3 Size of business

Multiple-choice questions

1 Which of the following are commonly used to measure business size?

(i) number of employees
(ii) capital employed
(iii) sales turnover
(iv) market capitalisation

a (i) and (ii) only

b (i) and (iii) only
c all of them
d (i), (iii) and (iv) only

2 Market capitalisation is defined as:

a the total value of market sales made by a business in a given time period
b the total value of all long-term finance invested in the business
c the total value of a companys issued shares
d the difference between a firms revenue and costs.

3 Governments in most countries are keen to encourage the development of small

business units. This may be explained by all of the following except:
a many jobs are created by small firms
b small firms are often dynamic
c small firms create competition
d small firms are less likely to become insolvent.

4 Small firms often face problems in raising short- and long-term finance. This
problem arises because:
a small firms typically have little security to offer banks in exchange for loans
b small firms do not have a separate legal identity
c small firms are typically unprofitable
d small firms face higher rates of corporation tax.

5 Corporation tax is a tax on:

a sales revenue
b cost of goods sold
c profit
d business premises.

Chapter 3 Multiple-choice questions Cambridge University Press 2010 1

6 Which of the following is not considered to be an advantage of small businesses?
a can adapt quickly to meet changing customer needs
b can employ specialist professional managers
c can offer personal services to customers
d can be managed and controlled by the owner(s)

7 Which of the following is not considered to be an advantage of large businesses?

a benefits from the cost reductions associated with large-scale production
b staff less likely to feel alienated
c may be diversified in several markets
d can access more forms of finance

8 Most businesses have growth as a long-term objective. Which of the following is

not a likely reason for this objective?
a to benefit from economies of scale
b to increase market share
c to increase the power and status of owners and directors
d to improve industrial relations

9 Aldi, a German supermarket chain, has pursued a policy of growth through

opening new stores in towns and cities where it previously had none. This is an
example of:
a external growth
b vertical expansion
c integration
d internal growth.

10 Tata, Indias largest motor-vehicle manufacturer, announced in 2008 that it was

to take over the Jaguar and Land Rover motor brands from Ford in a deal worth
$2.3 billion. This is an example of:
a conglomerate integration
b horizontal integration
c internal growth
d vertical integration.

Chapter 3 Multiple-choice questions Cambridge University Press 2010 2