176 TExES Business Education 6 - 12 Exam Practice Questions

1. The EIN can be obtained:

A. By appointment
B. By snail mail
C. At City Hall
D. All of the above

2. Characteristics of an independent contractor include:

A. Works on his employer's schedule
B. Uses company equipment
C. Pays his own federal and state taxes
D. Receives benefits from the employer

3. Organizations exempt from paying sales tax include:

A. Hospitals
B. Non-profit groups
C. Book stores
D. All of the above

4. According to the Uniform Commercial Code, when can a seller cancel a sale?

A. Buyer refused delivery of the item
B. After one week
C. In bad weather
D. Seller changes his mind

5. A purpose of communication is to:

A. Make money
B. Pass the time
C. Make noise
D. Give advice

6. Legal terms include:

A. Formulate
B. Correlation
C. Discovery
D. Insinuate

7. A budget determines:

A. Funds availability
B. Needed materials
C. Interest in expanding
D. All of the above

8. A business continuity manual should:

A. Avoid addressing conditions before an event
B. Discuss every possible scenario
C. Describe best responses
D. List locations

9. Qualities found in a good leader include:

A. Energetic
B. Easy going
C. Curiosity
D. Sensitivity

10. International business ethics is affected by:

A. Cultural traditions
B. Student organizations
C. Productivity
D. Distance

ANSWER KEY EXAM 176

1. Answer: B

The EIN, Employer Identification Number, is also called the federal tax ID number. It is a nine digit number the Internal Revenue Service (IRS) assigns to a business. This number identifies a specific business just like the social security number identifies a specific individual. It tells the IRS this owner is required to file various business tax returns monthly, quarterly and annually. The business owner can obtain an EIN online at the Internal Revenue Service web site, www.irs.gov, or by mail or telephone. Before the owner can file any tax returns, the business must have an EIN. If a business owner is unsure whether he needs an EIN, he should consult an accountant for advice.

2. Answer: C

An independent contractor is a self-employed individual who performs a service for a client. The client is required to report earnings of six hundred dollars ($600.00) or more in one year to the Internal Revenue Service (IRS) and provide the independent contractor with a 1099 by January 31st of the following year. An independent contractor works on his own timeframe, uses his own equipment, hires and compensates any additional people required to complete the job and is usually paid on a per job or per piece rate. The contractor and the client may have a contractual agreement that states each party's responsibilities. When a person is classified as an independent contractor, the hiring company avoids:

Withholding federal and state income taxes
Paying the employer's portion of Social Security and Medicare taxes
Paying federal and state unemployment insurance premiums
State disability insurance premiums and workers' compensation costs
Providing any fringe benefits
Liability for negligence or EEOC non-compliance by the contractor

3. Answer: B

Sales tax is a levy placed on the retail price of merchandise and services sold to the public. The state legislature determines what merchandise and services are levied and determines the percentage of the sale price businesses must collect. Sales taxes are collected by the comptroller's office. Cities and counties may also have sales tax requirements. They are set by the city council and elected county officials. These sales taxes are given to the tax assessor collector's office. Depending upon the amount of money collected, sales tax is paid on a monthly, quarterly or annual basis. The business collecting sales tax must apply for and receive a sales tax permit from the state prior to charging and collecting sales tax. Every jurisdiction exempts certain organizations (churches, non-profit organizations, charities) from paying sales tax. Qualifying groups must apply for a sales tax exemption certificate. If the exemption is claimed, the buyer must provide a copy of this certificate at the time of payment.

4. Answer: A

The Uniform Commercial Code is a set of rules and provisions enacted to simplify and clarify commercial transactions with uniform laws that govern all jurisdictions. If a transaction involves two or more states or another nation, the provisions of either may be applied as long as all the parties involved agree which code is to be used. Both buyer and seller have certain rights. When a buyer purchases an item, he receives clear title. He accepts in good faith that the seller legally owned the item and had authorization to sell it and transfer ownership. The buyer has the right to take possession according to the terms of the sale. If the buyer refuses to take delivery, fails to make the agreed upon payment as specified in the terms of the sale or payment is rejected (insufficient funds, buyer insolvency, etc.), the seller may cancel the sale; stop delivery; resell the item to recover any monetary loss incurred; demand return of the title and other paperwork provided at the time of the sale.

