Competency-Based

Competitive Events
*Written Exam*
for State/Province Use

Test Number 1274

Booklet Number _____

Finance Cluster Exam

ACT – Accounting Applications Series Event
BFS – Business Finance Series Event
FCE – Financial Consulting Event
FTDM – Financial Services Team Decision Making Event

INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area

identified above. Do not open this booklet until instructed to do so by the
testing monitor. You will have _____ minutes to complete all questions.

CAUTION: Posting these materials on a website is a copyright violation.

This comprehensive exam was developed by MBA Research exclusively for DECA’s
2022-2023 Competitive Events Program. Items have been randomly selected from the MBA
Research Test-Item Bank and represent a variety of instructional areas. Performance indicators
for this exam are at the prerequisite, career-sustaining, and specialist levels. A descriptive test
key, including question sources and answer rationale, has been provided to the DECA chartered
association advisor.

Copyright © 2023 by Marketing & Business Administration Research and

Curriculum Center®, Columbus, Ohio (dba MBA Research). Each individual test item contained
herein is the exclusive property of MBA Research. Items are licensed to DECA only for use as
configured within this exam, in its entirety. Use of individual items for any purpose other than as
specifically authorized is prohibited. Possession of this exam, without written authorization,
under any other circumstances is a copyright violation. Posting to inter- or intranet sites is
specifically forbidden unless written permission is obtained prior to posting. Report violations to
DECA at 703.860.5000 and MBA Research at 800.448.0398. Permission for reprinting is
granted to DECA chartered associations authorized by DECA Inc.

DECA Inc. will impose sanctions on chapters and chartered associations for violations of this
policy up to and including disqualification of competitors and chapters from further participation.
Test 1274 FINANCE CLUSTER EXAM 1

1. Which of the following is an example of a policy that's influenced by environmental law:

A. Medicine must be approved to be marketed to the public.
B. In many places, seatbelts are required by the government.
C. Drinking water must meet state, provincial, and federal quality standards.
D. Drivers must obey posted speed limits.

2. A primary responsibility of administrative law is to

A. establish congressional/parliamentary committees.
B. interpret constitutional laws.
C. overturn lower courts' decisions.
D. enforce agency regulations.

3. A public corporation's board of directors has the fiduciary responsibility to ensure that the company makes
decisions that protect the financial interests of
A. board members.
B. all shareholders.
C. the community at large.
D. government entities.

4. Several months ago, Erin convinced Sebastian to invest in her new business that sells health supplements. Erin
promised that Sebastian would receive a 10% return on his investment every month. Since investing in Erin's
company, though, Sebastian hasn't earned any money on his investment. Instead, Erin seems to have used his
investment to financially reward earlier investors. Which type of investment scheme does this example most
likely describe?
A. Ponzi scheme
B. Prime bank scheme
C. Annuities scam
D. Predatory lending

5. Which of the following is a tax-deductible gift:

A. Inherited items
B. Stocks
C. Charitable donation
D. Vacation home

6. The Frank and Fitzer Corporation pays federal and state income tax on its earnings. Its stockholders also pay
taxes on any dividends that they receive from the company. Frank and Fitzer's earnings are subject to
__________ taxation.
A. proportional
B. regressive
C. double
D. progressive

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 2

7. A financial institution fails to comply with an important government regulation. The financial institution will most
likely
A. get a better reputation.
B. pay a fine.
C. gain new business.
D. avoid an audit.

8. Which of the following is a benefit of using technology in compliance:

A. Less need for procedures and policies
B. Better risk management
C. Lower cost of implementing compliance
D. Decreased transparency

9. Megan is working with a group member who's explaining her part of a project. Megan wants to make sure her
group member knows she's listening, so she says things like, “I see,” “uh-huh,” and “I understand.” Which active
listening skill is Megan demonstrating?
A. Paraphrasing the message to test her understanding
B. Collecting all the information possible
C. Repeating critical information
D. Using a verbal acknowledgment response

10. Which of the following is an example of an informational message geared toward an external audience:
A. An inventory report
B. An office calendar
C. An employee handbook
D. A print advertisement

11. To contribute to a discussion in a useful way, you should avoid

A. blurting out statements without thinking.
B. talking about what's on your mind.
C. stating opinions and stick to the facts.
D. paying attention when others are speaking.

12. An employee with a prominent company position regularly uses offensive language criticizing government
leaders in his personal social media posts. He is putting his company at risk of
A. higher corporate taxation rates.
B. developing a social media footprint.
C. developing a negative public image.
D. being prosecuted for defamation.

13. What is a guideline for employees to follow in handling customer inquiries?

A. Try to make a sale while you're answering each inquiry
B. Make sure you clearly understand customers' inquiries
C. Don't try to handle inquiries when you are busy with a sale
D. Spend as little time as possible answering customers' inquiries

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 3

14. Handling customer complaints may allow a business to

A. gather more accurate product and marketing information.
B. expand its facilities.
C. learn inside information about its competitors.
D. afford raises for all of its employees.

15. Anna, the Bank Plus customer relationship manager, recently developed and implemented a new customer
relationship strategy across the organization. The strategy emphasizes better understanding of customer
needs. Anna also developed a recognition program to reward employees for delivering quality customer service.
Which of the following is most likely to be Anna's primary goal in implementing the new strategy:
A. Promoting the bank's new products and services
B. Publicly recognizing outstanding bank employees
C. Developing stronger long-term customer relationships
D. Reducing the number of forms new customers must fill out

16. Catherine has been Trevor's financial planner for 10 years. Because Trevor feels that Catherine has his best
interests in mind and keeps him updated on his investments, he told several of his friends and colleagues about
Catherine's expertise and recommended that they make appointments with her to discuss their financial plans.
The benefit to Catherine in this situation is that she
A. received referrals from an existing client.
B. gained a positive reputation through social media applications.
C. obtained recognition from her colleagues.
D. earned a sizable commission from Trevor's investments.

17. The Middleton Company uses customer relationship management (CRM) software to categorize customers by
their sales-dollar volume over a specific period of time. In this situation, the Middleton Company is using
__________ analytics to segment customers.
A. differed
B. profitability
C. product
D. demographic

18. Which of the following statements about economic resources is true:

A. As human resources become limited, natural resources and capital goods become limited.
B. As capital goods and natural resources become limited, human resources become limited.
C. As capital goods and human resources become limited, natural resources become limited.
D. As natural and human resources become limited, capital goods become limited.

19. A business periodically moves its employees from one department to another to perform different tasks, which
helps boost employee morale and combat boredom. This is an example of
A. task specialization.
B. task interdependency.
C. job rotation.
D. job security.

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 4

20. The connection between the social responsibility of a business and the community in which the business
operates is that the business's social responsibility __________ the community.
A. targets the area outside
B. targets only
C. has an effect on
D. depends upon

21. Which of the following is a reason that a company would decide to offer its products in other countries:
A. To subsidize developing countries
B. To expand to new, untapped markets
C. To provide jobs to people in other countries
D. To sell obsolete, outdated products

22. Which of the following factors affects society's basic values and behaviors that influence their buying decisions:
A. Environmental
B. Economic
C. Cultural
D. Political

23. When you accept criticism and use it in a constructive manner, it becomes
A. desirable.
B. more frequent.
C. anticipated.
D. very valuable.

24. Writing a letter to your grandparent is an example of

A. verbal communication.
B. nonverbal communication.
C. body language.
D. speech.

25. Assertive people believe that they have the right to ask other people to respond to their
A. whims.
B. needs.
C. directions.
D. orders.

26. Rewards and recognition fulfill a very basic human need for
A. self-esteem.
B. understanding.
C. friendship.
D. safety.

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 5

27. Which of the following is an example of demonstrating integrity in your personal life:
A. Being honest with a friend and telling them that you dislike their outfit
B. Keeping the money that someone left in the ATM
C. Admitting to your parents when you forget to empty the dishwasher
D. Using a white lie as an excuse to get out of an obligation

28. For several months, June has felt very tired at work. She has a hard time focusing on her job, is often irritated at
her coworkers, and has turned in several late assignments. At home, June feels considerably better. June is
experiencing
A. employee stress.
B. employee burnout.
C. organizational change.
D. employee turnover.

29. If you are considering the possible consequences of each decision you could make, you are
A. focusing on creativity.
B. assessing risk.
C. practicing mindfulness.
D. staying calm.

30. Anna's boss frequently demanded that she work late, even though she would not be paid for her overtime
hours. Because of this, Anna lost respect for her boss and decided to look for a new job. This example
demonstrates
A. how fairness has little impact on decision-making.
B. how the justice approach to fairness is limited.
C. how fairness is important to professional relationships.
D. how a lack of empathy undermines equality.

31. A credit account in which the purchaser usually makes a down payment and signs a contract to make a series
of scheduled payments and finance charges describes which of the following:
A. Open account
B. Revolving credit
C. Layaway plan
D. Installment credit

32. Which of the following is an example of a real estate investment:

A. Land to be developed in the future
B. A certificate of deposit
C. A corporate bond
D. Partial ownership of a corporation

33. Jack broke his left leg in a snowboarding accident and won't be able to work for three months. What type of
insurance will help Jack cover his living expenses while he is recovering from his accident?
A. Liability
B. Disability
C. Term life
D. Health

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 6

34. Shawn wants to know if his company is staying on budget, so he looks at the difference between the budgeted
amount and the amount the company actually spent. Shawn is analyzing a(n)
A. sales forecast.
B. asset.
C. expense.
D. variance.

35. How much will $5,000 be worth in five years if invested at an 8% compound interest rate?
A. $5,400
B. $5,045
C. $7,347
D. $8,000

36. Stefan decides to invest a sum of $1,200 into one of his favorite stocks that typically earns 9% or more each
year. If the stock earns 9% this year, what will be the total value of his investment?
A. $1,200
B. $1,308
C. $1,420
D. $1,080

37. What does an income statement show about a company over a period of time?
A. Profitability
B. Liabilities
C. Reliability
D. Equity

38. Seamus is calculating the value of all the outstanding Google stock owned by Google's shareholders. Seamus
is determining
A. cash flow.
B. shareholder's equity.
C. liability.
D. revenue.

39. An investor using a securities table can learn about a stock's volatility by checking the stock's
A. CLOSE.
B. 52-Week HI/LO.
C. VOL.
D. DIV.

