F4 BAFS – Business Environment & Introduction to Management Test (1)

Name: ____________________ Class: __________ ( ) Total mark: 70 marks

Section A (54 marks)

1) The following are the major stages of economic development in Hong Kong. Arrange them in the
correct sequence.
(1) International financial and services centre
(2) Entrepôt
(3) Knowledge-based economy
(4) Manufacturing centre

A. (2) → (4) → (1)→ (3)

B. (2) → (4) → (3) → (1)
C. (4) → (2) → (1) → (3)
D. (2) → (1) → (4) → (3)

2) Wholesale and retail trades are examples of

A. primary production.
B. secondary production.
C. tertiary production.
D. knowledge-based production.

3) The primary sector in Hong Kong is insignificant because

A. Hong Kong lacks arable land and natural resources.
B. Hong Kong lacks skilled labour.
C. it lacks government support.
D. None of the above

4) The Hong Kong government promotes a favourable business environment by

(1) maintaining law and order.
(2) providing education and training to Hong Kong people.
(3) providing infrastructure.
(4) controlling capital inflow and outflow.

A. (1) and (4) only

B. (1), (2) and (3) only
C. (2), (3) and (4) only
D. (1), (2), (3) and (4)

1
5) Under the ‘big market, small government’ as described by the HKSAR government,
(1) everyone can start a business regardless of the business nature in Hong Kong.
(2) the government plays a passive role in facilitating the functioning of the market.
(3) the government minimises its intervention in the market.
(4) the government encourages entrepreneurship and fair competition.

A. (1) and (3) only

B. (3) and (4) only
C. (1), (2) and (4) only
D. (1), (2), (3) and (4)

6) Which of the following is not a characteristic of Hong Kong as an externally-oriented economy?

A. Hong Kong is open to foreign workers, regardless of their nationality.
B. No trade barriers are imposed on imported goods.
C. The Hong Kong government does not control capital inflow and outflow.
D. In general, the media in Hong Kong enjoys a high degree of freedom.

7) Which of the following(s) is/are considered Hong Kong’s favourable physical factor(s)?
(1) Rich in natural resources
(2) Well-developed infrastructure
(3) Natural deep-water harbour
(4) Proximity to the Mainland

A. (1) and (3) only

B. (2) and (4) only
C. (3) and (4) only
D. (2), (3) and (4) only

8) Which of the following statements about CEPA is false?

A. CEPA gives Hong Kong firms a first-mover advantage for early entry into the Mainland
market.
B. Under CEPA, all products exported to the Mainland through Hong Kong can enjoy zero tariff.
C. The objective of CEPA is to reduce or eliminate barriers on substantially all trade in goods
between the two sides.
D. Under CEPA, Hong Kong firms are given preferential treatment upon entering into a number
of service sectors in the Mainland.

2
9) Which of the following is the meaning of outsourcing?
A. The transfer of production processes from being carried out inside the firm to being done by
outside firms.
B. The transfer of production processes from being carried out by outside firms to being carried
out inside the firm.
C. The transfer of sourcing processes from being carried out by outside firms to being carried out
inside the firm.
D. The transfer of sourcing processes from being carried out inside the firm to being done by
outside firms.

10) Which of the following is not a function of the WTO?

A. Handling trade disputes among member countries
B. Helping remove trade barriers such as tariffs and quotas
C. Providing financial aids to developing countries
D. Imposing trade sanctions on members which fail to comply with the rules and decisions of the
WTO

11) Which of the following statements regarding the characteristics of Hong Kong’s economy is
incorrect?
A. Hong Kong lacks primary industry, such as mining and quarrying.
B. The Hong Kong government pursues a laissez-faire policy which promotes a free market and
free trade.
C. Hong Kong has a simple taxation system. No profits tax is charged.
D. Hong Kong lacks natural resources. It needs to import foodstuffs from other countries.

12) Which of the following are characteristics of Hong Kong’s economy?

(1) Free trade
(2) Simple taxation
(3) Concentration on secondary industry
(4) Foreign exchange control

A. (1) and (2) only

B. (3) and (4) only
C. (1), (2) and (3) only
D. (2), (3) and (4) only

3
13) Which of the following statements regarding the World Trade Organization are correct?
(1) It settles trade disputes among members.
(2) It serves as a forum for multilateral trade negotiations among members.
(3) It helps developing countries develop the infrastructure needed to expand their trade.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

14) Firm A makes use of the Internet to locate the lowest cost supplier. It then obtains inputs from
different countries to save on costs. This is a process known as
A. outsourcing.
B. global sourcing.
C. technology transfers.
D. international specialisation

15) Which of the following statements about a partnership is false?

A. A partnership can have more than 20 partners.
B. All partners in a limited partnership have limited liability.
C. A limited partner is not involved in the planning and management of the business.
D. A general partner has unlimited liability.

16) A public limited company

A. has no upper limit on the number of shareholders.
B. must have at least one shareholder.
C. can issue shares to the general public.
D. All of the above

17) Which of the following are the advantages of a sole proprietorship?

