ACCA pm ch 9

Max is considering drilling in a new area where the chances of success are unknown. Which of the following is an example of risk in his situation?

• Drilling in a new area with unknown success chances.

• 60% chance of finding oil.

• Collecting new data through field research.

• Using payoff tables to analyze decisions.

Answer explanation

The correct choice, '60% chance of finding oil,' quantifies the uncertainty involved in the decision, making it a clear example of risk. The other options describe actions or processes but do not specify a measurable risk.

Sophia is working on a marketing project and needs to gather information without collecting new data herself. What method should she use?

• Collecting new (primary) data.

• Using existing published data.

• Conducting small group discussions.

• Testing how variables affect decisions.

Answer explanation

Desk research is primarily used for using existing published data, allowing researchers to gather insights without the need for new data collection.

Neha is launching a new product and wants to understand how potential customers feel about it. She invites a small group of people to discuss their opinions and reactions. Which research technique is Neha using?

• Desk research.

• Field research.

• Focus groups.

• Sensitivity analysis.

Answer explanation

Focus groups are a qualitative research technique that involves small group discussions to gather opinions and reactions on specific topics, making them the correct choice for this question.

Sophia is evaluating a new business project and wants to understand which factors will most impact the project's success. She decides to use sensitivity analysis. What is the main strength of sensitivity analysis in this context?

• It considers probabilities and simplifies comparison.

• It identifies key variables.

• It models multiple random variables simultaneously.

• It shows possible profits/losses for decisions.

Answer explanation

The main strength of sensitivity analysis is that it identifies key variables that significantly impact outcomes, allowing decision-makers to focus on the most influential factors in their analysis.

Priya is planning to invest in the stock market and wants to understand the range of possible outcomes based on different market conditions. What method can she use to model multiple random variables simultaneously to predict outcome ranges?

• The average expected result of repeated decisions.

• Possible profits/losses for decisions.

• Multiple random variables simultaneously to predict outcome ranges.

• Small group discussions to gain opinions.

Answer explanation

The Monte Carlo simulation uses multiple random variables to model complex systems and predict a range of possible outcomes, making it a powerful tool for risk assessment and decision-making.

Ishaan is considering different investment opportunities. He wants to calculate the Expected Value (EV) of each investment to make an informed decision. What is the formula for Expected Values (EV) that Ishaan should use?

• EV = Σ (p × x).

• EV = Σ (x ÷ p).

• EV = Σ (p + x).

• EV = Σ (p - x).

Answer explanation

The formula for Expected Values (EV) is EV = Σ (p × x), where p represents the probability of each outcome and x represents the value of each outcome. This choice correctly captures the concept of calculating expected value.

Henry is considering drilling for oil in a new area, but he has no information about the chances of success. Which of the following is an example of uncertainty?

• 60% chance of finding oil.

• Drilling in a new area with unknown success chances.

• Using existing published data.

• Testing how variables affect decisions.

Answer explanation

Drilling in a new area with unknown success chances exemplifies uncertainty because it involves unpredictable outcomes, unlike the other options which either provide probabilities or rely on existing data.

Kiara is starting a new business and wants to understand her potential customers' preferences. She decides to collect new (primary) data to help with her research. Which research technique should Kiara use?

• Desk research.

• Field research.

• Focus groups.

• Payoff tables.

Answer explanation

Field research involves collecting new (primary) data directly from sources, such as through surveys or observations, making it the correct choice. In contrast, desk research uses existing data.

Emily is analyzing her business plan and wants to test 'what if' scenarios to see how changes in costs or sales might affect her profits. Which method should she use?

• Payoff tables.

• Expected Values (EV).

• Sensitivity analysis.

• Monte Carlo simulation.

Answer explanation

Sensitivity analysis tests 'what if' scenarios by examining how changes in input variables affect outcomes, allowing for the assessment of risk and uncertainty in decision-making.

Noah is working on a research project and decides to go out into the community to gather information directly from people and places, rather than relying on existing published data. What is the main focus of Noah's field research?

• Using existing published data.

• Collecting new (primary) data.

• Conducting small group discussions.

• Testing how variables affect decisions.

Answer explanation

The main focus of field research is to gather new (primary) data directly from the source, rather than relying on existing published data or discussions. This approach allows researchers to obtain firsthand insights and information.