40. A stock with a high dividend yield is typically __________ than one with a low yield.
A. less established
B. more established
C. less volatile
D. more volatile

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 7

41. As financial intermediaries, what is all financial institutions' primary responsibility?

A. Transferring money from those who have it to those who need it
B. Investing clients' money in mid-cap growth companies
C. Calculating the opportunity costs of clients' potential investments
D. Conducting fundamental and technical analyses to evaluate securities

42. Which type of financial institution facilitates the buying and selling of securities between investors?
A. Savings and loan associations
B. Brokerage firms
C. Insurance companies
D. Credit unions

43. Mortgages and government bonds are examples of

A. interest-free services.
B. debt instruments.
C. equity products.
D. unrated investments.

44. Which of the following is a characteristic of a call market:

A. Buyers and sellers determine prices.
B. Buy orders are made at specific times.
C. Trades occur continuously.
D. Prices change from moment to moment.

45. Which of the following is an ethical principle that is applicable to finance:

A. Incrementalism
B. Competence
C. Self-interest
D. Framing

46. The Money for You Bank recently merged with the Keeping You Safe Insurance Company. The merger is an
example of __________ in the finance industry.
A. tactical planning
B. consolidation
C. convergence
D. licensing

47. When a business reviews a customer's credit application, it is evaluating risks associated with the
A. customer's beneficiaries.
B. business's reporting strategies.
C. business's accounting processes.
D. customer's ability to pay.

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 8

48. According to most analysts, the three economic indicators that stock market investors and traders should pay
the closest attention to are
A. gross domestic product, overhead expenses, and unemployment.
B. gross domestic product, unemployment, and inflation.
C. inflation, unemployment, and bonds rates.
D. interest rates, overhead expenses, and inflation.

49. When a country is experiencing a recession, which of the following typically occurs first:
A. Stock prices increase
B. A stock market crash
C. A stock market recovery
D. Stock prices decrease

50. Which of the following statements about hedge funds is true:

A. Hedge funds involve private investment partnerships.
B. Government agencies usually manage hedge funds.
C. Investment options for hedge funds are limited in scope.
D. Hedge funds are designed to generate conservative financial returns.

51. An increase in free-flowing capital is a benefit of

A. global protectionism.
B. economic conservatism.
C. investor innovation.
D. financial globalization.

52. When preparing a statement of equity, what does a business deduct from its total net income to obtain its
retained earnings?
A. Bad debt
B. Depreciation of assets
C. Sales tax payable
D. Dividends paid

53. One of the benefits of marginal analysis is

A. understanding the impact of sunk costs.
B. optimal decision-making.
C. improved workplace communication.
D. improved long-term strategy.

54. Which of the following is a responsibility of a managerial accountant:

A. Compiling the company's financial information for release to the public
B. Training employees and management on personal financial literacy
C. Making managerial decisions regarding planning, pricing, and sales
D. Conducting a cost analysis and explaining the findings to management

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 9

55. In corporate governance, oversight of management, segregation of control, and policy development are all
examples of
A. tasks of the board of directors.
B. internal control mechanisms.
C. transparency in management.
D. external control mechanisms.

56. Budgets are important to the management process because they

A. remove the possibility of financial constraints.
B. shift focus from future events to daily issues.
C. ensure that organizational goals come before personal goals.
D. help determine roles and responsibilities.

57. Which of the following is a cost driver that could affect the cost of internet service in a coffee shop:
A. Number of ingredients per product
B. Number of products sold
C. Number of direct labor hours
D. Number of customers

58. A financial information management system is often responsible for

A. assisting in the preparation of financial statements.
B. supervising the accounting and finance departments.
C. purchasing raw materials for production.
D. developing a corporate investment portfolio.

59. Financial information management is responsible for collecting, maintaining, and reporting data about financial
transactions. Business managers often use these data to
A. develop secondary equity markets.
B. determine if liability insurance is needed.
C. forecast financial inflows and outflows.
D. calculate the level of corporate groupthink.

60. To guard against intentional ethical violations, such as deliberate financial data tampering, an organization
should maintain
A. hard copies of all documents.
B. audit trails of data changes.
C. daily balance sheets.
D. an accounts receivable schedule.

61. Which of the following can be used to trace a financial transaction from beginning to end to ensure that the data
are accurate and have not been altered:
A. Accounting standards
B. Supply chain
C. Audit trail
D. Separation of duties

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 10

62. By reviewing a prospective customer's borrowing and repayment history, a business can determine if it should
A. provide the prospective customer with a high credit rating.
B. charge sales tax.
C. offer credit to the prospective customer.
D. increase the prime lending rate.

63. Which of the following statements regarding convergence and consolidation in the finance industry is true:
A. A desire for lower costs has slowed the pace of convergence and consolidation.
B. When multiple financial firms merge, they often end up with less capital to invest.
C. Technological advancements have increased the costs of offering new and different products.
D. Financial companies often enjoy higher earnings as a result of convergence and consolidation.

64. One step that financial-services companies can take to protect their clients' online business transactions from
hackers is to
A. use intranet capabilities.
B. install firewalls.
C. limit the number of client transactions.
D. avoid encryption methods.

65. When employees have the ability to retrieve only the computer data that are important for them to have to
perform their job, the business is applying the
A. concept of intrusion prevention.
B. doctrine of organizational structure.
C. principle of least authority.
D. law of diminishing capacity.

66. Joanna works as an accountant for a construction company. She is drafting a budget to determine whether the
company has enough money to start construction on a new high-rise building. As part of her research for the
budget, Joanna examines the company's accounts payable and receivable. Joanna is drafting a(n) __________
budget.
A. static
B. operating
C. cash flow
D. master

67. Spreadsheets, database applications, and other software are often used by businesses for
A. staff communication.
B. financial analysis.
C. employee recognition.
D. public relations.

68. Which of the following is a result that is likely to occur when companies take negative actions:
A. Increased efficiency
B. Excellent business reputation
C. High employee turnover
D. Bankruptcy

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 11

69. Google Calendar and Microsoft Outlook are both examples of

A. personal information management systems.
B. smartphone operating systems.
C. mobile geolocation tracking systems.
D. virtual reality applications for smart TVs.

70. What type of business record can a gift shop review to determine how many customers purchased items on
Tuesday?
A. Cash balances
B. Quarterly credit statements
C. Inventory status records
D. Daily sales receipts

71. One of the primary purposes of information management is to provide businesses with the strategic information
they need to
A. create sales presentations.
B. develop a short-term advertising campaign.
C. make long-term decisions.
D. write an annual report.

72. Determine if the following statement is true or false: It is acceptable for a business to distribute its customers'
personal information without their consent to third parties.
A. True; most international trade agreements include provisions that allow businesses to sell their customers'
personal information to other businesses.
B. True; after collecting customers' information, the business owns the information and can do whatever it
wants with the information.
C. False; it is unethical to distribute customers' personal information without their permission to third parties.
D. False; a business that distributes its customers' personal information is breaking antitrust laws.

73. William is in charge of using a database application to organize a large amount of his company's data. When he
looks through the numbers, he notices that the majority of them start with one, while very few begin with nine.
This is an example of what universal law?
A. Numerical law
B. The law of diminishing returns
C. Benford's law
D. The law of supply and demand

74. The purpose of data normalization is to

A. improve data integrity.
B. increase data redundancy.
C. remove new types of data.
D. delete conforming data.

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 12

75. A small food market that calls several vendors to obtain a price and then places an order with the lowest bidder
is using the __________ buying method.
A. informal
B. competitive-bid
C. negotiated
D. standing-order

76. Employees who are responsible for paying a business's bills can help the business to control its expenses by
A. paying bills within the discount period.
B. paying all bills as soon as they are received.
C. asking vendors to negotiate dating terms.
D. controlling the business's trade credit.

77. Operations activities are most closely related to a business's

A. location.
B. product.
C. name.
D. taxes.

78. What is one way that employers can avoid conflict over use of company property?
A. Enact a zero-tolerance policy for property misconduct.
B. Appoint an employee to handle all conflicts.
C. Allow minor misuse of company property.
D. Put clear, specific guidelines and consequences in writing.

79. A direct benefit of supply chain collaboration is

A. lower cost due to reduced inventory.
B. an increase in business profits.
C. lower cost due to higher inventory.
D. less flexibility in purchasing decisions.

80. Employees who understand who they are, accept their weaknesses, and realize that they each possess unique
talents usually have high
A. self-fulfillment.
B. self-understanding.
C. self-preservation.
D. self-esteem.

81. During a job interview, job applicants can indicate their interest in the job by asking questions about the
A. fringe benefits.
B. company.
C. interviewer.
D. vacation policy.

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 13

82. When an employee is dependable, is willing to learn new skills, and takes initiative in the workplace, the
employee is more likely to
A. obtain advice.
B. receive a promotion.
C. acknowledge others.
D. be passive.

83. Miguel always enjoyed designing and building bookshelves, tables, and storage cabinets for his family and
friends in his spare time. Through word-of-mouth, others started to ask Miguel to build items for them. Requests
for his services became so great that he decided to open his own woodworking business. Miguel decided to
start his own business because of his
A. desire for a flexible schedule.
B. need for adventure.
C. passion for a hobby.
D. technological knowledge.

84. Which of the following finance professionals typically oversees a company's cash management, capital raising,
and investment activities:
A. Underwriter
B. Risk manager
C. Cash manager
D. Treasurer

85. Investment banking, portfolio management, and accounting are all part of which of the following sectors of
business:
A. Finance
B. Marketing
C. Entrepreneurship
D. Management

86. To build professional relationships, a finance professional might talk with friends, family, and business
associates to discuss ways they can advance in their career. This is an activity called
A. networking.
B. selling.
C. socializing.
D. coordinating.

87. Which of the following has proven to be an effective way to initiate a professional relationship with a vendor:
A. Having salespeople talk to the vendor
B. Offering jobs to people on the vendor's staff
C. Giving the vendor an expensive gift
D. Treating the person to a round of golf

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 14

88. Which of the following best describes the purpose of corporate governance:
A. To ensure that companies are held to high ethical standards
B. To improve relations with company stockholders
C. To create a favorable image for the company
D. To make hiring and firing decisions for entry-level employees

89. Managerial accountants provide assistance to management by

A. gathering information on social media trends.
B. calculating probability of risky events.
C. accumulating data on costs and profits.
D. preparing financial statements for public review.

90. In a well-governed organization, what typically helps employees understand their roles and encourages positive
public impressions?
A. Transparency
B. Efficiency
C. Anonymity
D. Flexibility

91. Which of the following most likely led to a greater emphasis on governance structures in recent years:
A. Accounting fraud
B. Stock market crash
C. New technology in the industry
D. Competitor saturation

92. Which of the following statements regarding corporate governance is true:

A. Small organizations do not need corporate governance.
B. All companies need a board of directors to perform corporate governance.
C. Corporate governance can benefit organizations of any size.
D. Large companies are better at monitoring corporate governance.

