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1. (TCO 1) Approximately what percentage of businesses have a payroll with
fewer than 500 people?
(Points : 5)
10 percent
25 percent
75 percent
99 percent
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MultipleChoice
1
2. (TCO 1) You have a small business that offers printing services. One of the
services you offer is a high-speed color copier. You are currently the only
printing service in a tri-state area that offers such a service. You currently have
_______.
(Points : 5)
Creative destruction
A competitive advantage
A qualitative advantage
A capital advantage
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MultipleChoice
6
3. (TCO 1) Your employees are your most valued assets due to their _______.
(Points : 5)
Skill, knowledge, and information
Earnings
Knowledge of finance and accounting
College degree and high IQ
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MultipleChoice
8
4. (TCO 1) Entrepreneurship primarily involves which phase of business?
(Points : 5)
The startup process
Hiring of key employees
Maintaining a positive cash flow
Building and maintaining a sufficient customer base
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MultipleChoice
10
5. (TCO 1) Which of the following is the most common form of business
ownership?
(Points : 5)
Sole proprietorships
Partnerships
Corporations
Joint ventures
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MultipleChoice
14
6. (TCO 4) Which of the following acts was written to prevent large businesses
from forming trusts?
(Points : 5)
Clayton Act
Federal Trade Commission Act
Fair Debt Collection Practices Act
Civil Rights Act of 1964
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MultipleChoice
17
7. (TCO 4) Bankruptcy remains on a credit report for how many years?
(Points : 5)
3 years
5 years
7 years
9 years
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MultipleChoice
20
8. (TCO 4) Peter Drucker stated that businesses have _______ basic functions.
(Points : 5)
Two
Three
Four
Five
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MultipleChoice
24
9. (TCO 4) Managing inventory can be compared to which of the following?
(Points : 5)
A balancing act
Preparing for a test
Driving a bus
Lion taming
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MultipleChoice
26
10. (TCO 4) What is the key word in evaluating a channel of distribution? (Points
: 5)
Location
Plastics
Competition
Efficiency
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MultipleChoice
29
11. (TCO 4) A long-term agreement to rent a building, equipment, or other
assets is known as a:
(Points : 5)
Lease
Rental contract
Legally liable contract
Business contract
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MultipleChoice
33
12. (TCO 4) Consumers typically do not want the cheapest product available;
they want the:
(Points : 5)
Best product for the highest price
Most reasonable product at the highest price
Most reasonable product at the lowest price
Best product for the most reasonable price
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MultipleChoice
35
13. (TCO 4) The point at which total cost equals total revenue and the business
is neither making or losing money is known as the _______.
(Points : 5)
Profit area
Loss area
Breakeven point
Profit point
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14. (TCO 2) Through the franchise agreement, the ________ gains the benefit
of the parent company's expertise, experience, management systems,
marketing, and financial help.
(Points : 5)
Franchisor
Franchisee
Leaser
Lessee
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MultipleChoice
42
15. (TCO 2) The financial document that is used by startup businesses to show
where capital comes from and for what it will be used is called:
(Points : 5)
Cash-flow statement
Projected earnings statement
Sources and uses of funds
Income statement
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MultipleChoice
45
16. (TCO 2) Which of the following is not included in the marketing plan section
of the business plan?
(Points : 5)
How sales forecasts will be reached
Marketing objectives
Identification of potential markets
Cash-flow statements
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MultipleChoice
46
17. (TCO 3) When analyzing financial statements, remember that profits can be
increased and expenses can be decreased to make the records look better
__________.
(Points : 5)
In the short run
In the long run
For tax purposes
For bank audits
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MultipleChoice
49
18. (TCO 3) In the chapter opener, what was the limitation that kept Philip
Rosedale from creating Second Life when he first had the idea for it?
(Points : 5)
He didn't have enough money.
He didn't know how to promote it.
Computers were not powerful enough at the time.
Some technical gadget like a flux capacitor needed to be invented first.
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MultipleChoice
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19. (TCO 3) Most Inc. 500 companies receive more than half of their revenue
from:
(Points : 5)
Their local area
Their regional area
Outside their home regions and internationally
A 100-mile proximity of their business
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MultipleChoice
57
20. (TCO 3) Computers, office equipment, and furniture are all examples of
________ that have a life of more than one year.
(Points : 5)
Current assets
Current liabilities
Capital equipment assets
Investments
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MultipleChoice
59
21. (TCO 5) Mintzberg suggested several important skills a manager needed in
order to perform the four functions of management. The most important of these
was listed as
(Points : 5)
Carrying out negotiations
Motivating subordinates
Making decisions in conditions of extreme ambiguity in allocating
resources
Being willing to continually learn on the job
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MultipleChoice
62
22. (TCO 5) Maslow's hierarchy of needs theory ranks the highest level of needs
as what?
(Points : 5)
Physiological
Safety and security
Esteem
Self-actualization
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MultipleChoice
65
23. (TCO 5) The Equal Employment Opportunity Commission _______ that the
information from a job analysis be used to ensure equal employment
opportunity.