(1) A sole proprietorship can raise capital by issuing shares to the general public.
(2) The ownership of the business can easily be transferred.
(3) The owner can easily monitor the whole production process and ensure a high quality standard.
(4) A board of directors can be elected to run the business.

A. (1) and (4) only

B. (2) and (3) only
C. (2), (3) and (4) only
D. (1), (2), (3) and (4)

4
18) Which of the following forms of business ownership is/are (a) legal entity (entities)?
(1) Sole proprietorship
(2) Partnership
(3) Private limited company
(4) Public corporation

A. (1) and (2) only

B. (2) and (3) only
C. (2) and (4) only
D. (3) and (4) only

19) Which of the following statements about private limited companies is true?
A. A private limited company does not need to disclose its financial information to the public.
B. A private limited company can sell its shares to the public.
C. There is no upper limit on the number of shareholders in a private limited company.
D. A private limited company cannot invite new shareholders to join the business.

20) Which of the following are the advantages of a franchise?

(1) Autonomy in operation and management
(2) Well-known brand
(3) Easy to set up
(4) Large shop’s benefit

A. (1) and (2) only

B. (3) and (4) only
C. (2), (3) and (4) only
D. (1), (2), (3) and (4)

21) Which of the following statements correctly describes the difference between ordinary
shareholders and preference shareholders?
A. Preference shareholders can earn more dividends than ordinary shareholders when the
company earns more profit.
B. Preference shareholders have voting rights while ordinary shareholders do not.
C. Preference shareholders receive dividends before ordinary shareholders are paid.
D. Preference shareholders are entitled to special dividend shares while ordinary shareholders are
not.

5
22) Which of the following is/are the disadvantage(s) of a joint venture?
(1) A joint venture can be terminated without the consent of all parties.
(2) Partners may lose autonomy.
(3) Product information may be leaked to partners.
(4) A joint venture needs to pay a higher profits tax.

A. (1) only
B. (2) and (3) only
C. (2) and (4) only
D. (1), (2), (3) and (4)

23) The difference between public corporations and government departments is that
A. a government department is owned by the government but a public corporation is not.
B. a public corporation has a separate legal existence but a government department does not.
C. a public corporation is less efficient in decision-making processes.
D. a government department can raise capital for big projects through the public but a public
corporation cannot.

24) Which of the following statements about multinational corporations (MNCs) is false?
A. Most MNCs are listed public limited companies.
B. Most MNCs are labour-intensive and use relatively simple technology.
C. MNCs are usually slow to respond to market changes.
D. MNCs often employ professional managers to run their business.

25) Peter opened an upstairs bookstore in Causeway Bay last year. Unfortunately, because of rising
rent and poor sales, he has to close the bookstore. Peter is heavily in debt. He sells his own
properties to pay off the debt.
Which form of business ownership does Peter’s bookstore belong to?
A. Partnership
B. Sole proprietorship
C. Private limited company
D. Franchise

26) Which of the following regarding shareholders of a public limited company is incorrect?
A. They are the owners of the company but may not participate in the management of the
company.
B. They have limited liability.
C. Their shares can be transferred freely.
D. Their dividends are guaranteed as long as the company makes profit.

6
27) Peter and Roger own a hair salon. Roger invests capital in the business. However, he does not
take part in running the business. Roger is likely to be a
(1) limited partner
(2) general partner
(3) nominal partner

A. (1) only
B. (3) only
C. (1) or (3)
D. (2) or (3)

Section B (16 marks)

Question 1
Peter is thinking of opening an ice cream shop in Shenzhen. Before raising capital, he gathers
information about the price level in Shenzhen. He also conducts research to find out the preferences
of people there.
(a) List the external factors which Peter is considering when he
(i) gathers information about the price level in Shenzhen. (1 mark)
(ii) conducts research to find out the preferences of people. (1 mark)
(b) Refer to part (a). Apart from these factors, explain two other types of external factors which
would affect Peter’s decision on whether to set up an ice cream shop in Shenzhen. (4 marks)

Question 2
Mr Chan used his savings to start a small business as a chinaware manufacturer many years ago.
For years, Mr Chan’s chinaware has been well-regarded for its traditional hand-made quality. His
products are mainly exported to the US and Europe.

Mrs Chan helps Mr Chan in the daily running of the company. Mr Chan has worked hard for years,
as he has been worried that he would suffer great losses if the business fails. Mr Chan plans to
transfer the business to Patrick. However, Patrick seems to have no interest in taking over the
family business.
(a) Which form of business ownership does Mr Chan’s company belong to? (1 mark)
(b) If Patrick does not carry on the business, how will the company be affected after the
retirement of Mr Chan? (1 mark)
(c) Mr Chan is thinking of converting the company into a private limited company. How can his
company benefit from such a decision? Explain two ways. (4 marks)
(d) Suggest two reasons why Mr Chan would not prefer changing his company into a public
limited company. (4 marks)

End of Paper

7
F4 BAFS – Business Environment & Introduction to Management Test (1)

Name: ____________________ Class: __________ ( ) Result: /70 _______

Section A (54 marks)

1 2 3 4 5 6 7 8 9 10

11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27

Section B (16 marks)

Question _____

8
Question _____