BUS 201 Midterm Review

A chef put two frogs in a pot of warm soup water. Recognizing danger, the first frog jumped out, but the second frog didn't. In terms of ethics, what's the moral of the story?

Get out before the water gets too hot.

Scenario-Based Jerry Foster is a sole proprietorship who owns a canoe renting business. Jerry's employee, Terry Gibbs, greets customers at the company's office, loads the customers and their rented canoes onto a van, provides them with safety instructions and drives them upstream. Once unloaded the canoers are on their own to float back to the company's office to check in. Although there have been minor accidents, no one has drowned in the nine years the business has been in operation. Jerry plans to add kayaks and rubber rafts next year. The scenery is beautiful and each day people see wild animals come down to the water. If someone does drown this year, who will be held liable?

Jerry Foster

An example of a company known for responding appropriately to an ethical dilemma is _____.

Johnson & Johnson

Managers who tend to make decisions without soliciting input from subordinates are using the following leadership style _____.

autocratic

Which of the following statements about business ethics is false? a. Business ethics refer to actions taken by individuals to do the right thing. b. Business ethics concern the actions taken by a company to show concern for its stakeholders. c. Business ethics go beyond obeying applicable laws and regulations. d. Studying business ethics can help you learn to recognize and respond to ethical challenges.

b. Business ethics concern the actions taken by a company to show concern for its stakeholders.

Which of the following is the most common but riskiest option in becoming a small business owner? a. Marketing an unknown product b. Starting from scratch c. Obtaining a franchise d. Buying an existing business

b. Starting from scratch

For assessing the strength of the housing market, _____ is often a good indicator.

building permits

Which of the following is not among the four consumer rights identified by President John F. Kennedy in 1962? a. The right to be informed about a product b. The right to safe products c. The right to have products available d. The right to choose what to buy

c. The right to have products available

Which of the following is not a characteristic of an entrepreneur? a. is confident in their innovation or business idea b. is willing to work under a certain degree of uncertainty c. avoids risk d. has the flexibility to adjust to changing situations

c. avoids risk

Mary and Diane drafted a partnership agreement for their apparel business. Which element below should not have been included? a. division of partnership income (or loss) b. partner responsibilities; who does what c. projected financial statements d. conditions for dissolving the partnership

c. projected financial statements

Which of the following is not a requirement of an S-corporation? a. maximum of 100 stockholders b. each stockholder must be a U.S. citizen or resident c. revenues must be less than $1 million annually d. all stockholders must concur with the decision to form the S-corporation

c. revenues must be less than $1 million annually

_____ allocates the goods and services produced by government-run industries and tries to ensure that the resulting wealth is distributed equally.

central planning

Scenario-Based Herb and Betty Cogwell are husband-and-wife owners of a regional chain of restaurants with 108 employees. Recently, one of their chefs discovered some spoiled produce that had been delivered by one of the company's regular suppliers. The products were sent only to one restaurant and Herb and Betty weren't aware of the problem until two customers became ill. Why hadn't the chef reported the tainted food? He didn't see any reason for implicating the supplier, and he thought that, with the proper preparation, he could avoid any problems with it. He was, of course, wrong. Subsequently, Kari, a waitress, overheard Herb and Betty discussing the problem and was ready to report them to the authorities if they didn't take responsibility for their chef's actions. Betty and Herb should probably have created a document detailing the procedures to follow in the event of such an incident (after all, it's not an uncommon occurrence in the food-services business). Such a document is usually called a _____.

code of conduct

Clayton Moore must choose between taking actions that promote personal interests and the interests of others at work? The ethical issue that he's facing is best characterized as a matter of _____.

conflict of interest

When performing the management _____ function, managers measure the results of operations and compare them with the results they had laid out in their original goals.

controlling

_____ refers to the management process of comparing actual to planned performance and taking necessary corrective actions.

controlling

Which of the following criteria are not helpful in distinguishing a bribe from a gift? a. Cost of the item b. Timing of the gift c. Connection between the giver and the receiver d. All these criteria are helpful in distinguishing a bribe from a gift

d. All these criteria are helpful in distinguishing a bribe from a gift

Upper-level leaders should do all of the following to promote ethical policies in their organizations except: a. be available to help employees and solve ethical problems. b. be responsible for minimizing opportunities for wrongdoing and for exerting the controls needed to enforce company policies. c. be role models themselves. d. be prepared to take the blame for subordinates' misconduct.

d. be prepared to take the blame for subordinates' misconduct.

Unethical behavior in organizations can be reduced if management does all of the following except: a. establish a formal code of ethical business conduct. b. let employees know how they can report violations of ethical behavior. c. punish unethical behavior. d. depend totally on employee's personal ethics.

d. depend totally on employee's personal ethics.