(Points : 5)
Strongly urges and sometimes requires
Always requires
Urges
Does not care
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MultipleChoice
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24. (TCO 6) A production process that operates for long periods of time without
interruption is known as?
(Points : 5)
Analytic system
Synthetic system
Continuous process
Intermittent process
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MultipleChoice
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25. (TCO 6) Scheduling is necessary to maximize levels of: (Points : 5)
Efficiency and customer service
Customer service and expense
Sales and expense
Efficiency and effectiveness
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MultipleChoice
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26. (TCO 7) An account number of 13 would represent which of the following
accounts?
(Points : 5)
Accounts payable
Accrued taxes
Insurance expense
Accounts receivable
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MultipleChoice
78
27. (TCO 7) Equity funds never need to: (Points : 5)
Be repaid
Be accounted for
Be stated on the income statement
Be stated on the balance sheet
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MultipleChoice
81
28. (TCO 8) About what percent of small businesses export goods and
services?
(Points : 5)
10%
15%
30%
50%
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MultipleChoice
82
29. (TCO 9) The obligation of business to maximize the positive impact it has on
society while minimizing the negative impact is called:
(Points : 5)
Moral obligation
Business responsibility
Business ethics
Social responsibility
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MultipleChoice
85
30. (TCO 9) Threats and opportunities to a business can be found in which of
the following environments?
(Points : 5)
Economic and legal only
Legal and sociocultural only
Technological and competitive only
Economic, legal, sociocultural, competitive, and technological
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MultipleChoice
90
1. (TCO 1) Compare and contrast a sole proprietorship, a partnership and a
corporation. Provide examples of where you would use each structure.
(Points : 14)
Answer – Sole proprietorship, partnership and corporation are three of the most
used forms of business with distinct characteristics and benefits. Sole
proprietorship is a business that is owned and operated by one person, called
the owner of the business and there are no legal requirements to form a sole
proprietorship. A partnership is formed when two or more people come together
to form a business, with the intention of making profits. Like a sole
proprietorship, there are no legal requirements for people to form a partnership.
On the other hand, a corporation is a form of business that is an autonomous
entity in itself and is different from its owners and managers. To form a
corporation the business s must comply with the charter of the state it operates
in and must have filed legal paperwork after which it would come into existence.
The biggest advantage of a sole proprietorship is its simplicity in formation and
operation, where the owner can start it straight away and close it without any
objections. The partnership is more complex than that as more entities are
involved, however based on their mutual understanding it is also easy to form
and operate. On the other hand, the corporation is complex to start off, and
complex to maintain as it would have to comply with multiple legal and
regulatory requirements and operate in the framework that is required.
In terms of ability to raise capital and in terms of risk and liability, the corporation
has the best advantage as it would be able to effectively use a variety of means
such as equity and debt from a variety of sources to easily raise capital. Also,
the liability of the corporation would be limited to company owned assets and
assets of the owners and managers are not at risk. In terms of a partnership, the
ability to raise funds is limited by the capital the owners can bring in and the
amount of debt they are able to raise. Also, unless the partnership is a limited
partnership, the partners would be personally liable for the debts of the
company. The ability for raising loans and capital is most restricted for the sole
proprietor who has to use his funds and sources, and apply for loans that would
hold him personally should the business default.
Examples where each structure can be used –
- The sole proprietorship can be the best structure where a single person
has all the skills required and is starting off a business with his own
funds. He would have complete control over the business and be able to
take decisions that he feels are best
- The partnership can be used when a set of skills possessed by a set of
people are needed to start off the business, such as a firm of lawyers or
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doctors. This would be useful as they can together become more
effective, operate more efficiently and leverage each others strengths to
grow profitably
For a business that had been in the business for long as a sole
proprietorship or partnership, if it wants to raise funds and expand, it can
first change its form of business to corporation and then raise funds to
finance its growth and expansion plans
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2. (TCO 3) Analyze the advantages and disadvantages of buying an
existing business. Under what circumstances would one be more
advantageous? (Points : 14)
Answer – There are many advantages and certain disadvantages that go along
with the decision to buy an existing business, as discussed below
Advantages
- Quick enter into the market – With an established business, a company
can quickly enter into a market and start operating at full service, thus
reducing the time taken for establishing oneself
- A steady customer base is established – The existing business would
already have a steady customer based that can be a source of critical
flows that would help run the business
- The business location is familiar to customers – The business is already
well established and people know where it is, thus lower marketing and
advertising costs
- There is historical data that can be used for planning – As the business
had been operating for a long time, it would have relevant and important
data that can be used for making critical business decisions
- Inventory and infrastructure already in place – The company would
already have the inventory and infrastructure in place, thus avoiding the
costs of enlisting new suppliers and starting from scratch, enabling saving
of valuable time
- Experienced employees already hired and trained – The business would
already have a set of employees trained in that industry, hence lower
training and hiring costs
- Systems and processes already established – As the business is a
running concern, there are systems and processes that are already
established and these can then be used as a foundation for improving
- Brand image already built in the customer – A positive and powerful
brand if existing already can be very effectively used to scale up and
expand operations are a very fast pace
Disadvantages
- Negative brand image may be difficult to change – If the business that is
being sold has a negative brand image, it may be difficult to convince
customers and society otherwise
- Lack of motivation or talent in employees – The employees may leave the
company pr may not be talented or as motivated as required that would
bring down the desired level of performance
- Ineffective and inefficient processes – The company may not have been
operating well and would have inefficient systems and processes that
reduce the efficiency and effectiveness of the business
- Obsolete and end of life equipment – The inventory may be outdated and
the equipment and infrastructure end of life due to which there could be
need for a lot of capital investment
- Liabilities from past business contracts – The business may face a lot of
liability from past business contracts or lawsuits that could hamper
business goals
- Business location is fixed and cant be changed easily – The location of
the company is not good due to which it is not profitable, and it cannot be
changed as well easily
- Misrepresentation and hiding of facts by person selling business - The
person selling the business may have misrepresented facts that can lead
to the buy not meeting objectives and goals
Given that there are many advantages to buying a business, it is required that a
company perform thorough due diligence when they decide to buy, and should
buy only after performing checks multiple times from different dimensions. After
this, the decision to buy a business should be based on objectives such as the
time to market, the market position, the amount of finance available and if the
business would get a competitive advantage by deciding to buy the business.
