CIMA Managing Finance In A Digital World (E1) Practice Exam

Which statement best describes a hierarchical structure?

A flat structure with many equal levels A structure where decision rights are decentralized A structure that is wholly informal Big at the bottom, narrow at the top

Correct Answer:

Big at the bottom, narrow at the top

Explanation:

Hierarchy means authority is arranged in levels with a clear chain of command from top to bottom. A tall, formal structure is often depicted as a pyramid: many people at the bottom, progressively fewer at higher levels, ending with a small number of senior managers. The description “Big at the bottom, narrow at the top” captures this idea because it shows a large base of employees reporting upward to a small apex of decision-makers, which is the essence of a hierarchical organization. In contrast, a flat structure would have few levels and a broad base, indicating less layering of authority; decentralization spreads decision rights, reducing centralized control; and an informal structure lacks formal reporting lines, so it isn’t truly hierarchical.

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