93. Which of the following serves as an organization's conscience during decision-making:

A. The public
B. Board of directors
C. Employees
D. The “C-Suite” (CEO, CFO, etc.)

94. Which of the following ethical issues is most likely to cause hazard risks:
A. Misuse of resources
B. Lack of transparency
C. Unsafe working conditions
D. Conflicts of interest

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM 15

95. One of the goals of risk management is to

A. limit losses.
B. determine right from wrong.
C. increase revenue.
D. increase risk-taking.

96. To secure confidential financial data that are transmitted online, businesses often use
A. cross-platform technology.
B. debuggers.
C. encryption techniques.
D. bots.

97. Which of the following issues is keeping risk managers from getting the right information into the right context so
that the right decisions can be made:
A. Having a centralized enterprise risk management system
B. Having transparency around the effects of volatility on the organization
C. Having many different sources of data that can be used to assess risk
D. Having too little information that can be used to assess and understand risk

98. Which of the following is an ethical issue related to public safety that may increase a business's risk levels:
A. Implementing changes to increase production-line security levels
B. Monitoring smokestack emissions on an occasional basis
C. Taking shortcuts to complete a bridge construction project on time
D. Exaggerating the capabilities of a commercial vacuum cleaner

99. How do many professionals reduce their risks associated with client or patient lawsuits?
A. Develop noncompete contracts
B. Sign vendor contracts
C. Obtain professional liability insurance
D. Purchase disability insurance

100. Which of the following is a benefit of implementing enterprise risk management (ERM):
A. Improved sales in previously sluggish categories
B. Fewer expenses related to public relations
C. Increased performance variability
D. Increased confidence from company stakeholders

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

 KEY
Test Number 1274

Finance Cluster Exam

ACT – Accounting Applications Series Event
BFS – Business Finance Series Event
FCE – Financial Consulting Event
FTDM – Financial Services Team Decision Making Event

CAUTION: Posting these materials on a website is a copyright violation.

This comprehensive exam was developed by MBA Research exclusively for DECA’s
2022-2023 Competitive Events Program. Items have been randomly selected from the MBA
Research Test-Item Bank and represent a variety of instructional areas. Performance indicators
for this exam are at the prerequisite, career-sustaining, and specialist levels. A descriptive test
key, including question sources and answer rationale, has been provided to the DECA chartered
association advisor.

Copyright © 2023 by Marketing & Business Administration Research and

Curriculum Center®, Columbus, Ohio (dba MBA Research). Each individual test item contained
herein is the exclusive property of MBA Research. Items are licensed to DECA only for use as
configured within this exam, in its entirety. Use of individual items for any purpose other than as
specifically authorized is prohibited. Possession of this exam, without written authorization,
under any other circumstances is a copyright violation. Posting to inter- or intranet sites is
specifically forbidden unless written permission is obtained prior to posting. Report violations to
DECA at 703.860.5000 and MBA Research at 800.448.0398. Permission for reprinting is
granted to DECA chartered associations authorized by DECA Inc.

DECA Inc. will impose sanctions on chapters and chartered associations for violations of this
policy up to and including disqualification of competitors and chapters from further participation.
Test 1274 FINANCE CLUSTER EXAM—KEY 1

1. C
Drinking water must meet state, provincial, and federal quality standards. Water meeting state, provincial, and
federal quality standards is required by environmental law. Environmental law includes all government
regulations that protect the environment, wildlife, endangered species, water, and land and that prevent
pollution and over-cutting of forests. Because of environmental law, businesses must dispose of hazardous
chemicals in safe, approved ways to protect the land and water. They also must meet emissions standards to
protect the quality of the air. Seatbelts, medicine, and speed limit regulations are all important, but none of them
are influenced specifically by environmental law.
SOURCE: BL:073 Discuss the nature of environmental law
SOURCE: Legal Career Path. (2022). What is environmental law? Retrieved October 6, 2022, from
[Link]

2. D
Enforce agency regulations. Administrative law deals with the rules and regulations that have been established
by governmental agencies. Government and independent agencies have the authority to enact and enforce
regulations for various administrative functions, including aviation, taxation, and commerce. The legislative
branch of government establishes congressional/parliamentary committees. The judicial branch of government
interprets constitutional law and in some instances may overturn a lower court's judicial decision.
SOURCE: BL:074 Discuss the role of administrative law
SOURCE: Legal Information Institute. (2022, June). Administrative law. Retrieved October 6, 2022, from
[Link]

3. B
All shareholders. Fiduciary responsibility involves acting in the best interest of a client or benefactor and making
wise financial decisions on their behalf. A corporation's board of directors consists of individuals who are
appointed or elected to make decisions on behalf of the shareholders—the company's owners. Board members,
local community members, and government officials may or may not be shareholders.
SOURCE: BL:133 Discuss legal considerations in the finance industry
SOURCE: DirectorPoint. (2022). Board membership 101: Fiduciary duties. Retrieved October 6, 2022, from
[Link]

4. A
Ponzi scheme. A Ponzi scheme is an investment scheme in which higher level investors take money from lower
level investors without giving them the returns they were promised. In this situation, Erin obtained an investment
from Sebastian that she has not paid back. This example does not depict an annuities scam, a prime bank
scheme, or predatory lending.
SOURCE: BL:133 Discuss legal considerations in the finance industry
SOURCE: New York State Attorney General. (n.d.). Common investment scams. Retrieved October 6, 2022,
from [Link]

5. C
Charitable donation. Gifts are money, financial products, or property given to an individual or organization.
Some gifts, such as charitable donations, are tax deductible. This means that the donor pays a reduced amount
of tax or is exempt from paying the tax, depending on the type and value of the gift. Vacation homes, stocks,
and inherited items are taxable gifts.
SOURCE: BL:134 Discuss the effect of tax laws and regulations on financial transactions
SOURCE: Internal Revenue Service. (2022, May 2). Frequently asked questions on gift taxes. Retrieved
October 6, 2022, from [Link]
asked-questions-on-gift-taxes

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 2

6. C
Double. Double, or dual, taxation occurs when two different taxes are levied on the same income. Frank and
Fitzer's earnings are subject to double taxation because the company pays taxes on its income, and its
stockholders must pay taxes on any dividends that they receive from the company. If a government levies a
proportional tax, everyone pays the same percentage of income in taxes. A progressive tax requires individuals
with higher incomes to pay a higher percentage of income in taxes. A regressive tax requires individuals with
lower incomes to pay a higher percentage of income in taxes. There is not enough information provided to
determine if a proportional, progressive, or regressive tax system exists.
SOURCE: BL:134 Discuss the effect of tax laws and regulations on financial transactions
SOURCE: Kagan, J. (2022, June 9). Double taxation. Retrieved Ocober 6, 2022,
from [Link]

7. B
Pay a fine. Financial institutions often have to pay fines for noncompliance. Noncompliance does not typically
lead to a better reputation or new business. In fact, clients may be reluctant to do business with a financial
institution known for breaking the rules. Financial institutions can be audited by government agencies.
SOURCE: BL:148 Discuss the nature and scope of compliance in the finance industry
SOURCE: Scott, C. (2019, August 20). The dangers of non-compliance for your business. Retrieved October 6,
2022, from [Link]
your-business

8. B
Better risk management. Compliance technology facilitates more communication and transparency in regard to
risks. This allows companies to better prepare for the risks that are most likely to affect them. Compliance
technology also provides one place to store and organize risks that can be accessed by everyone. Using
technology in compliance increases transparency rather than decreasing it. Using technology in compliance
does not reduce the need for policies and procedures. Finally, using technology in compliance does not lower
compliance implementation costs.
SOURCE: BL:149 Describe the use of technology in compliance
SOURCE: Fadlallah, H. (2018, November 7). How information technologies influenced risk management?
Retrieved October 6, 2022, from [Link]
influenced-risk-management-7eb3a38d253

9. D
Using a verbal acknowledgment response. In one-on-one or small group conversations like Megan's, a short
verbal response lets the speaker know you are paying close attention. By saying things like “I see” or “uh-huh,”
you let the other person know that you're actively listening. Repeating critical information is another important
active listening skill that involves repeating things like phone numbers, names, or websites. When you
paraphrase the message, you repeat what the other person said but in your own words. When you collect all
the information possible, you observe gestures, interpret body language, and listen to the person's tone of
voice. All of these are important active listening skills, but they aren't what Megan is doing in this example.
SOURCE: CO:017 Demonstrate active listening skills
SOURCE: LAP-CO-017—Listen Up! (Demonstrating Active Listening Skills)

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 3

10. D
A print advertisement. Informational messages involve communicating data, facts, or knowledge to a message
receiver. Print advertisements communicate information about a business's products to customers or potential
customers, which are external audiences. An employee handbook, an inventory report, and an office calendar
are types of information provided to the business's employees, who are an internal audience.
SOURCE: CO:039 Write informational messages
SOURCE: Duggan, T. (2019, January 31). Examples of external communications in the workplace. Retrieved
October 6, 2022, from [Link]
[Link]

11. A
Blurting out statements without thinking. To contribute to a discussion in a useful way, you should think about
what you want to say before speaking. Make sure that you state accurate information and that you don't say
something in a way that is offensive to others. You should communicate facts and express opinions when
appropriate. You should talk about what's on your mind. And, you should pay attention when others are
speaking.
SOURCE: CO:053 Participate in group discussions
SOURCE: Braden, M. (2022, March 31). Focus on conversation rather than debate to improve your
communication skills. Retrieved October 6, 2022, from
[Link]
debate-to-improve-your-communication-skills/?sh=4cc7dd2da164

12. C
Developing a negative public image. Employees who share negative information publicly on social media create
risk for themselves and their company by building a negative image that can easily transfer to the company they
work for. The company is not likely to be prosecuted for defamation since the remarks were not written by the
company and did not occur within official corporate communications. Corporate taxes are enacted by law, not in
response to isolated events. Every company that has some type of online presence (e.g., website, social media
account) has a social media footprint.
SOURCE: CO:205 Describe the impact of a person's social media brand on the achievement of organizational
objectives
SOURCE: Chase, C. (2021, July 13). How your employees' social media behavior could impact your business.
Retrieved October 6, 2022, from [Link]
[Link]

13. B
Make sure you clearly understand customers' inquiries. Customers' inquiries are not always phrased in such a
way that employees can easily determine what customers want to know. Employees should find out exactly
what the customers are asking in order to give them the most accurate answers. Inquiries should be handled as
courteously as sales, which means spending whatever time is needed to answer them. In many cases, it would
be inappropriate to try to sell something to a customer who asks a question. Employees who are busy with a
sale can often take a moment to answer a single question for another customer without being rude to the first
customer. If the second customer has additional questions, they should be asked to wait until you can give
those questions your full attention.
SOURCE: CR:006 Respond to customer inquiries
SOURCE: Live Agent. (2022). How to respond to a customer request. Retrieved October 6, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 4

