while gathering information on a particular stock or
fund. Providing clients with a number of portfolio options usually takes place after the research has
been completed. Expanding the capabilities of the financial firm may or may not be something
within a financial adviser's control.
SOURCE: SE:194
SOURCE: Futrell, C. M. (2006). Fundamentals of selling: Customers for life through service (9th
ed.) [pp. 184-185]. New York: McGraw-Hill/Irwin.
95. C
Improved reputation. The use of product substitution can benefit the business in several ways.
When customers are provided the most satisfactory products, they have good feelings about that
business and tell others about the service. It is important to serve customers well so that the
business's reputation can be enhanced. Added convenience, increased satisfaction, and more
contentment are ways that customers benefit from substitute selling.
SOURCE: SE:114
SOURCE: SE LAP 111—Using Substitute Selling
96. D
Need. A common objection occurs when there is a conflict between a "want" and a "need." Even
though customers want an item very badly, the sale will not be made unless they are convinced
that they have a real need for it. The salesperson's job is to try to establish that need by stressing
the benefits of the product and the value it offers. Salespeople do not need to establish motive,
cost, or purpose if customers object to buying items they want.
SOURCE: SE:874
SOURCE: SE LAP 100—Converting Objections
97. D
Mutual funds. A mutual fund is an assortment of diversified stocks and bonds that may be
purchased by individuals or businesses. Investors often buy mutual funds because they do not
want to spend the time identifying and selecting specific stocks. In most cases, the stocks that
make up the mutual fund have been carefully evaluated in order to provide the best possible return
on investment. An investment company might recommend that a business invest retirement money
in mutual funds because the funds are safe and will increase in value over the years. A certified
check is a bank check that guarantees that the customer's money is being held on account to cover
the check. A demand deposit is money that can be withdrawn from a bank at any time. A
promissory note is a legal form signed by a borrower promising to repay a loan.
SOURCE: SE:215
SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.)
[pp. 464-465]. Cincinnati: South-Western.
98. A
Paid for. Salespeople should make their suggestions for additional purchases before the original
item is paid for and the transaction is complete. Otherwise, the customer may reject the suggestion
because of the additional time involved in completing a new sales check. Salespeople should wait
until the customer has selected and identified the original item to purchase before suggesting
additional purchases. Salespeople should demonstrate the original item before suggesting
additional purchases.
SOURCE: SE:875
SOURCE: SE LAP 110—Using Suggestion Selling
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Test 957
FINANCIAL ANALYSIS
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99. B
Planning. Top executives have the responsibility for planning a company's direction, which involves
deciding what will be done and how it will be accomplished. In a large company, the president is not
likely to be directly involved with supervising employees or the production of products. The
president's only involvement with hiring would be hiring management personnel.
SOURCE: SM:001
SOURCE: BA LAP 6—Manage This!
100. C
Unethical. An ethical person always gives credit to the person who actually did the work. When a
manager takes credit for the work of his/her people without identifying who really did the work, s/he
is not only being unethical but also deceitful, dishonest, untruthful, and eventually not successful
because the employees will begin performing poorly if not given recognition for their efforts.
Managers should set and demonstrate ethical behavior for the employees they manage.
SOURCE: SM:002
SOURCE: EI LAP 4—Work Right (Ethical Work Habits)