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SOCPA Fellowship Exam: Business Environment: free practice test

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Practice test questions with answers and explanations

Try the questions in the test above first, then open each one here to see the correct answer and why every other option is wrong.

01A review of the supplier master file found that 12% of records lack a tax number and that one supplier is entered three times as separate records. Which two data quality dimensions are affected, in that order?

Practice question Unit: Information technology

  1. AUniqueness, then completeness

    The order is reversed: missing fields are completeness and duplicates are uniqueness.

  2. BAccuracy, then timeliness

    Missing values are absent rather than inaccurate, and the problem is not how recent the data is.

  3. CCompleteness, then uniqueness ✓ Correct answer

    Missing tax numbers affect completeness, and the same supplier in separate records affects uniqueness (no duplicates).

  4. DValidity, then consistency

    Validity means values conform to the accepted format; it covers neither an absent value nor a duplicated record.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 1/1 (Data science)

02A company must process log files of tens of terabytes that cannot be loaded onto a single server. How does a distributed framework such as Hadoop deal with this?

Practice question Unit: Information technology

  1. AIt compresses all data onto one stronger server and processes it sequentially

    This ignores the idea of distribution, and loading onto one server was already ruled out.

  2. BIt converts data into fixed relational tables and drops unstructured fields

    It does not require conversion into relational tables, and it can handle unstructured data.

  3. CIt spreads the data across several nodes, each processing a part in parallel, then merges the results ✓ Correct answer

    This is the principle of distributed processing: split the data, process in parallel, then combine the results.

  4. DIt keeps a single copy on a master node and blocks the other nodes from reaching it

    It stores data spread across nodes rather than confining it to one node.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 1/6 (Big data)

03The demand function for a good is Qd = 100 − 2P and the supply function is Qs = 20 + 2P. What is the equilibrium quantity?

Practice question Unit: Economic analysis and concepts

  1. A40 units

    40 is the quantity demanded at a price of 30, which is not the equilibrium price.

  2. B80 units

    80 is the quantity demanded at a price of 10, not the equilibrium quantity.

  3. C60 units ✓ Correct answer

    Set Qd = Qs: 100 − 2P = 20 + 2P, so 4P = 80 and P = 20; substituting gives Q = 100 − 40 = 60.

  4. D20 units

    20 is the equilibrium price, not the quantity; the question asks for quantity.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 2/1 (The economic environment: micro and macroeconomics)

04Ahmad left a job paying 120,000 riyals a year to run his own business, which earned revenue of 300,000 riyals and had explicit costs of 150,000 riyals. What is the business's annual economic profit?

Practice question Unit: Economic analysis and concepts

  1. A150,000 riyals

    150,000 is the accounting profit (300,000 − 150,000), with the opportunity cost of the forgone salary not deducted.

  2. B270,000 riyals

    270,000 results from adding explicit and implicit costs (150,000 + 120,000), which is total cost, not profit.

  3. C180,000 riyals

    180,000 results from deducting only the salary from revenue, without the explicit costs.

  4. D30,000 riyals ✓ Correct answer

    Economic profit = revenue − explicit costs − implicit costs = 300,000 − 150,000 − 120,000 = 30,000.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 2/3 (Opportunity cost)

05The price of a good rises from 10 riyals to 12 riyals, and quantity demanded falls from 100 units to 80 units. Using the midpoint method, the price elasticity of demand (in absolute value) is approximately:

Practice question Unit: Economic analysis and concepts

  1. A1.00

    This results from using the starting values (20% ÷ 20%), not the midpoint.

  2. B1.22 ✓ Correct answer

    Change in quantity = 20 ÷ 90 = 22.22%; change in price = 2 ÷ 11 = 18.18%; elasticity = 22.22 ÷ 18.18 = 1.22, so demand is elastic.

  3. C1.50

    This results from using the new values as the base (25% ÷ 16.67%).

