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Pancyprian TS Bus. Org. study materials
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Pancyprian TS Bus. Org. practice questions

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Question 1The nature and environment of business

A small furniture maker in Limassol sells its products only to retailers, who then sell them to the public. Which type of market is the furniture maker operating in?

  1. The consumer market
  2. The financial market
  3. The labour market
  4. The business-to-business market Correct answer.

Explanation

A business-to-business (B2B) market involves transactions between one business and another, as when a manufacturer sells to retailers rather than directly to households. The consumer market covers sales to final households, the labour market covers the buying and selling of work, and the financial market covers funds.

Question 2The nature and environment of business

Which of the following best describes the primary sector of an economy?

  1. Activities that manufacture finished goods from raw materials
  2. Activities that provide services such as banking and retail
  3. Activities that extract raw materials directly from nature Correct answer.
  4. Activities that involve research and product design

Explanation

The primary sector covers extraction and harvesting of natural resources, such as farming, fishing, mining and quarrying. Manufacturing belongs to the secondary sector, while services such as banking and retail belong to the tertiary sector.

Question 3The nature and environment of business

A bakery buys flour, pays its bakers' wages and pays rent for its shop. Which of these costs is a fixed cost in the short run?

  1. The cost of flour used in the bread
  2. The wages paid to bakers per loaf produced
  3. The cost of the paper bags given to customers
  4. The monthly rent for the shop premises Correct answer.

Explanation

Fixed costs do not vary with the level of output in the short run, and rent on premises is normally paid at the same amount regardless of how many loaves are baked. Flour, piece-rate wages and paper bags all rise as output rises, so they are variable costs.

Question 4The nature and environment of business

Which of the following is the best example of an opportunity cost for a sole trader?

  1. The income the owner gives up by leaving paid employment to run the business Correct answer.
  2. The money paid in VAT to the government
  3. The depreciation recorded on the firm's delivery van
  4. The interest charged on a bank overdraft

Explanation

Opportunity cost is the value of the next best alternative forgone when a choice is made. By running the business, the owner forgoes the salary that could have been earned elsewhere, which is a genuine opportunity cost. Taxes, depreciation and interest are actual accounting costs rather than forgone alternatives.

Question 5The nature and environment of business

A company's owners have limited liability. What does this mean for them?

  1. They are exempt from paying tax on the company's profits
  2. They can lose only the capital they invested in the company Correct answer.
  3. They are liable for all the debts of the company without any limit
  4. They must personally repay any loan the company fails to repay

Explanation

Limited liability means shareholders' financial responsibility is capped at the amount they invested, so personal assets are protected if the company fails. Unlimited liability, by contrast, would expose owners to all business debts. Limited liability has no effect on the company's obligation to pay tax.

Question 6The nature and environment of business

Which of the following is a characteristic of a public limited company (PLC) rather than a private limited company (Ltd)?

  1. It must have at least two hundred shareholders at all times
  2. It cannot issue shares to raise capital
  3. Its owners always have unlimited liability
  4. Its shares may be offered for sale to the general public Correct answer.

Explanation

A public limited company may raise capital by offering its shares to the public, often through a stock exchange, whereas a private limited company may not offer shares to the general public. Both forms have limited liability, and there is no rule requiring two hundred shareholders.

Question 7The nature and environment of business

A government raises the minimum wage for all employees. Which stakeholder group benefits most directly and immediately from this change?

  1. Suppliers of raw materials to the firms
  2. Low-paid employees in the firms affected Correct answer.
  3. Consumers buying the firms' products
  4. Shareholders expecting higher dividends

Explanation

A higher minimum wage directly raises the pay of the lowest-paid workers, so they gain immediately. Shareholders may lose if profits fall, consumers may face higher prices, and suppliers are not directly affected by the wage change.

Question 8The nature and environment of business

Which of the following best explains why an economy benefits from specialisation and the division of labour?

