Entrepreneurship Chpt. 10
True/False
Indicate whether the statement is true or false.
____
1. Rules, policies, procedures, and budgets are important components of strategic planning.
____
2. Organizing involves directing and leading people to accomplish the goals of the organization.
____
3. The authoritative management style should never be used in today’s modern workplace.
____
4. Comparing actual revenues and expenses with what was projected is an example of the controlling function of
management.
____
5. Procedures are more specific than rules.
____
6. As a business owner, it is important for you never to make exceptions to rules, policies, and procedures once
they are established because if you do, customers and employees will become confused.
____
7. Successful inventory management involves balancing the costs of inventory with the benefits of having
inventory in stock.
____
8. The perpetual inventory method keeps track of inventory levels on a weekly basis.
____
9. The minimum amount of merchandise a business wants to keep in inventory is often referred to as the reorder
point.
____ 10. At least two people should be involved in taking a physical inventory.
____ 11. The cost of insurance tends to decrease as the value of the inventory insured increases.
____ 12. Two businesses with the same level of sales and expenses will have the same cash flow.
____ 13. One way to improve your cash receipts is to decrease your accounts receivable by getting customers who owe
you money to pay more quickly.
____ 14. Increasing payroll can improve a business’s cash flow.
____ 15. The three most important elements of a company’s financial strength are its assets, liabilities, and owner’s
equity.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 16. The person in a business who is responsible for planning, organizing, staffing, implementing, and controlling
the operations of a business is the
a. shop steward.
c. manager.
b. intern.
d. employee.
____ 17. Which of the following is not generally thought of as part of the organizing function?
a. organizing tasks into departments
c. allocating resources
b. assigning tasks
d. strategic planning
____ 18. A management style in which employees are involved in decision making and the manager provides less
direction is called
a. democratic management.
c. autocratic management.
b. mixed management.
d. authoritative management.
____ 19. The process of setting standards for the operation of a business and ensuring those standards are met is called
a. supervising.
c. controlling.
b. staffing.
d. implementing.
____ 20. Guidelines for the daily operations of a business are called
a. rules.
c. procedures.
b. policies.
d. mandates.
____ 21. All of the following are concerns about inventory that managers must address except
a. maintaining a wide assortment of stock.
b. reducing inventory turnover.
c. not ending up with out-of-date items.
d. keeping stock levels as low as possible without sacrificing performance or service.
____ 22. This inventory method involves taking a physical count of your merchandise at regular intervals, such as
weekly or monthly.
a. point-of-sale inventory method
c. manual inventory method
b. perpetual inventory method
d. periodic inventory method
____ 23. This type of budget shows the projections of a business’s cash flow.
a. sales budget
c. production budget
b. cash budget
d. general budget
____ 24. Which of the following is not a strategy a business can use to encourage faster payment?
a. increase the amount of time your customers have to pay their bills
b. offer discounts on bills paid right away
c. hire a collection agency to track down customers who are late with their payments
d. all of the above
____ 25. The dollar amount of all sales with any returns subtracted is called
a. gross profit.
c. gross sales.
b. net income.
d. net sales.
Numeric Response
26. Tim has a beginning inventory worth $50,000 in his computer software store and expects to sell $90,000 over
a period of six months. He wants to have $40,000 of inventory at the end of the six-month period. Calculate
the amount of purchases Tim will need to make over the next six months.
27. Jenny Rice owns a retail store. In her industry, she needs to keep three months worth of inventory in stock at
all times.What is the stock turnover rate in Jenny’s industry?
28. Denzel’s appliance store had total sales of $194,000 last month. Of that amount, $36,860 came from the sale
of refrigerators. What percentage of total sales came from refrigerators last month?
29. A business reported the following:
Net sales: $300,000
Cost of goods sold: $210,000
Operating expenses: $40,000
Taxes: $3,500
Find gross profit for the business.
30. A business reported the following:
Net income after taxes: $25,000
Net sales: $200,000
Find the net-profit-on-sales ratio.
Completion
Complete each statement.
31. An organizational ____________________ is a plan that shows how the various jobs in a company relate to
one another.
32. ____________________ includes all of the activities involved in obtaining, training, and compensating the
employees of a business.
33. Combining authoritative and democratic management styles is called ____________________ management.
34. A(n) ____________________ manual contains all of the rules, policies, and procedures that a business should
follow in order to function effectively.
35. Beginning inventory + Purchases – ____________________ = Ending inventory
36. A(n) ____________________ card is a paper inventory record for a single item.
37. The costs of holding inventory are known as ____________________ costs.
38. The stock ____________________ rate is the rate at which the inventory of a product is sold and replaced
with new inventory.
39. ____________________ sales is the dollar amount of all sales.
40. The ____________________ point is the volume of sales that must be made to cover all of the expenses of a
business.
Entrepreneurship Chpt 10
Answer Section
TRUE/FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
F
F
F
T
T
F
T
F
T
T
F
F
T
F
T
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
MULTIPLE CHOICE
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
C
D
A
C
B
B
D
B
A
D
NUMERIC RESPONSE
26. ANS: $80,000
PTS: 1
27. ANS: 4
PTS: 1
28. ANS:
19%
19 percent
0.19
PTS: 1
29. ANS: $90,000
PTS: 1
30. ANS:
12.5%
12.5 percent
0.125
PTS: 1
COMPLETION
31. ANS: structure
PTS: 1
32. ANS: Staffing
PTS: 1
33. ANS: mixed
PTS: 1
34. ANS: operations
PTS: 1
35. ANS: Sales
PTS: 1
36. ANS: stock
PTS: 1
37. ANS: carrying
PTS: 1
38. ANS: turnover
PTS: 1
39. ANS: Gross
PTS: 1
40. ANS: breakeven
PTS: 1