14. A
Gather more accurate product and marketing information. Handling customer complaints may allow the
business to gather more accurate product and marketing information (e.g., information about frequent product
issues or contact information for repeat customers). Handling customer complaints is not likely to allow a
business to afford raises for its employees, learn inside information about its competitors, or expand its facilities.
SOURCE: CR:010 Handle customer/client complaints
SOURCE: LAP-CR-010—Righting Wrongs (Handling Customer Complaints)

15. C
Developing stronger long-term customer relationships. By learning and better meeting customers' wants and
needs, bank employees—and ultimately, the bank as a whole—are able to develop stronger long-term
relationships with customers. And, as the bank builds goodwill among its customers, those customers are likely
to become loyal bank clientele. Although bank employees will be recognized for delivering quality customer
service as a result of the new strategy, it is not likely to be Anna's primary goal. Based on the information
provided, the new strategy is unrelated to new products and services or the number of forms that new
customers must fill out.
SOURCE: CR:012 Explain the responsibilities of finance professionals in providing client services
SOURCE: MindTools. (2022). Customer service mindset. Retrieved October 6, 2022, from
[Link]

16. A
Received referrals from an existing client. When clients such as Trevor are happy with a financial planner's
services, they are likely to recommend or refer the financial professional to their friends, family, and colleagues.
Trevor could also give Catherine the contact information of his friends and colleagues so that she can follow up
with them. The benefit to Catherine is that she increases her client base and earning potential. There isn't
enough information provided to determine if Trevor used social media applications to communicate with his
friends and colleagues about Catherine, if Catherine earned a sizeable commission from Trevor's investments,
or if Catherine obtained recognition from her colleagues.
SOURCE: CR:012 Explain the responsibilities of finance professionals in providing client services
SOURCE: BlueShore Financial. (2022). Ten traits of successful financial advisors. Retrieved October 6, 2022,
from [Link]
successful-financial-advisors

17. B
Profitability. Customer relationship management (CRM) analytics can be used to analyze and evaluate
customer data in many different ways. For example, a business can use CRM technology to segment its
customers into groups on the basis of the amount of money they spend with the business over a specific period
of time (e.g., by quarter or year). This helps the business analyze the profitability of their customers. Companies
may use this information to develop promotional programs for each category of customer to build loyalty.
Demographic segmentation considers factors such as age, education, gender, etc. There is not enough
information to determine if the company is analyzing product usage in relation to sales-dollar volume. Differed
analytics is a fictitious term.
SOURCE: CR:024 Use Customer Relationship Management (CRM) technology
SOURCE: Kiwak, K. (2022). CRM analytics. Retrieved October 6, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 5

18. D
As natural and human resources become limited, capital goods become limited. Capital goods are items
manufactured or constructed from natural and human resources. Natural resources are items found in nature
that are used in production, and human resources are the people who transform natural resources into capital
goods and consumer products.
SOURCE: EC:003 Explain the concept of economic resources
SOURCE: LAP-EC-903—Be Resourceful (Economic Resources)

19. C
Job rotation. Job rotation involves periodically moving employees from one job to another. Job rotation is an
effective management training method to broaden the employees' perspective of the business. Rotating jobs
and responsibilities can benefit employees and increase their morale because they are learning new skills. It
also keeps employees from becoming bored because they are doing different tasks. Job rotation benefits
businesses because employees are cross-trained and can serve as backup resources. Interdependency occurs
when workers must rely on each other to accomplish a task or produce a product. Job security is the likelihood
that an employee will be able to keep their job. Task specialization (specialization by task) involves being highly
skilled in one, very small portion of a job.
SOURCE: EC:014 Analyze impact of specialization/division of labor on productivity
SOURCE: LAP-EC-914—Divide and Conquer (Specialization and Division of Labor)

20. C
Has an effect on. The social responsibility of the business affects many aspects of community life by affecting
the level of employment, supporting cultural activities and educational programs, and making donations to
worthy community causes. The local community is not the only target for the business’s social responsibility, but
it is an important one. A business’s social responsibility depends upon the business, not the community.
SOURCE: EC:070 Explain the role of business in society
SOURCE: LAP-EC-070—Business Connections (Business and Society)

21. B
To expand to new, untapped markets. By offering their products in other countries, businesses are able to reach
new markets to which they have not previously been able to sell their products. Using international markets as a
dumping ground for obsolete, outdated products would be a short-term strategy that would eventually create a
negative company image. Governments may subsidize developing countries; businesses do not. Although
people in other countries may gain employment, that is not a reason for a company to offer its products in other
countries.
SOURCE: EC:104 Discuss the global environment in which businesses operate
SOURCE: LAP-EC-104—Stretch Your Boundaries (The Global Business Environment)

22. C
Cultural. Businesses are affected by the culture of the people who buy from them. They want to meet the needs
and wants of their customers. To do this effectively, they must be sensitive to their customers' values,
preferences, beliefs, etc., so that they do not offend their customer base. Economic factors relate to how people
generate revenue to obtain the desired goods and services. Government stability and laws are political factors
that operate in the business environment. Access to raw materials, availability of natural resources, amount of
pollution, and a business's location are examples of environmental factors affecting the business environment.
SOURCE: EC:105 Describe factors that affect the business environment
SOURCE: LAP-EC-105—What's Shakin'? (Factors Affecting the Business Environment)

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 6

23. D
Very valuable. Criticism is a valuable tool if you use it constructively to improve yourself. Making appropriate
changes should result in less frequent criticism rather than more. For most people, criticism does not become
desirable or anticipated.
SOURCE: EI:003 Explain the use of feedback for personal growth
SOURCE: LAP-EI-903—Grin and Bear It (Using Feedback for Personal Growth)

24. A
Verbal communication. Writing a letter to your grandparent is an example of verbal communication. Verbal
communication is the exchange of information through the use of words, including writing and speech. Writing a
letter to your grandparent is different from speaking to them. Nonverbal communication is the exchange of
information without the use of words, including body language, eye contact, and gestures. Writing a letter is not
nonverbal communication, because it involves the use of words.
SOURCE: EI:007 Explain the nature of effective communications
SOURCE: SkillsYouNeed. (2022). Verbal communication skills. Retrieved October 6, 2022, from
[Link]

25. B
Needs. Assertive people understand that they have the right to ask other people to respond to their needs, but
they also know they should be able to accept legitimate refusals. Aggressive people often have the mistaken
belief that they have a basic right to expect people to respond to their directions, orders, and/or whims.
SOURCE: EI:008 Use appropriate assertiveness
SOURCE: LAP-EI-008—Assert Yourself (Assertiveness)

26. A
Self-esteem. Humans have a very basic need to feel important and respected. Self-esteem and self-respect are
shaped in part by the messages we receive from those around us, including recognition for our efforts and
contributions. Safety, understanding, and friendship also are very basic human needs, but they are not fulfilled
by rewards and recognition.
SOURCE: EI:014 Recognize/Reward others for their efforts and contributions
SOURCE: LAP-EI-141—Gimme Five! (Recognizing/Rewarding Others)

27. C
Admitting to your parents when you forget to empty the dishwasher. Integrity includes being honest and
admitting when you've made a mistake. Using a white lie as an excuse to get out of an obligation is dishonest.
Telling your friend that you dislike their outfit might be honest, but it's not a tactful way to express an opinion
and does not show respect. Finally, keeping the money that someone left in the ATM is not an example of
integrity.
SOURCE: EI:022 Demonstrate honesty and integrity
SOURCE: LAP-EI-138—Sincerely Yours (Demonstrating Honesty and Integrity)

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 7

28. B
Employee burnout. Burnout results when employees experience negative stress over a prolonged period of
time. Its symptoms include lethargic behavior and irritability among other signs. Employee stress can lead to
burnout, but stress, by definition, is not long term. Employee turnover occurs when a person leaves their job
and is replaced by someone else. This is a cause, not a result, of stress. Organizational change occurs when a
company's management decides to run the company in a different manner than its current state. This change
can cause, but isn't a result, of stress.
SOURCE: EI:028 Explain the nature of stress management
SOURCE: LAP-EI-028—Keep Your Cool (Stress Management)

29. B
Assessing risk. Assessing risk means focusing on the possible consequences and outcomes associated with
your decisions and actions. Staying calm, focusing on creativity, and practicing mindfulness are not specifically
related to considering the possible consequences of each decision you could make.
SOURCE: EI:092 Develop tolerance for ambiguity
SOURCE: LAP-EI-092—Embrace the Unknown (Developing a Tolerance for Ambiguity)

30. C
How fairness is important to professional relationships. Treating others with fairness is essential for forming
positive professional relationships. When you treat someone fairly, your relationship with that person is equal
and balanced. One person is not taking advantage of the other or getting more out of the relationship than the
other. In this case, Anna's boss did not treat her fairly, so they did not develop a relationship of respect and
trust. Therefore, Anna looked for a different job. This example does not demonstrate how fairness has little
impact on decision-making, how the justice approach to fairness is limited, or how a lack of empathy
undermines equality.
SOURCE: EI:127 Demonstrate fairness
SOURCE: LAP-EI-127—Fair or Foul? (Demonstrating Fairness)

31. D
Installment credit. Installment credit is frequently used in the purchase of big-ticket items such as furniture. An
open, or regular, credit account allows credit users to buy at any time during a set period, usually 30 days. A
revolving credit account limits the total amount of money that may be owed and charges interest on outstanding
balances. Layaway is paying over a period of time for merchandise held by the store until the customer pays in
full.
SOURCE: FI:002 Explain the purposes and importance of credit
SOURCE: LAP-FI-002—Give Credit Where Credit Is Due (Credit and Its Importance)

32. A
Land to be developed in the future. Real estate is property, such as land to be developed in the future. If the
property becomes more valuable, investors can sell it for a profit. A certificate of deposit is a lending investment
in which an individual lends money to a bank to earn a set rate of interest for a specified period of time. A bond
is a lending investment in which an individual lends money to a government, municipality, or corporation to earn
a set rate of interest for a specified time period. Partial ownership of a corporation is stock.
SOURCE: FI:077 Explain types of investments
SOURCE: LAP-FI-077—Invest for Success (Types of Investments)

