Title: Control
Course: Question Banks

Q: When properly designed, organizational controls should
- allow the organization to control consumer reactions to their strategy.
- provide a way for an organization to ignore environmental changes.
- lead to better organizational performance.
A: lead to better organizational performance.

Q: Controls start with handling cash. On average, fraud takes 5% from US business revenues. It pays to pay attention. For example, a company may give some employees company credit cards and
- allow the company’s credit limit to be charged on each card.
- give the same limit to all employees.
- limit the maximum amount allowed on each.
A: limit the maximum amount allowed on each.

Q: Days for Girls International is a nonprofit creating a more dignified world for girls through advocacy, health education, and sustainable feminine hygiene. They implemented financial controls to better position the organization for sustainability and growth. Headquarters manager Lora and executive director Celeste must sign off on each check. Each month, Melissa presents the reconciled bank statements to Celeste, and she is also in charge of the small petty cash account, which Celeste checks monthly. They purchase their materials from two vendors, and the inventory is regularly checked against the books. Expenses and travel must be pre-approved. Each year a budget is set and approved by their board. Lora is also well versed in grant administration and manages those as well. Identify one additional control step for Days for Girls.
- Reconcile the checkbook against the bank statements.
- Check their inventories on a regular basis against the inventories recorded on the books.
- Look for additional vendors by using a competitive bidding process.
A: Look for additional vendors by using a competitive bidding process.

Q: If controls are well designed and implemented, they provide all of these types of benefits, EXCEPT:
- decentralized decision making
- improved quality control
- decreased responsiveness
A: decreased responsiveness

Q: Robin’s financial advisor explained that her stock portfolio did very well last year. It grew by 6 percent, better than bonds that earned only 2 percent. During the same period, the S&P 500 grew 14 percent. The S&P 500 is an index of 500 large companies having common stock listed on the NYSE or NASDAQ. The financial advisor is using the wrong
- measurement of actual performance.
- corrective action.
- performance standard.
A: performance standard.

Q: Professor Karl’s class has a DFW rate of 75%! DFW stands for dropped, failed, or withdrawn, and it shows the percentage of students who do not succeed. The college wants to keep DFW rates below 30 percent, on average. The class is Business Statistics, a difficult class. Perhaps the students are ill-prepared, or perhaps Professor Karl’s course is harder than necessary. What step should the Dean take next?
- Take corrective action.
- Change the performance standard.
- Analyze the deviations.
A: Analyze the deviations.

Q: An example of a feedback control is
- using the plans of the last marketing campaign to develop a new marketing campaign without asking how well it worked.
- taking yourself in for annual checkups at the doctor.
- an employee performance review.
A: an employee performance review.

Q: An example of a concurrent control is
- conducting due diligence on a potential strategic partner company.
- monitoring your basketball team’s play against an opponent and adjusting defense tactics in the next game.
- adjusting the color of a design project as you go along.
A: adjusting the color of a design project as you go along.

Q: If an organization tracks its strategy implementation, looks for problem areas, evaluates whether the problem areas indicate any weakness in the strategy, and makes any necessary changes, then it is using:
- operational controls
- behavioral controls
- strategic controls
A: strategic controls

Q: Suliman manages a manufacturing plant in North Carolina. Customers are unhappy over late deliveries. Inventories of some parts are high. Others are critically short. Senior management told him he has 3 months to become profitable or the plant will close. In this case, the plant’s income statement is
- a behavioral control.
- a tactical control.
- an operational control.
A: an operational control.

Q: Nick’s Pub wants employees to be friendly to customers. To be clear what that means, Nick’s made a rule that employees should smile and greet any customer within 5 feet. This is
- a financial control.
- a normative control.
- an objective control.
A: an objective control.

Q: Budgets are financial controls that tell a manager how much he can spend to achieve his goals. Budgets are an example of
- normative controls.
- tactical control.
- top-down controls.
A: top-down controls.