  1. Workers become more productive by repeating a narrow task Correct answer.
  2. Total output falls because workers lose interest in their work
  3. Firms must employ more workers to complete the same output
  4. Each worker performs every task in the production process

Explanation

Dividing production into specialised tasks allows workers to become skilled and fast at one operation, raising output per worker. This increases productivity and lowers average costs, although boredom from repetition is a recognised drawback.

Question 9The nature and environment of business

A firm's total revenue is €120,000 and its total costs are €95,000. What is its profit and what does this indicate?

  1. €25,000 loss, meaning costs exceed revenue
  2. €215,000 profit, meaning revenue plus costs
  3. €25,000 profit, meaning revenue exceeds total costs Correct answer.
  4. €95,000 profit, meaning costs equal profit

Explanation

Profit is calculated as total revenue minus total costs, so €120,000 − €95,000 = €25,000. A positive result means the firm is covering all its costs and earning a surplus. Adding revenue and costs or equating costs with profit is arithmetically wrong.

Question 10The nature and environment of business

Which of the following describes a mixed economy?

  1. An economy in which all resources are owned and allocated by private firms
  2. An economy in which all resources are owned and allocated by the state
  3. An economy combining private enterprise with state ownership and regulation Correct answer.
  4. An economy that relies entirely on barter rather than money

Explanation

A mixed economy contains both a private sector, where firms respond to market signals, and a public sector, where government owns or regulates resources and provides services. Pure market and pure command economies are the two extremes it combines.

Question 11The nature and environment of business

A government imposes a tax on sugary drinks. Which effect is most likely in the market for these drinks?

  1. The demand curve shifts right and the price tends to fall
  2. The supply curve shifts left and the price paid by consumers tends to rise Correct answer.
  3. Nothing changes because taxes affect only producers' profits
  4. Quantity demanded rises because the tax signals quality

Explanation

A tax on a product raises the cost of supplying it, shifting supply to the left and generally pushing the market price up and quantity down. Demand is not shifted by a tax on producers, and consumers usually bear part of the tax through higher prices.

Question 12The nature and environment of business

Which of the following is most likely to be a reason for government intervention in a market?

  1. To remove all competition between businesses
  2. To ensure that firms always maximise profits
  3. To correct market failure such as pollution from production Correct answer.
  4. To prevent consumers from making any choices

Explanation

Governments intervene to correct market failure, for example by taxing or regulating pollution that imposes costs on third parties. Profit maximisation is a private objective, and removing competition or consumer choice is not a normal aim of policy.

Question 13The nature and environment of business

A firm's production creates chemical waste that pollutes a nearby river, harming local residents who are not part of the transaction. This is an example of which concept?

  1. A negative externality of production Correct answer.
  2. A merit good
  3. Economies of scale
  4. A positive externality of consumption

Explanation

A negative externality of production is a cost imposed on third parties by a firm's output, such as pollution harming residents. Positive externalities confer benefits on third parties, economies of scale are internal cost savings, and merit goods are under-consumed goods the state may subsidise.

Question 14The nature and environment of business

Which of the following best describes the role of an entrepreneur in a business organisation?

  1. Supplying capital to the business without taking any risk
  2. Combining the factors of production and bearing the risk of the enterprise Correct answer.
  3. Auditing the firm's financial statements independently
  4. Setting the level of taxation for the whole economy

Explanation

The entrepreneur organises land, labour and capital into a productive enterprise and bears the risk of loss if it fails. Supplying capital without risk describes a lender, while taxation and auditing are roles of government and external auditors.

Question 15The nature and environment of business

A firm moves from producing 1,000 units at an average cost of €8 to producing 2,000 units at an average cost of €6. What does this illustrate?

  1. Economies of scale Correct answer.
  2. Diseconomies of scale
  3. An increase in fixed costs only
  4. A fall in total cost

Explanation

Economies of scale occur when average cost falls as output expands, here from €8 to €6 per unit. Total cost has actually risen, from €8,000 to €12,000, and the fall in average cost is not explained by fixed costs alone.

