Business MC Midterm

Which of the following is an example of an institutional investor?

a mutual fund

Jordon, a senior executive at a marketing firm, used to regularly meet international clients to discuss future projects. After one of his recent meetings went wrong, Jordan, in a fit of rage, threw a paper weight at his junior associate. The firm's management immediately terminated Jordan for this act. In the context of business ethics, Jordon was guilty of _____ in this scenario.

an ethical lapse

In the context of balance sheets, resources owned by a firm are known as ______

assets

Quotas are taxes levied against imports.

false

Who among the following is most likely to benefit in a case where there is a weak dollar against a euro?

. John is an American who exports goods to Europe.

A Franchise Disclosure Document (FDD) is:

A Franchise Disclosure Document (FDD) is:

In the context of the economic environment of business, which of the following is most likely to reduce the risks of running a business ?

A low level of corruption

Which of the following is a similarity between socialism and communism?

Both have a strong involvement of the government.

Which of the following is a similarity between a sole proprietorship and a partnership?

Both their earnings are untouched by the Internal Revenue Service.

In the context of monetary policy, when the economy contracts, the Fed typically decreases the money supply.

False

Which of the following statements is true of the Dodd-Frank Act?

It required large firms in the financial sector to hold more equity and less debt in their capital structures.

In the context of bringing the code of ethics of a company to life, which of the following statements is true when experts try to advocate a forceful, integrated approach to ethics?

It should be ensured that the company's ethics code is both local and global in scope.

Which of the following is a disadvantage of starting a business from scratch?

It takes sheer sweat equity to build a customer base.

In which of the following ways do public accountants differ from management accountants?

Public accountants conduct external audits, whereas management accountants analyze the financial statements of their own organization.

Adhering to a new act passed in 2002, the CEO of Pearsil & Pearsil, a real estate company, now personally certifies the validity of the company's financial statements. Given this information, the CEO most likely follows the_____.

Sarbanes-Oxley Act

Which of the following is a recent advancement in the Western European countries that developed powerful socialist economies in the decades after World War II?

They have imposed stiff austerity measures to control government spending.

Which of the following statements is true of angel investors?

They typically provide funds to start-ups in exchange for a share of ownership

The controversial $700 billion economic bailout plan passed by Congress in early October 2008 was called the _____.

Troubled Assets Relief Program

Gross Domestic Product ( GDP) levels tend to be somewhat understated, since they don't include any illegal activities, which can represent a significant portion of some countries' production.

True

From a financial manager's perspective, the time value of money reflects the fact that

a dollar received today is worth less than a dollar received in the future.

A _____ refers to a partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm

a general partnership

Lois wants to start an art gallery. However, because of lack of adequate funds, she decides to borrow money from a bank. The bank is hesitant to give money to Lois because it cannot verify whether her business would be able to earn enough profit to repay the borrowed amount within the stipulated period. However, after a thorough research, the bank grants her the money. In the given scenario, Lois uses _____ to fund her business.

a loan

Under the terms of _____, a firm will pay interest on any funds it borrows, and a commitment fee on any funds it does not borrow.

a revolving credit agreement

A public accounting firm takes up a contract to perform an external audit for an oil manufacturing company. The firm, however, is already in a consulting contract with the oil company. Because of its prior association with the oil company and the hefty fee the oil company pays the firm, the firm manipulates the audit report. Which of the following laws is violated in this scenario?

The Sarbanes-Oxley Act

In the context of owners' equity, which of the following is true of retained earnings

They are accumulated earnings reinvested in a company rather than being paid to the owners.

_____ measure how effectively an organization uses its resources to generate net income

asset management ratios

_____ refers to funds provided by creditors.

debt financing

The _____ is a common measure of leverage that compares liabilities to assets

debt ratio

Benny-Duke Inc. reported a net income of $7 million but paid no dividends to its shareholders. The shareholders should sue the company for failure to provide a return on their equity investment.

false

Term loans issued by commercial banks are popularly used by financial institutions and large corporations because they typically carry lower interest rates than commercial paper.

false

Firms that rely on a lot of debt in their capital structure are said to be _____

highly leveraged

A severe cyclone causes substantial damage to a brick manufacturing company's production equipment. As a result, the company spends a sum of $25,000 to repair the equipment. Given this information, the sum of $25,000 that the company spends is its _____.

indirect cost

The management of Lovelo, a candy manufacturing company, comes across a case of employee theft in their inventory. In this case, the company should seek the help of a(n) _____ to look into the matter .

internal auditor

Which of the following statements is true of a socially responsible firm?

it has an obligation to respect the needs of all stakeholders.