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 8

33. B
Disability. Disability insurance provides a percentage of a worker's normal wages to the worker when they
cannot work because of an illness or injury. Often, businesses obtain disability coverage for their employees as
a component of their benefits package. Health insurance covers such medical expenses as hospital bills,
doctors' fees, lab charges, and other medical costs. Liability insurance protects against lawsuits that result from
injuries to others. Term-life insurance provides insurance coverage at a fixed rate for a limited amount of time.
The beneficiary receives payment upon the death of the insured during that time.
SOURCE: FI:081 Describe the concept of insurance
SOURCE: Guardian. (2022). Disability insurance. Retrieved October 6, 2022, from
[Link]

34. D
Variance. A variance is the difference between a budgeted amount and an actual amount. Budget variances let
businesses know where they are on target and where they are not. An expense is the money that the business
spends. An asset is something of value that a business owns. A sales forecast is a prediction of future sales
over a specific period of time.
SOURCE: FI:106 Describe the nature of budgets
SOURCE: LAP-FI-106—Money Tracks (Nature of Budgets)

35. C
$7,347. To calculate the future value of money, first add 1 to the interest rate expressed as a decimal (1 + 0.08
= 1.08). Then, raise that sum to the power of the number of periods; in other words, multiply that sum by itself 5
times (1.08 X 1.08 X 1.08 X 1.08 X 1.08 = 1.46933). Finally, multiply the product by the original investment
(1.46933 X $5,000 = $7,346.65). Rounded up, the final value is $7,347.
SOURCE: FI:238 Calculate the time value of money
SOURCE: Heyford, S.C. (2022, May 23). Understanding the time value of money. Retrieved October 6, 2022,
from [Link]

36. B
$1,308. To calculate the future value of a one-year investment, first calculate the earned interest by multiplying
the original amount by the interest rate ($1,200 X .09 = $108). Then, the amount of earned interest is added to
the original amount to calculate the total value of the investment ($108 + $1,200 = $1,308).
SOURCE: FI:238 Calculate the time value of money
SOURCE: TVMCalcs. (2022). Time value of money: Concepts and calculations. Retrieved October 7, 2022,
from [Link]

37. A
Profitability. The income statement shows a company's profitability over a period of time. Reliability, equity, and
liabilities are not part of the income statement.
SOURCE: FI:274 Describe sources of securities information
SOURCE: Averkamp, H. (2022). Income statement. Retrieved October 7, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 9

38. B
Shareholder's equity. Shareholder's equity is determined by subtracting the liabilities from the assets on a
balance sheet. Liability is what the company owes. Revenue is money that is earned. Cash flow consists of the
money that comes into and flows back out of a company.
SOURCE: FI:274 Describe sources of securities information
SOURCE: Hayes, A. (2022, March 20). What is shareholder equity (SE) and how is it calculated? Retrieved
October 7, 2022, from [Link]

39. B
52-Week HI/LO. The highest and lowest prices paid during the past year can be used to learn how volatile a
stock is. If the range between the lowest and highest prices is large, then the stock's price has risen or fallen
sharply in the past year. Such a stock would be considered volatile. The stock's dividend, volume, and closing
price are much less reliable indicators of a stock's volatility.
SOURCE: FI:275 Interpret securities table
SOURCE: Merritt, C. (n.d.). What is the importance of the 52-week high & the 52-week low prices? Retrieved
October 7, 2022, from [Link]

40. C
Less volatile. Volatility is the movement of a stock's price. A stock with a higher yield percentage is less volatile,
while a stock with a low yield tends to be more volatile. The yield percentage is not necessarily an indication of
how established a company is or isn't; rather, a company that pays out dividends is seen as more established
than one that puts profits back into the business.
SOURCE: FI:275 Interpret securities table
SOURCE: LAP-QS-037—Table Talk (Reading Stock Tables)

41. A
Transferring money from those who have it to those who need it. Financial institutions play an integral role in
our economic system. They act as financial intermediaries (middlemen) by transferring money from those who
have it to those who need it. In essence, financial institutions facilitate the flow/movement of money through the
economy. Investment institutions such as mutual funds, investment banks, pension funds, and exchanges may
invest clients' money in mid-cap growth companies; calculate the opportunity costs of clients' potential
investments; and conduct fundamental and technical analyses to evaluate securities. However, none of those
activities is the primary responsibility of all financial institutions, including deposit-taking institutions, finance and
insurance institutions, and investment institutions.
SOURCE: FI:336 Describe the role of financial institutions
SOURCE: Horton, M. (2022, April 29). What are the 9 major types of financial institutions? Retrieved October 7,
2022, from [Link]
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 10

42. B
Brokerage firms. Brokerage firms are financial institutions that act as intermediaries between investors who buy
and sell stocks and securities. Savings and loan associations are financial institutions that specialize in savings
deposits, mortgages, and other loans. They can only have 20% of their lending in commercial loans, and 65%
or more must be in residential mortgages. Credit unions are not-for-profit cooperatives that have higher rates on
deposits and lower rates on loans than commercial banks but are restricted to particular membership groups.
Finally, insurance companies collect premiums from people who want to protect themselves against loss, help
manage risk, and preserve wealth.
SOURCE: FI:336 Describe the role of financial institutions
SOURCE: Horton, M. (2021, April 29). What are the 9 major types of financial institutions? Retrieved October
21, 2022, from [Link]
[Link]

43. B
Debt instruments. Debt instruments are assets that generate income, usually by charging interest, for the asset
provider. For example, a mortgage is a financial product (asset) provided by a financial institution (asset
provider or lender) to a home or business owner. The borrower pays back the mortgage or loan with interest.
Charging and collecting interest is the way that the financial institution makes money by providing the loan.
Government bonds are debt instruments because the organizations or individuals who purchase the bonds
(asset providers) earn interest (income) on the bond from the bond issuer (government). An equity instrument
involves acquiring ownership of an asset, such as stock. Mortgages and government bonds are not examples of
unrated investments or interest-free services.
SOURCE: FI:337 Explain types of financial markets (e.g., money market, capital market, insurance market,
commodities markets, etc.)
SOURCE: Chen, J. (2022, September 26). Debt instrument. Retrieved October 7, 2022,
from [Link]

44. B
Buy orders are made at specific times. In call markets, transactions take place at specific times. When
individuals put in orders to buy or sell a commodity, analysts review the orders to determine the optimal selling
price that will satisfy most of the orders. After determining the price, all transactions occur at the same time. In
call markets, there are typically few traders and a low trading volume. On the other hand, trades occur
continuously on auction markets, and the buyers' and sellers' activities influence the price at any given time.
SOURCE: FI:337 Explain types of financial markets (e.g., money market, capital market, insurance market,
commodities markets, etc.)
SOURCE: McMahon, M. (2022, September 28). What is a call market? Retrieved October 7, 2022,
from [Link]

45. B
Competence. Competence is the ability to do what needs to be done. Financial professionals have an ethical
responsibility to do their jobs with a high level of skill. Incrementalism is the diminishing of ethical values over
time. Self-interest is looking out for your own well-being. Framing is the tendency to respond to situations based
on how those situations are posed or viewed.
SOURCE: FI:355 Discuss the role of ethics in finance
SOURCE: LAP-FI-355—Money Morals (The Role of Ethics in Finance)

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 11

46. C
Convergence. Convergence occurs when financial providers from different financial sectors (e.g., banking
services and insurance) merge. Consolidation takes place when financial providers within the same institutional
category merge. For example, if two banks were to merge, they would be consolidating their companies.
Tactical planning is short-range planning (one year) of specific actions the business will take. Two businesses
should look much further ahead than just one year before making the decision to merge. Licensing is a
business structure that requires the authorization or permission from an owner of another entity to use
trademarked, copyrighted, or patented material for a specific activity, during a specific time period, for the profit
of both parties. Businesses that enter into licensing agreements do not merge.
SOURCE: FI:573 Discuss the nature of convergence/consolidation in the finance industry
SOURCE: Chen, J. (2022, April 21). Convergence. Retrieved October 7, 2022, from
[Link]

47. D
Customer's ability to pay. Credit is the arrangement by which businesses or individuals can purchase now and
pay later. Before offering credit to a prospective customer, the business needs to analyze the customer's
financial status to determine if the customer has the money available to make payments on time and in the full
amount of the agreement. Businesses review the customer's income, assets, debt ratio, credit history, etc. If the
customer's financial status meets the business's credit standards, then a credit arrangement is a viable option.
If the customer carries high debt in relation to assets, it would be too risky for the business to offer credit
because the customer is more likely to become delinquent. The business does not analyze risks related to its
own accounting processes or reporting strategies. A beneficiary is a person who receives benefits, most often
money, from another person. For example, a beneficiary of a life insurance policy receives money upon the
insured's death.
SOURCE: FM:009 Describe techniques used to analyze customer financial information
SOURCE: Williams, M. (2019, March 4). What banks look for when reviewing a loan application. Retrieved
October 7, 2022, from [Link]
reviewing-a-loan-application

48. B
Gross domestic product, unemployment, and inflation. According to most analysts, the three economic
indicators that impact the stock market the most (and, therefore, the three that stock market investors and
traders should pay the closest attention to) are the gross domestic product, unemployment, and inflation. The
gross domestic product (GDP) is the final market value of the total output of all goods and services produced
within a country's geographic boundaries during a year's time. The stock market mirrors the GDP—if the GDP
goes up, the stock market usually goes up with it. The unemployment rate is the percentage of the workforce
that is unemployed. The stock market is inversely related to the unemployment rate—if the unemployment rate
goes up, stock prices usually go down. Inflation is a rise in prices that may occur when demand exceeds supply
or when productivity declines and costs of labor go up. If inflation and interest rates both rise, the stock market
will suffer. However, if inflation goes up while interest rates stay low, the stock market is likely to benefit.
Overhead expenses and bond rates are not economic indicators.
SOURCE: FI:574 Describe the relationship between economic conditions and financial markets
SOURCE: Levitt, A. (2022, January 23). Macroeconomic indicators that affect the US stock market. Retrieved
October 7, 2022, from [Link]
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 12

49. D
Stock prices decrease. A country's stock market usually reflects the economic condition of its overall economy.
During a recession, stock prices tend to decrease in value because investors are more likely to sell stock
because they expect lower profits and the potential for firms to go bankrupt. A recession does not typically lead
to a stock market crash. A stock market recovery is an indicator that the country is coming out of a recession.
SOURCE: FI:574 Describe the relationship between economic conditions and financial markets
SOURCE: Pettinger, T. (2018, December 9). Relationship between stock market and economy. Retrieved
October 7, 2022, from [Link]
stock-market-and-economy

50. A
Hedge funds involve private investment partnerships. A hedge fund is a pooled investment fund that uses many
types of aggressive investment strategies to maximize returns. A hedge fund involves a limited number of
investors (private partnership) and requires a large minimum investment amount. Professional financial
managers manage hedge funds rather than government agencies.
SOURCE: FI:575 Explain the nature and scope of financial globalization
SOURCE: Investopedia. (2022, August 11). What is a hedge fund? Examples, types, and strategies. Retrieved
October 7, 2022, from [Link]