  4. D0.82

    This is the inverse of the correct value, because the price change was divided by the quantity change.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 2/2 (Elasticity and its applications)

06A firm in a perfectly competitive market faces a market price of SAR 20 and has marginal cost MC = 4 + 2Q. What quantity maximizes its profit?

Practice question Unit: Economic analysis and concepts

  1. A8 units ✓ Correct answer

    Correct: the profit-maximizing condition is P = MC, so 20 = 4 + 2Q and Q = 8.

  2. B4 units

    This comes from dividing (20 − 4) by 4, a wrong use of the marginal cost slope.

  3. C10 units

    This is 20 divided by 2, ignoring the constant term in marginal cost.

  4. D16 units

    This comes from ignoring the coefficient on Q, that is, solving 20 = 4 + Q.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 2/4 (Market structures)

07A firm earns a return on equity of 15% (based on year-end equity) and retains 60% of its earnings. Using the sustainable growth formula g = (ROE × b) / (1 − ROE × b), what is the sustainable growth rate?

Practice question Unit: Financial management

  1. A9.00%

    9.00% is ROE × b only, leaving out the denominator 1 − ROE × b.

  2. B6.38%

    6.38% comes from using the 40% payout ratio instead of the retention ratio (0.06 / 0.94).

  3. C9.89% ✓ Correct answer

    Correct. ROE × b = 0.15 × 0.60 = 0.09 and the denominator is 1 − 0.09 = 0.91, giving 0.09 / 0.91 = 9.89%.

  4. D25.00%

    25.00% comes from dividing ROE by the retention ratio (0.15 / 0.60), which is not the sustainable growth formula.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 3/1 (Capital structure and related concepts)

08Al-Ufuq Company has cash of SAR 90,000, marketable securities of SAR 30,000, receivables of SAR 150,000, inventory of SAR 240,000, prepaid expenses of SAR 10,000 and current liabilities of SAR 200,000. What is the quick (acid-test) ratio?

Practice question Unit: Financial management

  1. A1.20

    This leaves out marketable securities (240,000 ÷ 200,000), which are quick assets and belong in the numerator.

  2. B1.40

    This keeps prepaid expenses in the numerator (280,000 ÷ 200,000), although they will not convert into cash.

  3. C1.35 ✓ Correct answer

    Quick assets are 90,000 + 30,000 + 150,000 = SAR 270,000, and dividing by 200,000 gives 1.35.

  4. D2.60

    This is the current ratio (520,000 ÷ 200,000), because it includes inventory and prepaid expenses.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 3/2 (Financial position analysis: ratios, trend and cash flow)

09Al Ofuq Company expects an annual cash flow of SAR 20,000 at the end of each year for 5 years. If the discount rate is 10%, what is the present value of these cash flows? (Present value annuity factor for 5 years at 10% = 3.7908)

Practice question Unit: Financial management

  1. ASAR 100,000

    This is the sum of the cash flows without discounting (20,000 × 5), which ignores the time value of money.

  2. BSAR 83,398

    This is the value for payments at the start of each year (75,816 × 1.10), but the cash flows arrive at year end.

  3. CSAR 75,816 ✓ Correct answer

    Present value = 20,000 × 3.7908 = SAR 75,816.

  4. DSAR 122,102

    This is the future value of the payments (20,000 × 6.1051), not the present value.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 3/3 (Financial valuation methods and their assumptions)

10A venture fund plans to invest SAR 5 million in a start-up. It expects the company to be worth SAR 120 million at exit in 5 years and requires 8 times its investment. Under the venture capital method, what is the pre-money valuation (SAR millions)?

Practice question Unit: Financial management

  1. A15

    This is the post-money value (120 ÷ 8), not pre-money.

  2. B10 ✓ Correct answer

    Correct: post-money = 120 ÷ 8 = 15, so pre-money = 15 − 5 = 10.

  3. C20

    This adds the investment to post-money instead of deducting it (15 + 5).

  4. D24

    This divides exit value by the investment (120 ÷ 5), which ignores the required return.

Reference: SOCPA Fellowship syllabus, Business Environment, topic 3/8 (Valuing pre-profit companies)

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