Initiatium, a software development firm, utilized $2 million to create a new software. Half of the total budget was acquired from loans from different sponsors while the rest was funded by the firm. The debt ratio amounts to 0.5. The given scenario illustrates the analysis of _____.

leverage ratios

In the context of the history of American business, during the _____, businesses began to develop distinctive identities to help customers understand the differences among various products.

marketing era

_____ is the profit or loss a firm earns in the time period covered by the financial statement that reports the revenues and expenses.

net income

In its role as a regulator, the Fed

oversees mergers and acquisitions.

officer at the bank, Cerejo, decides to look at the company's net income. Cerejo will find this information in Grydon's _____.

profit and loss statement

_____ measures how long it takes for a firm to receive payment from customers who buy on credit

the average collection period

As the recession of 2007-2008 loomed over both large and small businesses, many firms looked for ways to deleverage. The term deleveraging implies that:

the firms replaced much of the debt in their capital structure with equity.

Macroeconomics involves the study of:

the gross domestic product of a country.

Money market mutual funds raise money by selling shares to large numbers of investors

true

Chechinko, an African country, and Herito, an Asian country, use the same amount of resources to produce alcohol. Despite this, Chechinko is able to manufacture a higher quantity of alcohol than Herito. In this context, which of the following statements is definitely true of Chechinko?

Chechinko enjoys an absolute advantage in terms of alcohol production, relative to Herito.

In the context of the code of ethics of a company, which of the following is a step that is virtually always included when experts advocate a forceful, integrated approach to ethics?

Communicating about the importance of ethics

Which of the following is a difference between inflation and deflation?

Inflation is a period of rising average prices across an economy, whereas deflation is a period of falling average prices across the economy.

The basic mission of the _____ is to promote global economic cooperation and stable growth.

International Monetary Fund

In the context of fiscal policy, which of the following actions by the government helps boost the economy in the long term?

Investing in public assets, such as a national renewable energy grid

In the context of foreign direct investment, which of the following is a benefit of offshoring?

It has the potential for high profits.

In the context of the strategies for reaching global markets, which of the following is a disadvantage of foreign outsourcing?

The adherence to ethical standards by foreign producers is at risk.

in the context of the dimensions of the business environment, which of the following is true of the competitive environment?

Vocal promoters of a firm's products can get the firm new customers effectively.

A _____ refers to the overage that occurs when more money flows into a nation than out of that nation.

balance of payments surplus

When the Fed sells securities, _____.

banks cut back on the loans

A newly appointed government in the United States requests Congress to raise the amount of money that the government can borrow. This borrowed money is intended to be used to cover the costs of the major policies that the government plans to implement. In this scenario, the government has asked the Congress to hike its _____.

debt ceiling

In _____, firms either acquire foreign firms or develop new facilities from the ground up in foreign countries.

direct investment

Operth, an automobile company, hires people from various cultural and social backgrounds. This allows the company to enjoy a competitive advantage by developing innovative products that serve a wide customer base. Which of the following dimensions of the social environment does this scenario exemplify?

diversity

In the context of the legal and ethical dimensions of business conduct, it is illegal and unethical to:

engage in sexual harassment.

During the production era, managers focused mostly on customer satisfaction and not on production efficiency.

false

In the context of launching a new venture, the prime age for entrepreneurship is late 40s to early 50s

false

In the context of limited partnerships, the general partners of a company assume limited personal liability for any of the company's debts

false

The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements.

false

The key disadvantage of foreign outsourcing is dramatically higher labor wages.

false

the members of the Financial Accounting Standards Board (FASB) can be reappointed to serve two additional terms after the completion of their first term.

false

Socially responsible firms support consumer choice by:

following laws that prevent anticompetitive behavior such as collusion.