Q: What is an example of a measure for the financial analysis area of the balanced scorecard?
- manufacturing defects
- customer satisfaction with speed of service
- gross margin
A: gross margin

Q: What is an example of a measure for the customer analysis area of the balanced scorecard?
- order processing time
- training dollars per employee
- customer retention
A: customer retention

Q: The purpose of the balanced scorecard is to:
- focus management’s attention on financial results and incentive payments.
- provide human resources with a balanced means of disciplining employees.
- integrate nonfinancial and financial controls to provide a balanced understanding of organizational performance.
A: integrate nonfinancial and financial controls to provide a balanced understanding of organizational performance.

Q: Researchers found that, in the early 1990s, less than 10% of total executive compensation at publicly held firms was contingent on stock prices. By 2003, that share had ballooned to almost 70%. Critics pointed out that many top executives had been heavily rewarded for short-term performances that ultimately proved disastrous. Stockholders are better off in the long run when companies
- pay high dividends.
- buy back shares to boost the stock price.
- use a balanced scorecard approach to incentives.
A: use a balanced scorecard approach to incentives.

Q: Legg Mason’s senior management was concerned about the risk that portfolio managers were taking. Rather than dictate changes in the portfolios, they gave each manager a risk budget. In this way, they
- avoided responsibility for risk decisions.
- used top-down controls to reduce risk.
- delegated the authority and decisions.
A: delegated the authority and decisions.

Q: TPE’s cashflow swings over the calendar year. Revenues come in early when students enroll in summer camps before June. In the summer, the camp pays camp counselors, rents performance locations, and buys gasoline for the buses. TPE needs to be disciplined about expenses in the spring, when the bank account is fat, so they can pay everyone through the summer. For this, TPE needs
- an income statement.
- a balance sheet statement.
- a budget.
A: a budget.

Q: Wiley Coyote invests in Acme Manufacturing because he buys so much gear from them. Acme’s debt/equity ratio is 1, meaning they have $1 of debt for every $1 of equity. What should Wiley do with this number?
- Nothing. It looks good by itself.
- Compare it the leverage of his bank.
- Compare it the industry average.
A: Compare it the industry average.

Q: The Humongous Food Store (HFS) has a turnover ratio of 12. The turnover ratio is revenue divided by average inventory. This means, in a sense, that they sold everything in the store once per month. But HFS is losing money. The manager should
- cut staffing and reduce expenses.
- create a budget to control expenses.
- compare his turnover ratio to other grocery stores’ ratios.
A: compare his turnover ratio to other grocery stores’ ratios.

Q: Toyota has made a science of door closing. They measure the exact speed at which a car door should close in order to latch, without excess effort. They measure each car on the production line to see that it falls within the acceptable range. Because of this control, Toyota benefits from
- higher production costs and greater customer loyalty.
- lower product returns and lower customer loyalty.
- lower product returns and greater customer loyalty.
A: lower product returns and greater customer loyalty.

Q: Phillips Electric makes LED lights. To move to market quickly, they did not worry about quality before shipping. They allowed easy returns and generous refunds during this period. As they gained experience with improving the manufacturing quality, the quality improved, and they
- saw no change in customer behavior.
- found that customer expectations were higher.
- found that customers returned more to buy more lights.
A: found that customers returned more to buy more lights.

Q: Measuring teaching quality is difficult. If quality is measured by test scores, teachers and administrators have an incentive to cheat. The Chicago and Atlanta school systems suffered scandals from widespread cheating. If quality is measured by direct observation, the observations tend to be highly favorable. Administrators must weigh
- the pros and cons of quality management.
- the ups and downs of quality management.
- the costs and benefits of quality management.
A: the costs and benefits of quality management.

Q: Microsoft had an unusual approach to software bugs. They would often release software (such as Microsoft Windows) with bugs. Then customers would use it, find the bugs, and report them back to Microsoft. This reduced Microsoft’s ________ to find the bugs, and it identified which bugs were important to customers.
- quality
- benefits
- cost
A: cost