Question 16The nature and environment of business

Which of the following is the main purpose of a business plan for a start-up seeking finance?

  1. To guarantee that the business will make a profit
  2. To show lenders or investors how the business will operate and repay or reward them Correct answer.
  3. To register the business with the tax authorities
  4. To replace the need for any market research

Explanation

A business plan sets out the business idea, market analysis, operations and financial forecasts so that lenders and investors can judge risk and expected return. It cannot guarantee profit and does not substitute for market research or legal registration.

Question 17The nature and environment of business

A country's economy shifts over several decades from mainly farming to mainly tourism and financial services. Which change has occurred?

  1. A movement from the primary sector to the tertiary sector Correct answer.
  2. A movement from the secondary sector to the primary sector
  3. A movement from the tertiary sector to the secondary sector
  4. A movement from the tertiary sector to the primary sector

Explanation

Farming is a primary activity, while tourism and financial services are tertiary activities, so the shift is from primary to tertiary. This pattern is typical of economic development as incomes rise and demand for services grows.

Question 18The nature and environment of business

Two firms in the same industry agree to fix prices and share the market between them. Which term best describes this behaviour?

  1. A cartel Correct answer.
  2. A takeover
  3. A merger
  4. A monopoly

Explanation

A cartel is an agreement among competing firms to coordinate prices, output or market shares, which restricts competition and is generally illegal under competition law. A merger or takeover combines firms into one owner, while a monopoly describes a single dominant supplier.

Question 19The nature and environment of business

A firm's fixed costs are €40,000, its variable cost per unit is €5 and it sells each unit for €9. How many units must it sell to break even?

  1. 10,000 units Correct answer.
  2. 4,444 units
  3. 5,000 units
  4. 1,000 units

Explanation

Break-even output equals fixed costs divided by contribution per unit, where contribution is price minus variable cost, €9 − €5 = €4. Dividing €40,000 by €4 gives 10,000 units. Other answers come from dividing by the wrong figure or misreading the contribution.

Question 20The nature and environment of business

A firm's sales revenue rises by 15% after it increases its advertising budget by 5%. Which conclusion is best supported?

  1. The firm must now have a monopoly in its market
  2. The advertising appears effective because revenue grew faster than the extra spending Correct answer.
  3. The firm's fixed costs have fallen as a result of advertising
  4. The advertising was ineffective because revenue rose by more than the spend

Explanation

Revenue rising by 15% from a 5% increase in advertising spend suggests the extra spending generated a proportionally larger sales response, so the campaign appears effective. It says nothing about market structure or fixed costs, and faster revenue growth indicates effectiveness rather than failure.

Question 21Forms of business ownership and legal structures

Under Cyprus company law, which characteristic distinguishes a private company (Idiotiki Etaireia) from a public company (Dimotiki Etaireia)?

  1. A private company must have at least seven shareholders at all times
  2. A private company may not offer its shares to the public and restricts the transfer of shares Correct answer.
  3. A private company must be listed on the Cyprus Stock Exchange within one year
  4. A private company is prohibited from having limited liability for its members

Explanation

A private company is defined by restrictions on offering shares to the public and on share transfers, and it typically limits membership to fifty persons. A public company may invite the public to subscribe for its securities. These restrictions are the core structural difference between the two forms.

Question 22Forms of business ownership and legal structures

A general partnership (Syneterismos) in Cyprus is best described by which statement?

  1. Liability of partners is limited to their capital contribution
  2. Partners are jointly and severally liable for the debts of the partnership Correct answer.
  3. It must always be registered as a company under the Companies Law
  4. It has a separate legal personality distinct from its partners

Explanation

In a general partnership each partner is jointly and severally liable for the obligations of the business, meaning creditors can pursue any partner for the full debt. The partnership does not offer the shield of limited liability. This is the defining risk that separates it from a limited company.