51. D
Financial globalization. Globalization is the rapid and unimpeded flow of capital, labor, and ideas across
national borders. Free-flowing capital on an international level has led to the integration of financial markets,
offering equal access to market participants, regardless of their home countries. Liberalization and financial
product innovation (rather than investor innovation) are factors that have fueled the movement to financial
globalization. Protectionism refers to government policies that aim to protect domestic industries and
businesses against foreign competition. Protectionism hinders the free flow of capital across national borders.
Free-flowing capital is not necessarily a benefit of economic conservatism.
SOURCE: FI:575 Explain the nature and scope of financial globalization
SOURCE: Agrawal, A.J. (2017, August 15). Ten reasons why businesses are going global. Retrieved October
7, 2022, from [Link]

52. D
Dividends paid. Retained earnings are the income that a corporation keeps after paying dividends to its
stockholders. This amount, which includes any forwarding balance of retained earnings from the previous
accounting period, is reported on the company's statement of equity, which is also called the statement of
retained earnings. The depreciation of assets, sales tax payable, and bad or uncollectible debt are not included
on the statement of equity.
SOURCE: FI:630 Explain the nature of statements of changes in equity
SOURCE: Carlson, R. (2021, April 15). How to prepare a statement of retained earnings. Retrieved October 7,
2022, from [Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 13

53. B
Optimal decision-making. Marginal analysis is a technique used to make financial decisions by comparing the
relevant costs of each alternative to determine the difference in cost. Marginal analysis helps companies make
decisions that optimize resource use and maximize profits. It helps them select the best financial option.
However, marginal analysis is not always suited for long-term decisions; rather, it is better suited for short-term
decision-making. Marginal analysis should not take sunk costs into account because they do not impact future
outcomes. Finally, marginal analysis is not necessarily related to improved workplace communication.
SOURCE: FI:659 Describe marginal analysis techniques and applications
SOURCE: Ross, S. (2021, July 31). How marginal analysis helps in managerial decisions. Retrieved October 7,
2022, from [Link]
[Link]

54. D
Conducting a cost analysis and explaining the findings to management. Managerial accountants conduct many
types of financial analyses. A cost analysis involves measuring direct expenses such as materials and labor and
indirect expenses such as overhead costs to estimate the total cost of a project. Managerial accountants are
responsible for explaining the findings of their analyses to management so that management can make
informed financial decisions. Managerial accountants are strictly internal accountants, meaning their work is not
typically released to the public. Managerial accountants do not make management decisions regarding
planning, pricing, and sales—they simply inform and advise management on company finances. Managerial
accountants do not train employees or management on personal financial literacy.
SOURCE: FI:660 Explain the nature of managerial accounting
SOURCE: Corporate Finance Institute. (2022, April 29). Managerial accounting. Retrieved October 7, 2022,
from [Link]

55. B
Internal control mechanisms. Internal control mechanisms monitor the progress and activities of an organization
and make corrections when the company goes off track. Examples of internal control mechanisms include
oversight of management, segregation of control, independent internal audits, and policy development. These
are not examples of tasks of the board of directors—rather, internal control mechanisms are intended to make
sure that the board of directors behaves in accordance with company values and goals. These are also not
examples of transparency in management or external control mechanisms. External control mechanisms are
controlled by people outside of an organization and are designed to serve the objectives of regulators,
governments, trade unions, and financial institutions, for example.
SOURCE: PD:214 Describe the components of a well-governed company (e.g., board of directors, reporting,
transparency, internal and external audit functions)
SOURCE: Davoren, J. (n.d.). Three types of corporate governance mechanisms. Retrieved October 11, 2022,
from [Link]

56. D
Help determine roles and responsibilities. Budgets can be used to determine employees' responsibilities and
measure performance so that resources are used wisely. Budgets do not shift the focus from future events to
daily issues; in fact, they encourage organizations to focus on both the big and small pictures. Budgets also do
not necessarily put the focus on organizational goals over personal goals; rather, they try to allow both sets of
goals to align. Finally, budgets do not remove the possibility of financial constraints altogether, but they allow
organizations to recognize constraints before they become problematic.
SOURCE: FI:662 Discuss the nature of cost accounting budgets
SOURCE: [Link]. (2022). Importance of budgets. Retrieved October 7, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 14

57. D
Number of customers. A cost driver is a variable that causally affects costs over time. Because internet service
becomes more expensive as the number of people using it increases, the number of customers in a coffee shop
drives the cost of the internet service. The number of products sold, the number of direct labor hours, and the
number of ingredients per product could all be considered cost drivers but not specifically for the cost of internet
service.
SOURCE: FI:663 Discuss the nature of cost allocation
SOURCE: Banton, C. (2020, November 14). Activity cost driver. Retrieved October 7, 2022,
from [Link]

58. A
Assisting in the preparation of financial statements. Financial information management systems are often
responsible for collecting, maintaining, and reporting data about financial transactions; assisting in the
preparation of financial statements; supporting budgeting activities; and storing and protecting customers'
financial information. Individuals in the finance department are typically responsible for developing a corporate
investment portfolio. Operations personnel normally purchase raw materials for production. Someone within the
finance or accounting department is likely to supervise the financial-information management system, rather
than the financial information management system supervising the accounting and finance departments.
SOURCE: FM:002 Explain the nature and scope of the financial-information management function
SOURCE: Gartenstein, D. (2018, April 5). Why is financial management so important in business? Retrieved
October 7, 2022, from [Link]
[Link]

59. C
Forecast financial inflows and outflows. Financial information management has multiple responsibilities in an
organization. For example, it collects, maintains, and reports data about financial transactions. Business
managers often use these data to forecast financial inflows and outflows, which is extremely helpful when
developing a budget. The financial information management function also assists in the preparation of financial
statements and protects customer financial information. Business managers are unlikely to use the data to
determine if liability insurance is needed, develop secondary equity markets, or calculate the level of corporate
groupthink.
SOURCE: FM:002 Explain the nature and scope of the financial-information management function
SOURCE: Chapter 12: Information systems for business functions. (n.d.). Retrieved October 7, 2022, from
[Link]

60. B
Audit trails of data changes. An organization should maintain audit trails to record the details of any financial
data tampering and/or erasures. After the organization discovers tampering and/or erasures, the data in
question can be recovered and/or restored to its original state. It is not necessary to keep hard copies of every
document. An accounts receivable schedule and daily balance sheets do not guard against deliberate financial
data tampering or erasures.
SOURCE: FM:003 Explain the role of ethics in financial-information management
SOURCE: Beal, V. (2021, May 24). Audit trail. Retrieved October 7, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 15

61. C
Audit trail. One way to identify potential ethical violations in financial information management is to trace
financial transactions from beginning to end using audit trails. A financial information manager can utilize an
audit trail to review all documents pertaining to a particular transaction and determine if data recorded in the
system are accurate or altered. Separation of duties is an internal control requiring more than one person to
complete a task. Accounting standards are principles or rules that businesses must follow when recording and
presenting their financial information. The supply chain is a system of organizations, people, processes, etc.,
used to move a product from supplier to user.
SOURCE: FM:003 Explain the role of ethics in financial-information management
SOURCE: Brenner, L.J. (n.d.). Accounting systems ethics. Retrieved October 7, 2022, from
[Link]

62. C
Offer credit to the prospective customer. Credit is the arrangement by which businesses or individuals can
purchase now and pay later. Before offering credit options to a prospective customer, the business should
review the customer's borrowing and repayment history by obtaining a credit report. The credit report, which is
generated by a credit-rating agency, indicates the prospect's borrowing and repayment history and provides a
credit rating. The credit rating indicates the extent to which the business or individual pays its debts in a timely
manner. The government, rather than businesses, sets the prime lending (interest) rate and establishes sales-
tax rates. Various jurisdictions have laws that require businesses to collect sales tax from customers on certain
purchases.
SOURCE: FM:009 Describe techniques used to analyze customer financial information
SOURCE: Treece, K., & Tarver, J. (2022, March 26). Focus on payment history—it's the most important credit
factor. Retrieved October 7, 2022, from [Link]
history

63. D
Financial companies often enjoy higher earnings as a result of convergence and consolidation. Convergence
within the finance industry typically involves financial providers from different financial sectors merging, such as
a retail bank merging with an insurance company. Consolidation takes place when financial providers within the
same institutional category merge, such as a retail bank merging with another retail bank. Some of the factors
leading to convergence and consolidation in the finance industry are technology, liquidity constraints, a desire
for increased profitability, and a desire for lower costs. Technological advancements have reduced the costs of
offering new and different financial products. The convergence/consolidation of multiple financial companies
usually results in more liquid capital to invest or to offer as loans for all companies involved. By merging, some
financial firms (especially those converging with others within their financial sector) can achieve economies of
scale, which result in reduced redundancy and lower costs for all involved. Finally, financial companies often
enjoy higher earnings as a result of convergence and consolidation.
SOURCE: FI:573 Discuss the nature of convergence/consolidation in the finance industry
SOURCE: Kenton, W. (2020, November 27). Consolidate. Retrieved October 7, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 16

64. B
Install firewalls. To protect their clients' financial well-being, financial institutions must take great care to ensure
that their online systems are safe from hackers. One way financial institutions protect their clients from hackers
is by installing firewalls. A firewall is a type of computer security system that interfaces between the business's
computer system and the internet. The firewall protects sensitive information from hacking activities. Encryption
is another way that financial-services businesses protect online financial information. Encryption is the process
of transforming information into a secret code so only the recipient can read it. Intranet refers to a system of
networked computers within a business. Limiting the number of online transactions does not secure or protect
financial information from hackers.
SOURCE: FM:011 Describe the use of technology in the financial-information management function
SOURCE: Acevedo, L. (2017, September 26). How to build a management information system. Retrieved
October 17, 2022, from [Link]
[Link]

65. C
Principle of least authority. By limiting employees' access to the data necessary to perform their work, a
business protects confidential information, reduces risks associated with internal fraud, and helps keep the
computer system secure. Diminished capacity is a legal doctrine or defense that states that an accused
wrongdoer's mental state may have been negatively affected by trauma or intoxication during a crime, but was
not suffering from a severe mental disease or disorder that relieves the accused from criminal responsibility.
Concept of intrusion prevention and doctrine of organizational structure are fictitious terms. Businesses use
firewalls and antivirus software to prevent external computer intrusions or disruptions. Organizational structure
defines the levels of authority within a business or organization.
SOURCE: FM:011 Describe the use of technology in the financial-information management function
SOURCE: Indiana University. (2021, March 16). About the principle of least privilege. Retrieved October 7,
2022, from [Link]