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3. (TCO 4) Compare and contrast Economic Order Quantity and Just-InTime as inventory control methods. Evaluate how these control methods
can improve the financial position of a small business. (Points : 14)
Answer – Two of the often used methods of inventory control, the Economic
Order Quantity and Just In Time inventory control methods are compared and
contrasted. Economic order quantity is a traditional method of inventory control
that aims to minimize the total costs of inventory by balancing the ordering costs
with the holding costs of an inventory item. EOQ tries to arrive at the right
quantity of inventory that should be ordered at a time that would lead to
minimization of the overall cost of inventory, which is a total of inventory
ordering costs and inventory holding costs. On the other hand, Just In Time is a
inventory managements system is based on the idea that a firm that is managed
well does not need to pile up inventory, and to order smaller quantities and
closer to the time when the inventory is actually needed. In Just In time, the total
capital that is stuck in inventory is minimized, leading to better working capital
management with the business being able to run in a very lean and efficient
fashion. The EOQ method in comparison would have to have more working
capital requirement as it would need to purchase all the inventory at once and
store it even though it may not be used straight away. Another advantage of the
JIT method is that it has lower risk of inventory going obsolete as it will always
order late and close to when the inventory is actually needed.
Both these techniques can be used by a small business to very effectively
manage inventory, and through it operate better financially. With the EOQ, as
the business would be ordering the inventory at quantities that would lower total
cost, it would be making best use of its funds leading to better return on
investment. In case of JIT, as the firm would order lower quantities of inventory,
it would be able to operate at much high efficiency levels and have lower
working capital requirements, thus enabling small businesses to do more and
serve more customers even with a lower capital base. Thus both these
techniques can be very effectively used to ensure a better financial position for a
small business.
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4. (TCO 6) Compare and contrast analytic manufacturing systems and
synthetic manufacturing systems, giving an example of each. (Points :
14)
Answer – The major different between analytic and systemic systems is the way
they treat inputs and the end product they come up with. Analytic systems are
systems that reduce inputs into component parts so as to extract products.
Examples of analytical systems include automobile salvage businesses that buy
damaged or end of life cars and vehicles from insurance companies or from
individuals so that they can dismantle them for parts or for extracting the scrap
iron to sell. Synthetic systems on the other hand are systems that combine a
number of inputs to create a finished product or to change the inputs into a
different product. Example of a synthetic system is an automobile production
system that takes steel and other inputs into the systems and creates them into
a car. Another example is that of a restaurant that takes inputs such as
vegetables and meat and converts them into meals that can be eaten.
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5. (TCO 9) Analyze the four levels depicted in the pyramid of social
responsibility. (Points : 14)
Answer - The four levels of social responsibility as per the pyramid of social
responsibility are listed and analyzed below
Economic responsibility – At this level, the responsibility of the firm is to be
profitable and earn profits and revenues for its stakeholders and society. This is
the foundation on which the other levels rest as the firm would first need to have
resources and sources based on which it can perform its other duties.
Legal Obligations – As part of this level, it is the responsibility of the organization
to obey the law, and ensure that the company is operating as per the legal
framework and rules that have been set by the law. As part of this, various
compliance requirements must be met, and there must be rules followed in every
aspects of the business such as HR, finance, operations and marketing
Ethical responsibility – At this level, it is the duty of the firm to be ethical and
ensure that all the actions and decisions that are taken are in line with ethical and
moral principles. The firm at this level would do what is right, just and fair and
would avoid causing harm or pain to any stakeholder in society.
Philanthropic Goodwill – At this level, the firm targets and aims to be a good
corporate citizen, and to actively and significantly contribute to making the
society in which it operates better. It would contribute to causes with the
objectives of making and enhancing the quality of life in the society.