Lesson 2.16.1

2.16.1 Conflicts in business decision making Quiz: OCR Business, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 2.16.1, Conflicts in business decision making: 20 multiple choice questions for the OCR Business (H431), Unit 2: Business objectives and strategy, written with Revision Ninja.

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The 20 questions

  1. Which stakeholder conflict occurs when shareholders demand higher dividends while employees request pay rises?

    • Managers versus lenders
    • Shareholders versus suppliers
    • Shareholders versus employees
    • Customers versus suppliers

  2. What is the principal-agent problem in business decision making?

    • Loss of control
    • Shortage of liquidity
    • Failure of communication
    • Conflict of interest

  3. Which corporate objective often conflicts directly with maintaining high short-term profit margins?

    • Tax avoidance
    • Market share growth
    • Cost minimisation
    • Dividend payout

  4. Overtrading occurs when a business attempts to grow too quickly without sufficient what?

    • Working capital
    • Share capital
    • Brand equity
    • Fixed assets

  5. What financial tradeoff occurs when a firm decides to retain profits rather than pay dividends?

    • Revenue versus turnover
    • Investment versus income
    • Assets versus liabilities
    • Debt versus equity

  6. A business cuts unit costs by relocating production abroad. Which stakeholder group suffers directly?

    • Domestic workforce
    • Overseas customers
    • Company directors
    • Institutional shareholders

  7. Holding large cash reserves improves liquidity but directly reduces which key performance metric?

    • Tax liability
    • Solvency
    • Profitability
    • Gearing

  8. Which strategic conflict arises when a firm issues new shares to fund massive expansion?

    • Dilution of control
    • Higher interest burden
    • Increase in gearing
    • Immediate insolvency

  9. Why might ethical sourcing of raw materials create a conflict for financial managers?

    • Lower customer loyalty
    • Decreased product quality
    • Reduced brand equity
    • Higher unit costs

  10. Short-termism in business decision making prioritises immediate financial returns over which strategic activity?

    • Research and development
    • Cost reduction
    • Dividend payments
    • Asset sales

  11. A manufacturer sells directly online, causing conflict with its existing independent retailers. What is this?

    • Horizontal alliance
    • Market penetration
    • Vertical integration
    • Channel conflict

  12. Forcing suppliers to accept longer payment terms improves buyer cash flow but risks what?

    • Higher interest rates
    • Increased tax liability
    • Supplier insolvency
    • Dilution of shares

  13. Which strategic model contrasts shareholder wealth maximisation with meeting broader social needs?

    • Porter generic strategies
    • Boston matrix
    • Stakeholder theory
    • Ansoff matrix

  14. Increasing product quality through premium materials creates a trade-off with which business goal?

    • Brand reputation
    • Market standing
    • Cost minimisation
    • Customer satisfaction

  15. A firm uses price skimming for a new product. What target group is initially excluded?

    • Early adopters
    • High-income consumers
    • Price-sensitive customers
    • Competitors

  16. Decentralising decision making improves local responsiveness but increases the risk of what issue?

    • Higher transport costs
    • Lower employee motivation
    • Slower local responses
    • Loss of consistency

  17. Which major drawback is typically associated with choosing organic growth instead of external growth?

    • Cultural clashes
    • Slower expansion
    • Reduced ownership
    • Higher gearing

  18. A firm adopts lean production to cut inventory costs. Which operational risk increases as a result?

    • Supply disruption
    • Excessive storage costs
    • Product obsolescence
    • High holding fees

  19. Which financial metric increases when a business raises long-term funds via debt rather than equity?

    • Liquidity ratio
    • Gearing ratio
    • Profit margin
    • Asset turnover

  20. A haulage firm introduces night deliveries. Which stakeholder group is most likely to complain about noise?

    • Shareholders
    • Customers
    • Local community
    • Lenders

All OCR Business quizzes