Question 23Forms of business ownership and legal structures

Which statement correctly describes a sole proprietorship (Atomiki Epicheirisi) in Cyprus?

  1. Profits are taxed only at the business level, never at the owner's level
  2. The business is a separate legal person from the owner
  3. The owner bears unlimited personal liability for business debts Correct answer.
  4. The owner has limited liability because the business is registered

Explanation

A sole proprietorship has no separate legal personality, so the owner and the business are the same legal person. Consequently the owner is personally liable without limit for the debts of the business. Registration does not create a liability shield.

Question 24Forms of business ownership and legal structures

What is the minimum number of members required to form a private company limited by shares in Cyprus?

  1. Two
  2. Seven
  3. One Correct answer.
  4. Five

Explanation

A private company limited by shares may be formed by a single member, and it may also have a single director and secretary. The law permits one-person companies, so none of the higher figures is required. This flexibility makes the private company the most common vehicle for small businesses.

Question 25Forms of business ownership and legal structures

Which document of a company sets out the rules governing its internal management, such as the appointment of directors and proceedings at meetings?

  1. The memorandum of association
  2. The share certificate
  3. The articles of association Correct answer.
  4. The certificate of incorporation

Explanation

The articles of association contain the internal regulations of the company, covering matters such as directors, meetings, and share transfers. The memorandum governs the company's relationship with the outside world and states its objects and capital. Together they form the constitutional documents.

Question 26Forms of business ownership and legal structures

Which form of business organisation gives its owners limited liability while also being treated as a separate legal person?

  1. A sole proprietorship
  2. A company limited by shares Correct answer.
  3. A general partnership
  4. An unregistered business name used by two traders

Explanation

A company limited by shares is a separate legal person, and the liability of its members is limited to the amount unpaid on their shares. This combination of separate personality and limited liability is what distinguishes it from partnerships and sole traders. Creditors generally look to the company's assets rather than the members' personal assets.

Question 27Forms of business ownership and legal structures

A company limited by guarantee is most commonly used in Cyprus for which purpose?

  1. Trading partnerships between two or more individuals
  2. Raising share capital from public investors
  3. Holding a banking licence with a minimum share capital
  4. Non-profit or charitable activities where members guarantee a fixed sum on winding up Correct answer.

Explanation

In a company limited by guarantee the members do not contribute share capital but undertake to pay a fixed amount if the company is wound up. This structure suits clubs, charities, and non-profit associations. It is not designed for raising capital from investors.

Question 28Forms of business ownership and legal structures

Two accountants wish to run a practice together but want to limit their personal exposure to the firm's debts. Which structure best achieves this?

  1. A private company limited by shares Correct answer.
  2. A general partnership with a written partnership agreement
  3. A sole proprietorship registered in both names
  4. An informal arrangement with no registration

Explanation

Only an incorporated form such as a private company limited by shares provides limited liability for its owners. A partnership agreement, however detailed, does not shield partners from the firm's obligations. Registering as a company therefore best meets the stated objective.

Question 29Forms of business ownership and legal structures

In a limited partnership (Periorismeni Syneterismos), which statement is correct?

  1. The limited partnership must be incorporated as a company
  2. All partners have limited liability
  3. There must be at least one general partner with unlimited liability and one limited partner Correct answer.
  4. Limited partners may freely manage the day-to-day business

Explanation

A limited partnership must include at least one general partner who bears unlimited liability and at least one limited partner whose liability is capped at the agreed contribution. If a limited partner takes part in management, that partner risks losing limited liability. This hybrid structure distinguishes it from a general partnership.

Question 30Forms of business ownership and legal structures

What is the effect of the doctrine of separate legal personality on a company's shareholders?

