Business Acumen for Compensation Professionals v1.0

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An organization whose focus is on obtaining capital, marketing products or services, sales growth and cash conservation is most likely to be in what stage of the business lifecycle?

  • A. Start-up
  • B. Growth
  • C. Mature
  • D. Decline


Answer : A

What choices are most commonly faced by companies in the decline phase of the business lifecycle?

  • A. Whether to improve productivity, obtain new operating capital or generate new sales growth
  • B. Whether to reinvest in existing products, create new products or maximize profits with current products as long as possible
  • C. Whether to acquire competitors with greater market share or merge with more successful companies
  • D. Whether to increase sales, maximize distribution capacity or increase efficiency to meet growing demand


Answer : B

In what stage of the business lifecycle do companies typically begin standardizing procedures through policy creation?

  • A. Start-up
  • B. Growth
  • C. Mature
  • D. Decline


Answer : B

What metric should compensation professionals pay closest attention to for ensuring alignment between the compensation strategy and the HR and business strategies?

  • A. Variable pay costs as a percent of total compensation
  • B. Total compensation expense for the business, including base pay and variable pay
  • C. Reward costs as a percent of total operating costs
  • D. The organizationג€™s market comparatio


Answer : C

If employees have a significant impact on the bottom line, what type of pay mix is most appropriate?

  • A. A varying mix depending on employee influence on goals to provide the necessary incentive to maximize profits
  • B. 100% variable pay to motivate all employees to maximize productivity and sales
  • C. 90/10 for the majority of employees (base/variable) to share in the companyג€™s success with increased variable pay for management/executives to motivate employees to seek higher positions
  • D. High base pay and low variable pay to ensure predictability of total compensation expense


Answer : A

Which of the following factors has the greatest impact on how aggressive a stance (high vs. low) an organization will take in terms of where it positions itself against the market with its compensation strategy?

  • A. The industry it operates in
  • B. The bottom line
  • C. The organizational headcount
  • D. The risk tolerance of compensation leaders


Answer : B

What most accurately describes a reason why organizations use financial reports?

  • A. To differentiate company financial data from industry competitors to prevent loss of proprietary information
  • B. To provide subjective information to key constituents that reflects the companyג€™s performance in the most favorable manner depending on stakeholder priorities
  • C. To create a historical record of financial performance and identify trends that may justify changes in strategy
  • D. To promote consistency of communication regarding company performance and value


Answer : D

Information on the annual report shows results for what time period?

  • A. The calendar year from January 1 to December 31
  • B. The fiscal year, which matches the calendar year from January 1 to December 31
  • C. The fiscal year, which shows results from July 1 to June 30
  • D. The fiscal year, which may match the calendar year or may be a different 12-month period, depending on the company


Answer : D

Quarterly financial reports typically include data for a given quarter compared to what?

  • A. The previous quarter
  • B. The budget
  • C. The same quarter in the previous year, plus the current six-month or nine-month cumulative comparables
  • D. The aggregate performance of the same quarter in the previous three years


Answer : C

How do quarterly reports most commonly compare to the annual report?

  • A. The cumulative information on the four quarterly reports adds up to the information on the annual report.
  • B. The quarterly reports are more detailed. The annual report provides similar data in summary form.
  • C. The annual report is required and the quarterly reports, while commonly used, are optional.
  • D. The quarterly reports are not as detailed as annual reports, and might not match due to changing accounting estimates over the year.


Answer : D

What information is found on the balance sheet?

  • A. A list of what is owned, what is owed and the equity of an entity
  • B. The revenues and expenses incurred by an entity over a period of time
  • C. The change during the reporting period in cash and cash equivalents
  • D. The profitability of the company as of a specific date


Answer : A

Which financial statement or combination of statements provide(s) the most comprehensive view of the companyג€™s financial situation?

  • A. The balance sheet
  • B. The income statement
  • C. The cash flow statement and the income statement
  • D. The cash flow statement, along with the balance sheet and income statement


Answer : D

What do profits, equity and debt all have in common?

  • A. They are all reported on the balance sheet.
  • B. They are all sources of capital.
  • C. They all incur the same costs to the business.
  • D. Nothing. Each of these is a different financial metric.


Answer : B

What is the top line or starting point of an organizationג€™s income?

  • A. Gross profit
  • B. Revenue
  • C. Net income
  • D. Operating profit


Answer : B

Which of the following is the earnings available to equity owners after paying debt and taxes?

  • A. EBIT
  • B. EPS
  • C. Net income
  • D. Operating profit


Answer : C

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Exam contains 85 questions
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