All of the following influence the ethics of a business except _____. a. ethical leadership at the top of the organization b. an organization's culture c. top management's willingness to hold subordinates accountable for their conduct d. relentless pressure to generate revenue

d. relentless pressure to generate revenue

_________ are earnings distributed to shareholders by a corporation.

dividends

The first step to take in the control process is to:

establish standards by which performance is measured.

Sometimes the only section of a business plan that readers will consider is the _____.

executive summary

A SWOT analysis defines what an organization stands for. T/F

false

A rewarding aspect of being a business owner is that you can't get fired-an advantage that comes under the heading of "Creative Freedom and Personal Satisfaction." T/F

false

A supply curve shows the relationship between the price of a product and the quantity that consumers are willing to buy. T/F

false

Among free market theorists, the principle of laissez-faire calls for government intervention to equalize the distribution of resources. T/F

false

As a general rule it is not feasible to gain new markets or open new distribution channels through mergers and acquisitions. T/F

false

Believe it or not, it's in the best interests of a company to operate unethically. T/F

false

COO stands for Chief Organization Officer. T/F

false

Corporations are limited to large, well-known companies. T/F

false

Ethics in an organization is based solely on personal values. T/F

false

First-line managers report to top management and oversee the activities of middle managers. T/F

false

Franchises are considered an easy, cost-efficient way to start your own business. T/F

false

Franchises generally don't include such complex products as hotels. T/F

false

Indicators that predict economic decline over periods of three to twelve months are called lagging economic indicators. T/F

false

It is not necessary to decide if the business should survive the owner(s) in the startup stage. T/F

false

More than three-fourths of all U.S. adults are either self-employed or work for small businesses. T/F

false

The best time for management to practice crisis management is when a crisis occurs in their company. T/F

false

The earnings of a limited liability company (LLC) are only taxed once-when they are paid out to employees in the form of wages and salaries. T/F

false

The three goals shared by all of the world's economies are growth, high employment, and high wages. T/F

false

Accounting, finance, management, marketing, and production are the _____ areas of business.

functional

The ability to get along well with and motivate other people depends on _____ skills and is vital at any level of management.

interpersonal

A manager who's adopted a "hands-off" approach and provides relatively little direction to subordinates, is practicing a _____ leadership style.

laissez-faire

If you work for a company that expects you to deceive customers about the quality of your product, you should:

leave the organization

Polaroid is a classic example of a firm that enjoyed a patent-based _____ for years in instant-film technology.

legal monopoly

The _____ in a limited partnership has(have) limited involvement in the business and suffer loss only to the extent of their business investments.

limited partners

The _____ section of the business plan is designed to convince the reader that the company will be operated by well-qualified and experienced people.

management plan

The _____ section of the business plan specifies the proposed legal form of the organization-sole proprietorship, partnership, or corporation.

management plan

Swarez Construction Corp. is a nationwide builder of small business buildings. To understand the nature of supply and demand for its products, management would conduct a _____ study.

microeconomic

The study of the economic choices made by individual consumers or businesses is called _____.

microeconomics

Mary Kay Inc.'s _____ states that the organization is committed "To enrich the lives of women around the world."

mission statement

The sole regional supplier of Gasanol, a fuel made of gasoline and soy oil, operates in a(n) _____ market.

monopoly

_____ are shorter-term performance targets that direct the activities of an organization.

objectives

Because they operate in a(n) _____ industry, a fare decrease at American Airlines will likely result in decreases at other carriers.

oligopolist

Scenario-Based General Motors operates several divisions in supplying cars, trucks, vans, and SUVs to its customers. Each division engages the usual business participants, overlaps management functions with other divisions, and works in basically the same functional areas as all of the others. Chevrolet, Cadillac, and GMC trucks are among the company's product lines. Its few major competitors include Ford, DaimlerChrysler, Nissan, Honda, and Toyota. Each automaker sells a large portion of all the products sold in the marketplace, and each differentiates its product lines. The industry conditions illustrated in this scenario are best characterized as _____.

oligopoly

A(n) _____ chart is a diagram or visual representation delineating the interrelationships of positions within an organization.

organization

When it has more than one ____, a business can operate as a partnership or a corporation.

owner

Owners of small businesses are responsible for much of the _____ of U.S. business.

product innovation

A demand curve shows the _____ of a product that will be demanded at different prices.

quantity

About 80 percent of small businesses in the U.S. are concentrated in the _____ sector.

service producing

CEO, Jack Yates oversees the operations of Johnson Company, a corporation with 1,200 employees. Yates reports to the company's board of directors. Who owns Johnson Company?