  1. The company owns its assets and incurs its own liabilities, distinct from its shareholders Correct answer.
  2. Shareholders own the company's property directly in proportion to their shares
  3. Directors and shareholders are treated as the same legal persons
  4. Shareholders are personally liable for the company's contracts

Explanation

Once incorporated, the company is a legal person distinct from its members, owning property and bearing obligations in its own name. Shareholders hold shares, not direct title to company assets. This separation underpins limited liability and perpetual succession.

Question 31Forms of business ownership and legal structures

A court is asked to disregard a company's separate personality because it was used as a mere façade to commit fraud. This situation illustrates which concept?

  1. Promoter's pre-incorporation contract
  2. Perpetual succession
  3. Lifting the corporate veil Correct answer.
  4. Ultra vires

Explanation

Lifting the corporate veil occurs when a court looks past the company's separate personality to hold those behind it responsible, typically in cases of fraud or improper use of the corporate form. It is an exception to the general rule of separate personality. The other doctrines address different company law issues.

Question 32Forms of business ownership and legal structures

Which statement about the liability of a member of a company limited by shares is accurate?

  1. The member's liability is limited to any amount unpaid on the shares held Correct answer.
  2. The member has no liability whatsoever in any circumstances
  3. The member is liable for all company debts as they fall due
  4. The member is liable only if appointed as a director

Explanation

In a company limited by shares, a member's liability is limited to the amount, if any, unpaid on the nominal value of the shares held. Once shares are fully paid, the member generally has no further obligation to contribute. This is the mechanism that caps investor risk.

Question 33Forms of business ownership and legal structures

A promoter signs a contract on behalf of a company that has not yet been incorporated. Under the general position, what is the promoter's position?

  1. The company is bound retrospectively from the date of the contract
  2. The contract is void because a non-existent company cannot be a party
  3. The promoter is automatically released once incorporation occurs
  4. The promoter may be personally liable on the contract unless the company adopts it after incorporation Correct answer.

Explanation

A company cannot be bound by a contract made before it exists, so the promoter who contracted may remain personally liable. The company may later adopt or enter into a fresh contract after incorporation, which can release the promoter. Until then, the risk sits with the promoter.

Question 34Forms of business ownership and legal structures

Which feature best explains why a company enjoys perpetual succession?

  1. Its memorandum cannot ever be amended
  2. Its directors are appointed for life
  3. Its shares are always freely transferable
  4. It exists as a legal person independently of changes in its membership Correct answer.

Explanation

Perpetual succession follows from separate legal personality: the company continues to exist despite the death, bankruptcy, or departure of members or directors. Its existence is not tied to any individual. This continuity is a key advantage over partnerships and sole traders.

Question 35Forms of business ownership and legal structures

A partnership agreement is silent on how profits are shared. In the absence of agreement, what is the usual default position for a general partnership?

  1. Profits are shared equally among the partners Correct answer.
  2. Profits are distributed according to hours worked
  3. Profits are retained entirely by the managing partner
  4. Profits are shared in proportion to capital contributed

Explanation

Where the partnership agreement is silent, the default rule is that partners share profits and losses equally, regardless of the amount of capital each contributed. Partners can displace this by express agreement. This default reflects the personal, mutual nature of partnership.

Question 36Forms of business ownership and legal structures

A private company wishes to raise a large amount of capital by inviting the general public to subscribe for its shares. What is the legal position?

  1. It may do so freely once the directors pass a resolution
  2. It may do so provided the shares are fully paid in advance
  3. It may do so only if all shareholders are Cypriot residents
  4. It must first convert to a public company or otherwise comply with the rules permitting offers to the public Correct answer.

Explanation

A private company is prohibited from offering its shares to the public. To raise capital from the public it must re-register as a public company and comply with the applicable prospectus and disclosure rules. A board resolution alone cannot remove this statutory restriction.

Question 37Forms of business ownership and legal structures

A sole trader transfers the business to a newly incorporated company but continues to run it exactly as before, using the company's bank account for personal expenses and failing to observe any corporate formalities. What is the most likely legal risk?