66. C
Cash flow. Companies use cash flow budgets to project how and when cash will flow in and out of a business
within a specified time period. Cash flow budgets help organizations determine if they are handling their money
wisely, and if they have enough cash on hand to continue operating as normal. An operating budget is a
forecast and analysis of projected income and expenses over the course of a specified time period. Operating
budgets are often compared month to month to see if a company is overspending on supplies. A master budget
is a comprehensive budget that provides a complete picture of a company's financial activity and health. A static
budget is a fixed budget that remains unchanged throughout the year. For example, a company may have a
static budget for standard office supplies. In this example, Joanna is creating a cash flow budget because she is
specifically examining her company's accounts payable and receivable to determine the amount of available
cash.
SOURCE: FM:013 Demonstrate budgeting applications
SOURCE: Girsch-Bock, M. (2022, August 5). How to create a business budget for your small business.
Retrieved October 7, 2022, from [Link]
business/accounting/articles/business-budget

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 17

67. B
Financial analysis. Modern technology such as spreadsheets, databases, and other software applications have
made it easier for companies to perform financial analysis. Companies use these technologies to analyze their
financial performance, create budgets, predict future incomes and expenses, and review their overall financial
health. Companies do not generally use these technologies for employee recognition, staff communication, or
public relations.
SOURCE: FM:014 Demonstrate financial analysis applications
SOURCE: Corporate Finance Institute. (2020, February 17). Types of financial analysis. Retrieved October 7,
2022, from [Link]
analysis

68. C
High employee turnover. Taking negative actions can result in unhappy employees who will soon look for other
jobs, creating high turnover. This costs a company a lot of time and money in hiring and training new
employees. Negative actions will not necessarily result in bankruptcy, but they definitely will not result in
increased efficiency or an excellent business reputation.
SOURCE: MK:019 Demonstrate connections between company actions and results (e.g., influencing consumer
buying behavior, gaining market share, etc.)
SOURCE: LAP-MK-019—Just Do It…Right (Company Actions and Results)

69. A
Personal information management systems. Personal information management systems are designed to help
you keep track of important dates, meetings, deadlines, and other critical information. Google Calendar and
Microsoft Outlook are two examples of personal information management systems—not virtual reality
applications, mobile geolocation tracking systems, or smartphone operating systems. Virtual reality applications
are designed to make users feel like they are experiencing an "alternate world," whereas mobile geolocation
tracking systems are intended to pinpoint a user's location. A smartphone operating system is the overarching
system that controls a cell phone—such as Android.
SOURCE: NF:005 Demonstrate personal information management/productivity applications
SOURCE: White, D. (2022, October 4). What is a personal information manager? Retrieved October 6, 2022,
from [Link]

70. D
Daily sales receipts. A business maintains receipts for each sales transaction it processes. Sales receipts
provide the business with different types of information including which products were purchased, the dollar
volume of sales for a particular day, the form of payment used, and the number of customers who purchased
items. Quarterly credit statements, cash balances, and inventory status records will not provide the gift shop
with the desired information.
SOURCE: NF:014 Monitor internal records for business information
SOURCE: QuickBooks. (2022). Record your total daily sales in QuickBooks Online. Retrieved October 6, 2022,
from [Link]
sales-quickbooks-online/L0rHb69Mh_US_en_US

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 18

71. C
Make long-term decisions. Information management is the process of accessing, processing, maintaining,
evaluating, and disseminating knowledge, facts, or data for the purpose of assisting business planning and
decision-making. One type of planning that a business conducts is strategic planning, which involves making
long-term decisions for the company as a whole. These decisions often involve planning how to grow the
business over a period of years. Whatever the purpose, businesses need strategic information to be able to
make those long-term decisions. The purpose of strategic information is usually not to help businesses create
sales presentations or write an annual report.
SOURCE: NF:110 Discuss the nature of information management
SOURCE: LAP-NF-110—In the Know (Nature of Information Management)

72. C
False; it is unethical to distribute customers' personal information without their permission to third parties.
Businesses collect and maintain information about their customers, employees, products, and vendors.
Governments require businesses to maintain certain types of information to be in compliance. Some
information, such as customer credit card account numbers and health information, are confidential, so the
business should take steps to secure the information. Distributing customer information (e.g., mailing lists)
without their consent to third parties is not ethical behavior and is illegal in many jurisdictions. Trade
agreements are agreements between nations that provide for favorable trade relations. Trade agreements do
not allow businesses to sell customers' personal information. Antitrust laws are regulations that prevent a
person or company from taking actions that restrain free trade and competition in the marketplace.
SOURCE: NF:111 Explain the role of ethics in information management
SOURCE: Lutkevich, B. (2020, February). Consumer privacy (Customer privacy). Retrieved October 6, 2022,
from [Link]

73. C
Benford's law. Benford's law states that in many large sets of numerical data, numbers that begin with lower
digits occur significantly more frequently than numbers that begin with higher digits (i.e., one is the most
frequent, while nine is the least frequent). This is not an example of the law of supply and demand, numerical
law, or the law of diminishing returns.
SOURCE: NF:124 Demonstrate advanced database applications
SOURCE: Weisstein, E.W. (2022). Benford's law. Retrieved October 7, 2022,
from [Link]

74. A
Improve data integrity. Data normalization is a process that improves data integrity by reducing data
redundancy, removing anomalies, and making it easier to accommodate new types of data. The purpose of
data normalization is not to increase data redundancy, delete conforming data, or remove new types of data.
SOURCE: NF:124 Demonstrate advanced database applications
SOURCE: Wambler, S. (2002-2012). Introduction to data normalization. Retrieved October 7, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 19

75. A
Informal. The informal buying method is often effective for small food markets and usually involves calling
several vendors to obtain prices. Then, the market calls the lowest bidder to place an order. This is a simple
process that reduces the need for a lot of paperwork. Also, orders can be placed quickly. Formal buying
methods require more paperwork and usually written quotes rather than verbal quotes over the phone.
Competitive-bid, negotiated, and standing-order are formal buying methods that take more time than informal
methods.
SOURCE: OP:016 Place orders/reorders
SOURCE: Arkansas Department of Education. (2018, February 13). Informal procurement method "Three bids
and a buy." Retrieved October 6, 2022, from
[Link]

76. A
Paying bills within the discount period. Most suppliers grant discounts to businesses that pay their bills within a
certain period of time. Employees who are responsible for paying the business's bills should make sure that
payment is made on time so that the business saves the amount of the discount. Paying all bills as soon as they
are received would not help control expenses since some bills have an extended payment period of 60 or 90
days. The business can use its money in other ways during the extended payment period. Buyers try to
negotiate the most favorable dating terms with vendors at the time of purchase, not when the bills are due.
Trade credit is credit granted by suppliers when they allow businesses an extended period of time in which to
pay for goods.
SOURCE: OP:025 Explain employee's role in expense control
SOURCE: LAP-OP-025—Buck Busters (Employee Role in Expense Control)

77. B
Product. Operations activities are most closely related to a business's product. The product a business makes
or provides affects every aspect of operations. A business's name, taxes, or location are not as directly related
to its operations activities.
SOURCE: OP:189 Explain the nature of operations
SOURCE: LAP-OP-189—Smooth Operations (Nature of Operations)

78. D
Put clear, specific guidelines and consequences in writing. The more clearly policies are laid out, the easier it is
to handle any disputes that may arise with company property without conflict. Allowing minor misuse of
company property may be a company-wide policy, but it does not necessarily prevent conflict, because it may
become difficult to know what is acceptable and what is not. Likewise, enacting a zero-tolerance policy will not
necessarily prevent conflict, because it does not account for accidental or minute infractions. Employees may
not feel that they are being treated fairly, because they are being held to impossibly high standards. Finally,
while appointing an employee to handle conflicts is a good practice, it does not necessarily help avoid conflict in
the first place.
SOURCE: OP:442 Comply with policies and procedures for use of property and equipment
SOURCE: Snook, A. (2021, August 5). Policies and procedures in the workplace: The ultimate guide [2021].
Retrieved October 6, 2022, from [Link]
workplace-the-ultimate-guide/

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 20

79. A
Lower cost due to reduced inventory. Collaborating within a supply chain can reduce the amount of inventory a
company needs to carry, which reduces inventory, storage, and transportation costs. Lower cost is not achieved
with higher inventory. A company benefits from more flexibility—not less—when it collaborates with its supply
chain because doing so gives the company access to more resources and helps it develop stronger supplier
relationships. When supply chain collaboration is effective, it can increase a company's profits, but increased
profits are an indirect, not direct, benefit.
SOURCE: OP:444 Explain the benefits of supply chain collaboration
SOURCE: Andrews, J. (2022). The importance of supply chain collaboration. Retrieved October 6, 2022, from
[Link]

80. D
Self-esteem. Self-esteem is the regard or respect that you have for yourself. Employees who recognize their
strengths and weaknesses are able to accept who they are and like themselves, which is the basis of self-
esteem. Self-fulfillment involves achieving personal growth and reaching one's fullest potential. Self-
understanding is comprehending one's own abilities, interests, values, attitudes, and personality traits and
recognizing their effects on one's behavior. Self-preservation involves preserving oneself from destruction or
harm.
SOURCE: PD:013 Assess personal interests and skills needed for success in business
SOURCE: Cherry, K. (2022, August 3). What is self-esteem? Retrieved October 6, 2022, from
[Link]

81. B
Company. Asking questions about the company and the job tells the interviewer that the applicant is very
interested in the position. Oftentimes, the applicant will obtain advance information about the company to be
able to ask good questions. Questions about fringe benefits, such as the business's vacation policy, may be
appropriate, but they indicate the applicant's interest in what the job will provide, not the applicant's interest in
the job itself. Questions about the interviewer would be inappropriate.
SOURCE: PD:028 Interview for a job
SOURCE: Herrity, J. (2022, July 14). What is the purpose of a job interview? (Plus tips for success). Retrieved
October 6, 2022, from [Link]

82. B
Receive a promotion. When an employee receives a promotion, they are usually given more responsibility and
authority, which often includes managing other people or performing more complex work. Employees who
receive promotions often share common traits and patterns of behavior. These employees tend to be
dependable—they follow through on their promises and complete their work on time. Employees who receive
promotions are also willing to learn new skills, such as mastering a new computer program. Employees who
receive promotions also take initiative. Initiative is the willingness to do something or perform a task without
being told to do so, rather than taking a passive approach to work. Many types of employees obtain advice and
acknowledge coworkers in the workplace.
SOURCE: PD:035 Identify skills needed to enhance career progression
SOURCE: Glassdoor. (2021, December 17). 8 habits of employees that get promoted. Retrieved October 6,
2022, from [Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 21