5. Answer: D

The purpose of communication is to convey information, give advice and ask questions. The method can be verbal (speaking, singing, tone of voice) or nonverbal (body language, hand gestures, eye contact). Frequently, both methods are used in conversations, lectures and presentations. Communication requires a "teller" as well as a "receiver" and both parties must be actively engaged for the process to be effective. It doesn't matter if the information is spoken, written or gestured, if one person doesn't do his part, the process breaks down and the message is misunderstood, misinterpreted or missed altogether. Business communication can be internal and external.

Internal communication is used to outline the corporate vision, plans and strategy, explain policies and procedures and inform employees and shareholders of changes. External communication reaches outside the company's four walls to create a positive image, inform, entertain, offer products and services and explain its commitment to customer satisfaction.

6. Answer: C

These definitions are based on information in The American Heritage College Dictionary:

Complaint: A statement made in a civil action; a formal charge, made under oath, about the commission of a crime.
Court Order: A direction or command given by a court or other adjudicative body that is entered into the record but not necessarily included in the final judgment.
Subpoena: A written order issued by the court commanding a person to give testimony.
Discovery: Used as a legal term means "data or documents that someone involved in a legal action must disclose to another person before or during a proceeding."
Mediation: The "attempt to bring about a peaceful settlement between disputing parties through the intervention of a neutral third party."
Arbitration: The legal process used by disputing parties when they "submit their differences to the judgment of an impartial person that has been appointed by mutual consent or statutory provision."

7. Answer: A

Many people consider budgets a waste of time because they rarely reflect reality; but there has to be some kind of plan showing how funds are allocated. The budget determines what funds will be available and when, how they will be spent, by whom and on what and who will authorize the expenditures. A Personnel Budget is based on headcount. Generally, personnel costs are sixty to seventy percent of a budget plan, so headcount must be accurate and all associated costs included. An Operating Budget includes costs associated with running a business. Some are fixed, some vary from month to month, but all must be budgeted. Most operating budgets are based on two to five years of historical data. A Capital Budget allocates funds for large ticket items. Many items considered capital expenses are depreciated on some sort of schedule, i.e., over three, five or seven years. In some cases, the Internal Revenue Service sets the depreciation schedule.

8. Answer: C

Business continuity planning (BCP) defines how the organization will continue to function when a natural or made-made disaster occurs. The plan assumes all risks, given enough time, will happen at some point and the company must be able to continue operating. BCP recognizes some risks have long-term consequences and explains how to address each risk so the company keeps functioning until normal operations resume. A business continuity manual is a comprehensive, realistic, easy-to-use document that contains all the critical information needed in the event of disruption in operations. It addresses conditions before, during and after the event. For each risk, the manual outlines who and what may be affected, how long the event might last and describes the best response while acknowledging it is impossible to address every conceivable scenario. The manual should list the names and contact numbers of key staff and any applicable government regulatory reporting requirements with contact names and numbers. A copy of the manual should be stored off-site.

9. Answer: D

Leadership is more about behavior than a specific skill set. Skills such as decision-maker, listener, communicator and motivator, while important, can be learned. Qualities such as integrity, honesty, humility, commitment, passion, wisdom and sensitivity, which are present in good leaders, are part of the person's character. These traits are lived on and off the job, in public and in private. They are integral to who the person is and cannot be faked. Jack Welch, former CEO proposed these fundamental leadership principles:

There is only one way - the straight way.
Make sure the right people are in the right jobs.
Make sure everyone knows they count.
The true test of self-confidence is the courage to be open.
Business has to be fun.
Never underestimate the other guy.
Understand where real value is added and put the best people there.
Know when to meddle and when to let go.

10. Answer: A

The American Heritage College Dictionary defines ethics as "a set of principles of right conduct; a theory or system of moral values." Business ethics is applying this definition to an organization's or a country's approach to conducting affairs in the commercial arena. In the beginning, business people did whatever was expedient to sell their goods and services and make a profit. Because of many factors, in the last few years, the international business community has been forced to take a look at some of its practices and find alternate ways of conducting commerce. The tricky issue is how to reconcile core values that may be very different in individual cultures. Issues being studied include:

A search for accepted universal values
Comparison of business traditions in different countries and cultures
How religious perspectives affect commerce
Varying standards, i.e., child labor, living wages, etc.
Multinational groups outsourcing to take advantage of varying standards
Conducting business with rogue governments