shareholders

To understand where _____ businesses are concentrated, you need to divide them into the goods-producing sector and the service-producing sector.

small

_____ companies provide valuable services to _____ companies by acting as sales agents for their products.

small / large

A survey conducted by the Wall Street Journal indicates that _____ have a more satisfying business experience.

small business owners

Step one in planning a business, usually called _____, is the process of establishing an overall course of action.

strategic planning

The past two decades have seen a _____ in the number of businesses owned by women and minorities.

substantial increase

If, in any given year, the government takes in more money than it spends on goods and services, the result is a budget _____.

surplus

Some business owners prefer to operate as a limited liability company (LLC) rather than an S-corporation for the following reason:

the LLC form of organization does not have as many rules and regulations as does an S-corporation

The term laissez-faire means that:

the government should leave business activities to function according to the laws of economics.

The traditional planning process begins at the _____ level of an organization.

top

A business that is owned and controlled by those who use its services is called a cooperative. T/F

true

A hostile takeover is a takeover that is resisted by the targeted company's management and its board of directors. T/F

true

A major disadvantage of a partnership is that partners may disagree on how to operate the business and divide the profits. T/F

true

A partnership agreement specifies each owner's rights and responsibilities in the business. T/F

true

According to the law, people must be hired, evaluated, promoted, and rewarded on the basis of merit, not personal characteristics. T/F

true

Among the consumer rights cited by President John F. Kennedy in 1962 is the right to safe products. T/F

true

An organization chart is a diagram or visual representation delineating the interrelationships of positions within an organization. T/F

true

By law, employers must provide workers' compensation. T/F

true

Companies tainted by questionable ethics suffer from higher employee turnover than trustworthy firms. T/F

true

Economists study the interactions between households and businesses and look at the ways in which the factors of production are combined to produce the goods and services that people need. T/F

true

Fast-food chains that have eliminated Styrofoam containers reflect the desire of owners to be good corporate citizens. T/F

true

Fiduciary responsibility means that managers are responsible for safeguarding a company's assets and handling its funds in a trustworthy manner. T/F

true

If a sole proprietorship incurs a debt or suffers a catastrophe, the owner is personally liable for it. T/F

true

In a limited partnership, although one partner runs the business, any number of the others may have partial involvement in the business. T/F

true

In designing an organizational structure, management uses departmentalization to group specialized jobs into meaningful units. T/F

true

Pillows have labels identifying the materials used to make them because of President John F. Kennedy's bill of consumer rights. T/F

true

Price stability occurs when the average of the prices for goods and services does not change much; when they go up, we experience inflation. T/F

true

Profits earned are taxed as personal income and there are no special taxes to pay in the sole proprietorship form of business ownership. T/F

true

Scenario-Based Pat Smith and George Johnson own five flower shops in Manhattan. They want to open a wholesale flower business to supply their shops as well as others in their geographical area. They currently operate as a partnership but are considering changing their legal form of organization. One reason for doing this is to increase the likelihood that they will be able to raise the funds needed to expand. An S-corporation would give them a more favorable tax treatment than a regular corporation. T/F

true

The "Target Market" section of the business plan profiles future customers. T/F

true

The economic system of a country is the means by which a society makes decisions about allocating resources to produce and distribute products. T/F

true

The federal government has set a minimum wage. T/F

true

The inflation rate is the percentage change in a price index. T/F

true

The mission statement describes the purpose of your organization-the reason for its existence. T/F

true

The most important step in the process of starting a business is creating a business plan-a document that identifies a company's goals and explains how they'll be achieved. T/F

true

The rationale behind growth through merger or acquisition is that one plus one equals three: the combined company is more valuable than the sum of the two separate companies. T/F

true

Under its matrix structure, Nike creates product teams made up of designers, marketers, and other specialists to design new products. T/F

true

When a manager motivates employees to achieve organizational goals he or she is engaging in the management function of directing. T/F

true

Scenario-Based Brothers Ronnie and Jacob are both in college; Ronnie is a senior and Jacob a sophomore. They're both majoring in business administration and want to open a small business a few years after graduation. They understand that it's important to gain more management experience and build good credit ratings. Ronnie wants more security in his work and would be satisfied working with an older partner until he "learns the ropes." More than Jacob, he'd prefer a business that's been established for a few years. Although he likes a certain degree of independence, he's willing to follow directions and take advice. Jacob, on the other hand, wants more freedom to make his own choices and to succeed or fail on his own merits. He's quite creative and likes to set his own rules. Among the disadvantages of business ownership, both brothers would probably balk at the prospect of _____.

undesirable duties