  1. The company automatically loses its certificate of incorporation
  2. The shareholders automatically become jointly and severally liable for all company debts
  3. The business becomes a partnership by operation of law
  4. A court may lift the corporate veil and treat the individual as personally liable Correct answer.

Explanation

Where the corporate form is used as a mere façade and no genuine separation is maintained, courts may lift the veil and hold the individual behind the company liable. Observing formalities and keeping company and personal finances separate supports the reality of separate personality. Shareholders generally are not liable merely because formalities were ignored.

Question 38Forms of business ownership and legal structures

Which comparison between a public company and a private company in Cyprus is correct?

  1. A private company must have more directors than a public company
  2. A public company cannot have limited liability
  3. A public company may offer securities to the public, whereas a private company may not Correct answer.
  4. A public company needs a lower minimum share capital than a private company

Explanation

The ability to offer securities to the public is the central privilege of a public company, accompanied by stricter capital and disclosure requirements. A private company is barred from public offers and enjoys more flexible internal rules. This distinction drives the choice between the two forms.

Question 39Forms of business ownership and legal structures

An investor holds fully paid shares in a company limited by shares that later becomes insolvent. Creditors seek to recover the shortfall from the investor personally. What is the investor's liability, in principle?

  1. The investor is liable only if also a director
  2. The investor is liable up to twice the nominal value of the shares
  3. The investor must pay an equal share of all company debts
  4. The investor has no further liability beyond the fully paid shares Correct answer.

Explanation

Once shares are fully paid, the member has discharged the liability attached to them and is not personally answerable for the company's debts. Limited liability confines the member's risk to the capital subscribed. Creditors must look to the company's own assets.

Question 40Forms of business ownership and legal structures

A small family-owned business in Nicosia has been trading for years as a general partnership. The partners now want to bring in a new investor who will contribute capital but must not take part in managing the firm, and they want that investor's exposure to be capped at the amount contributed. Which structure best meets these requirements while preserving the existing partners' full liability for the firm's debts?

  1. A general partnership (Syneterismos) with the investor admitted under a contract that restricts his role to financing only
  2. A company limited by guarantee, with the investor becoming a guarantor member
  3. A private company limited by shares, with the investor becoming a shareholder holding ordinary shares
  4. A limited partnership (Periorismeni Syneterismos), with the new investor admitted as a limited partner Correct answer.

Explanation

A limited partnership has two categories of partners: general partners, who manage the business and remain fully liable for its debts, and limited partners, who contribute capital, take no part in management, and are liable only up to their agreed contribution. This matches the family's wish to keep full liability and control among the existing partners while capping the new investor's exposure. A general partnership cannot give one member limited liability, and a company limited by shares or by guarantee would change the whole structure rather than add a limited partner.

Question 41Management functions: planning, organising, leading, controlling

In the management process, which function is primarily concerned with setting objectives and deciding in advance how they will be achieved?

  1. Leading
  2. Organising
  3. Planning Correct answer.
  4. Controlling

Explanation

Planning is the function in which managers define goals, forecast future conditions and choose the means and resources needed to reach those goals before action begins. The other functions take the plan as their starting point rather than creating it.

Question 42Management functions: planning, organising, leading, controlling

A transport company assigns its drivers, vehicles and workshop staff to specific depots and defines who reports to each depot supervisor. Which management function does this describe?

  1. Organising Correct answer.
  2. Controlling
  3. Leading
  4. Planning

Explanation

Organising is the process of dividing work, grouping tasks, allocating resources and establishing authority relationships so that plans can be executed. Assigning staff and vehicles to depots and fixing reporting lines is the classic organising activity of building structure.

Question 43Management functions: planning, organising, leading, controlling

Which statement best describes the controlling function in a bus operating company?