83. C
Passion for a hobby. Entrepreneurial ventures often begin as hobbies such as sewing, baking, jewelry making,
or woodworking. Because Miguel enjoyed woodworking in his spare time, his business started out as a hobby.
There is not enough information to determine if Miguel wanted a more flexible schedule, had technological
knowledge, or needed more adventure in his life when he started his business.
SOURCE: PD:066 Explain career opportunities in entrepreneurship
SOURCE: LAP-PD-066—Own Your Own (Career Opportunities in Entrepreneurship)

84. D
Treasurer. A treasurer working in corporate finance typically oversees the business's cash management, capital
raising, and investment activities. The treasurer is also usually responsible for the business's financial goals and
objectives. Risk managers and cash managers are also financial managers, but their duties are more limited
than those of the treasurer. Risk and insurance managers oversee the company's risk-management programs
as well as the organizational insurance budget. Cash managers monitor the organization's cash flow.
Underwriters work in the insurance industry. They are responsible for calculating the risk of loss, establishing
premium rates, and designing policies to cover risk.
SOURCE: PD:152 Discuss employment opportunities in the finance industry
SOURCE: LAP-PD-152—Career Opportunities in Finance

85. A
Finance. The finance field includes career pathways in accounting, banking services, corporate finance,
insurance, and securities and investments. Investment banking, portfolio management, and accounting are,
therefore, all part of the finance sector of business. The marketing sector of business includes career pathways
in marketing communications, marketing management, marketing research, merchandising, and professional
selling. Entrepreneurship careers involve starting and running a successful business. The management sector
of business includes career pathways in administrative services, business information management, general
management, human resources management, and operations.
SOURCE: PD:152 Discuss employment opportunities in the finance industry
SOURCE: Folger, J. (2022, September 16). Is finance a good career path? Retrieved October 7, 2022, from
[Link]
[Link]

86. A
Networking. When people connect with others who might help them accomplish their personal career and
professional goals, they are networking. Finance professionals might learn about employment and continuing
education opportunities as well as prospective clients (selling opportunities) through the networking process.
Socializing involves personal activities rather than professional activities. Coordinating is linking activities
together in a systematic or organized way.
SOURCE: PD:153 Discuss opportunities for building professional relationships in finance
SOURCE: Lotich, P. (2019, July 9). 5 advantages of professional networking. Retrieved October 7, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 22

87. D
Treating the person to a round of golf. Something as simple as four hours of golf gives you the opportunity to
get to know a vendor better. It gives you an opportunity to learn the person's interests and to talk business in a
casual environment. Giving the vendor an expensive gift might be construed as a bribe. Although having
salespeople talk to the vendor is helpful, it doesn't foster a professional relationship with you. Offering jobs to
people on the vendor's staff would create conflict rather than helping to build a positive, professional
relationship.
SOURCE: PD:153 Discuss opportunities for building professional relationships in finance
SOURCE: Hoban, S. (2022). Building business relationships. Retrieved October 7, 2022, from
[Link]

88. A
To ensure that companies are held to high ethical standards. Corporate governance is important because it
holds companies accountable for their behavior and helps organizations avoid financial, legal, and ethical
pitfalls. The purpose of corporate governance is not to create a favorable image for the company, to make hiring
and firing decisions for entry-level employees, or to improve relations with company stockholders.
SOURCE: PD:213 Discuss the importance of corporate governance in business
SOURCE: Reference. (2020, April 13). Why is corporate governance important? Retrieved October 7, 2022,
from [Link]
6f7173fe92e0b495

89. C
Accumulating data on costs and profits. Managerial accountants provide financial information to managers to
help managers make informed business decisions. The financial information that managerial accountants
provide can vary from manager to manager, but a large part of managerial accounting work is accumulating
data on business costs and profits. Preparing financial statements for public review is a responsibility of a
financial accountant; managerial accounting is not for external use. Gathering social media trends and
calculating risk probability are not accounting activities.
SOURCE: FI:660 Explain the nature of managerial accounting
SOURCE: Tuovila, A. (2022, August 23). Managerial accounting meaning, pillars, and types. Retrieved October
7, 2022, from [Link]

90. A
Transparency. When a business is transparent, it means it maintains open and truthful communications. If a
business is transparent about company goals, values, and strategies, employees are better able to understand
their roles within the greater organization. The public also views the organization more positively, because
secretive businesses are sometimes viewed with suspicion or skepticism. Efficiency, flexibility, and anonymity
neither help employees better understand their roles nor encourage positive public impression.
SOURCE: PD:214 Describe the components of a well-governed company (e.g., board of directors, reporting,
transparency, internal and external audit functions)
SOURCE: Mack, S. (2019, March 8). Seven characteristics of good corporate governance. Retrieved October
7, 2022, from [Link]
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 23

91. A
Accounting fraud. Governance structures help balance the interests of a company's stakeholders and would
most likely be impacted by internal happenings such as accounting fraud. Competitor saturation, a stock market
crash, and new technology in the industry are all examples of external factors that most likely would not affect a
company's governance structure.
SOURCE: PD:302 Identify the factors that impact governance structures
SOURCE: Shaftoe, R. (n.d.). Reasons for corporate governance. Retrieved October 7, 2022, from
[Link]

92. C
Corporate governance can benefit organizations of any size. While small organizations might not have to follow
the same regulations or take the same type of structured approach, they can still benefit from corporate
governance. They do not, however, necessarily need a board of directors. Large companies are not necessarily
better at monitoring corporate governance.
SOURCE: PD:302 Identify the factors that impact governance structures
SOURCE: Chen, J. (2022, August 18). Corporate governance definition: How it works, principles, and
examples. Retrieved October 7, 2022, from
[Link]

93. B
Board of directors. The board of directors guides the organization during the decision-making process so that
the organization continues to accomplish its mission in an efficient and ethical way. It would not be appropriate
for the C-Suite, an organization's employees, or the public to act as an organization's conscience during
decision-making.
SOURCE: PD:303 Describe the impact of governance processes on decision-making and management
functions
SOURCE: Management Study Guide. (2022). Corporate governance - definition, scope and benefits. Retrieved
October 7, 2022, from [Link]

94. C
Unsafe working conditions. Hazard risks are situations that can cause injury or harm to people, property, or the
environment. They are most likely to result from issues related to unsafe working conditions. Lack of
transparency, misuse of resources, and conflicts of interest are more likely to cause strategic, operational, or
financial risks than hazard risks.
SOURCE: RM:041 Explain the role of ethics in risk management
SOURCE: LAP-RM-041—Manage Risk the Right Way (Ethics in Risk Management)

95. A
Limit losses. Risk management is a business activity that involves the planning, controlling, preventing, and
limiting of business losses and enhancing possibilities for gain. One of the goals of risk management, therefore,
is to limit business losses. Increasing revenue might be a benefit of implementing risk management, but it is not
a goal of risk management. Risk management does not necessarily aim to increase risk-taking or to determine
right from wrong.
SOURCE: RM:041 Explain the role of ethics in risk management
SOURCE: LAP-RM-041—Manage Risk the Right Way (Ethics in Risk Management)

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 24

96. C
Encryption techniques. Risk management is a business activity that involves implementing activities to limit
business losses. One way that businesses control security risks is by using encryption to prevent unauthorized
individuals (e.g., hackers) from obtaining confidential financial data. Encryption is the process of transforming
information into a code so that only the recipient can read it. A bot is a program that scans the web looking for
information changes. Cross-platform technology refers to computer applications that can run on different
platforms, such as Windows and Macintosh. Debuggers are computer programs that help programmers identify
flaws or "bugs" in a computer program.
SOURCE: RM:042 Describe the use of technology in risk management
SOURCE: Loshin, P. (2022). Encryption. Retrieved October 7, 2022, from
[Link]

97. C
Having many different sources of data that can be used to assess risk. Many financial institutions maintain
individual or departmental databases that cannot interact with the data throughout the organization. This keeps
risk managers from having a clear picture of the organization-wide risks. Rather than having too little
information, risk managers have just the opposite problem: too much decentralized information. Centralized
information is needed. Transparency is needed around the effects of volatility on the organization.
SOURCE: RM:042 Describe the use of technology in risk management
SOURCE: Reciprocity. (2021, December 13). Emerging risk management trends you need to know. Retrieved
October 7, 2022, from [Link]
know

98. C
Taking shortcuts to complete a bridge construction project on time. While shortcuts might save time and money,
they might increase the business's risk. If less durable materials are used, processes are skipped, or
undertrained workers make mistakes, the bridge may not be safe. If the bridge collapses as a result of shortcuts
taken, the construction company may be held liable for damages. Smokestack emissions pose environmental
risks, which may result in health-related issues. Changes to increase security reduce the business's risk.
Exaggerating the capabilities of a commercial vacuum cleaner are risks related to advertising and/or sales.
SOURCE: RM:043 Discuss legal considerations affecting risk management
SOURCE: Milano, S. (n.d.). Examples of unethical managers. Retrieved October 7, 2022, from
[Link]

99. C
Obtain professional liability insurance. Professional liability insurance is a type of insurance that provides
financial protection for certain types of professionals, such as doctors, nurses, lawyers, architects, and
accountants. The purpose of the insurance is to reduce the risk of financial loss to the individual and to the
company for whom they work if a client or patient sues them. The purpose of disability insurance is to cover
people who cannot work for long periods of time due to illness or injury. Signing vendor contracts and
developing noncompete contracts do not reduce risks associated with client or patient lawsuits.
SOURCE: RM:043 Discuss legal considerations affecting risk management
SOURCE: Beam, J. (2022, October 2). What is malpractice insurance? Retrieved October 7, 2022, from
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio

Test 1274 FINANCE CLUSTER EXAM—KEY 25

100. D
Increased confidence from company stakeholders. Companies that implement enterprise risk management
(ERM) are more likely to enjoy confidence from their shareholders and other stakeholders. ERM sends a strong
signal to shareholders that the organization is taking risk management seriously. ERM can provide assurance to
management, the board of directors, and shareholders that all possible steps are being taken to manage and
prevent risk. Improved sales and decreased expenses in public relations are not guaranteed when
implementing ERM. Ideally, ERM would result in less performance variability—meaning that the organization's
performance would remain consistently high.
SOURCE: RM:062 Discuss the nature of enterprise risk management (ERM)
SOURCE: Hayes, A. (2022, September 7). Enterprise risk management (ERM): What it is and how it works.
Retrieved October 7, 2022, from [Link]
[Link]

Copyright © 2023 by MBA Research and Curriculum Center®, Columbus, Ohio