  1. Measuring actual performance against standards and taking corrective action Correct answer.
  2. Persuading staff to accept new safety procedures
  3. Deciding the annual route timetable before the year starts
  4. Grouping drivers into teams under shift supervisors

Explanation

Controlling involves setting performance standards, measuring actual results, comparing the two and correcting significant deviations. It is a monitoring and corrective process rather than a forward decision or a motivational act.

Question 44Management functions: planning, organising, leading, controlling

A depot manager spends most of the day resolving disputes between drivers, briefing staff on a new ticketing system and encouraging punctuality. Which management function dominates this behaviour?

  1. Leading Correct answer.
  2. Controlling
  3. Organising
  4. Planning

Explanation

Leading covers directing, motivating, communicating with and resolving conflicts among people so that they perform effectively. The manager's activities are all interpersonal and motivational rather than structural or measurement-based.

Question 45Management functions: planning, organising, leading, controlling

According to the classical management process, what is the logical relationship between planning and controlling?

  1. Planning sets the standards against which controlling measures performance Correct answer.
  2. Controlling provides the standards that planning later adopts
  3. The two functions are independent and never interact
  4. Controlling must be completed before any planning can start

Explanation

Planning establishes objectives and performance standards, and controlling uses those standards to evaluate actual results and correct deviations. The two are interdependent, with planning logically preceding control but control feeding information back into future plans.

Question 46Management functions: planning, organising, leading, controlling

Which of the following is a characteristic of a strategic plan rather than an operational plan?

  1. It is set by first-line supervisors for their teams
  2. It sets long-term direction for the whole organisation Correct answer.
  3. It specifies daily driver shift rotas
  4. It covers a short period, usually up to one year

Explanation

Strategic plans are long-term, organisation-wide and concerned with direction, markets and major resource commitments. Operational plans translate strategy into short-term detail for specific units and are made lower in the hierarchy.

Question 47Management functions: planning, organising, leading, controlling

A bus company's board decides to withdraw from intercity services and concentrate on urban routes over the next five years. At which planning level does this decision sit?

  1. Strategic planning Correct answer.
  2. Operational planning
  3. Standing plan
  4. Contingency planning

Explanation

Withdrawing from a market and refocusing the business over several years is a strategic decision about the organisation's long-term direction and scope. It is taken at the top level and shapes all lower-level plans.

Question 48Management functions: planning, organising, leading, controlling

Which statement correctly distinguishes a policy from a procedure?

  1. A policy and a procedure are identical terms in management literature
  2. A policy gives a general guideline for decision-making, while a procedure prescribes the specific steps to be followed Correct answer.
  3. A procedure is set only by top management, while a policy is set only by supervisors
  4. A policy is a one-time plan for a unique project, while a procedure is a recurring rule

Explanation

Policies are general guides that channel thinking and give discretion within limits, whereas procedures are detailed sequences of required steps for handling routine activities. Both are standing plans, but they differ in generality and specificity.

Question 49Management functions: planning, organising, leading, controlling

A transport operator prepares a written response plan for how depots will operate if a fuel supply disruption occurs. What type of plan is this?

  1. Standing plan
  2. Single-use plan
  3. Contingency plan Correct answer.
  4. Strategic plan

Explanation

A contingency plan is prepared in advance to specify responses to a specific possible disruption or emergency. It is triggered only if the anticipated event occurs, unlike routine standing plans or one-off single-use plans.

Question 50Management functions: planning, organising, leading, controlling

In a management-by-objectives (MBO) process, which feature is essential?

  1. Objectives are agreed jointly by supervisor and subordinate and later used to appraise performance Correct answer.
  2. Objectives are replaced each week to remain flexible
  3. Objectives are kept confidential so that employees are not distracted
  4. Objectives are set only by top management and communicated downward without discussion

Explanation

MBO relies on participative, jointly agreed objectives with measurable targets that become the basis for periodic review and appraisal. The mutual setting of goals links planning directly to control.