Chloe and Tamara start a vintage fashion boutique. While both invest equally in the store and are entitled to equal profits, it is Tamara who looks after the day-to-day business transactions and manages the store. Chloe does not actively participate in managing the store, and her personal wealth is not at risk in case the business suffers losses. In this scenario, Chloe is a _____.

limited partner

Janice is an accountant in a public relations firm. She prepares financial reports upon request by the management of the firm and does not stick to a predetermined schedule. The reports that she prepares mainly help the internal stakeholders of the firm. Given this information, it can be said that Janice performs _____.

managerial accounting

The government of Lenzerbia, a country in South Asia, monitors its inflation rate using an index that measures change over time in the prices that businesses pay to each other for goods and services. In this scenario, the Lenzerbian government most likely uses the _____ to evaluate inflation.

producer price index

A small-scale consulting firm in Hawaii was struggling financially because it was unable to generate enough capital to run its business transactions. To generate capital, the firm decided to use web technologies and digital resources to build long-term associations with current customers and to reach out to new customers. In this scenario, the firm is using concepts that primarily originated in the _____ of American business history.

relationship era

In the case of C corporations, shareholders don't pay income taxes on _____.

retained earnings

A thriving cowboy culture encourages entrepreneurship. The term "cowboy culture" refers to a culture where:

standout individuals who break free of old ways attract attention and admiration in many of the countries with high entrepreneurship rates.

Carla and Liang both have shares in HD&Z Corporation, a C corporation that offers limited liability to all its owners. In this context, Carla and Liang are the _____ of HD&Z Corporation.

stockholders

In the context of a business environment, computers, telecommunications, and other digital tools are considered to be part of the _____.

technological environment

Timothy wanted to start a coffeehouse. However, he could not buy a space to start his business because of lack of funds. Which of the following threats is highlighted in the given scenario?

too little money

Globalization has made ethics and social responsibility complicated for workers at every level.

true

Xavi develops a cell phone battery that can be charged by a solar panel and can run efficiently for up to three hours. His friends point out that it would be difficult to get cell phone manufacturers to adopt this new technology and that it could take a long time for people to start relying on it. However, Xavi is convinced that he can make his idea popular and successful. He plans to start a new company called EnerMob Inc. that would promote and sell the cell phone battery to the public. In this scenario, which of the following entrepreneurial characteristics is Xavi demonstrating?

vision

Ethics refer to:

sets of beliefs about right and wrong.

_____ is the authority granted by a domestic firm to an overseas firm for the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area.

Foreign licensing

One core responsibility of business is to deliver consumer value by providing quality products at fair prices. _____ are critical components of this equation.

Honesty and communication

In the context of the fundamental rights of capitalism, which of the following statements is true about capitalism?

It doesn't guarantee that anyone will actually earn profits.

The district of Dansas in Nerito, a European country, is a major producer of walnuts. All producers in the district sell packaged walnuts. The market structure is flexible enough for producers to enter and leave the market as and when they wish, but no single producer has control over the prices of the product. Which of the following market structures exists in Dansas?

Pure competition

Pastello, a bakery in New Jersey, needs to sell all the goods in its inventory before they perish. The bakery owners, Mark and Julia, plan to use the cash received from selling the goods to open a new outlet of Pastello in a different locality. In this scenario, the goods stored in Pastello's inventory represent its _____.

current assets

Mauve starts a business that specializes in procuring and selling antique items. Her business caters specifically to individuals who have high-income jobs and who like collecting unique artifacts. Mauve does not have much competition and can decide the prices of her products without any external influence. The opportunity of _____ is highlighted in the given scenario.

exploiting market niches

A sole proprietorship tends to be both larger and more profitable than a partnership.

false

Corporations are by far the most common type of business organization in the United States.

false

John and Lena sign a contract with the owner of Little Fairy, a well-known preschool chain, to start a preschool in their city. They take permission from the owner to use the name and products of Little Fairy. They also furnish their preschool in Little Fairy's trademark style. In this scenario, John and Lena are starting a _____.

franchise

Despite the U.S. economic crisis of 2008, research suggests that:

most budding entrepreneurs still plan to launch their firms in the next three years.

Niconti Inc. sells premium quality tea leaves. The company owns 400 acres of land on which it has established a large tea plantation with a tea processing factory. In this scenario, the land owned by Niconti Inc. can be classified as _____.

natural resources

In its role as a regulator, the Fed:

oversees mergers and acquisitions.

The Canadian government issues a legal notice to one of its coal manufacturing companies after the government learns that the heating equipment purchased by the company emits a higher level of gases than the level permitted by the Environmental Protection Agency. In this scenario, the coal manufacturing company is in violation of exceeding the level of its _____ emissions.

scope 2

In Fidaro, a North American country, punctuality is considered a sign of integrity. On the other hand, in Gwary, an African country, punctuality is considered a sign of anxiety and is given less importance. This exemplifies:

sociocultural differences.

Lint Port, an apparel company, offers personalized customer service in all its stores and engages in post-purchase communication to take feedback from its customers. It also gives gift vouchers with customized messages to its customers on their birthdays. The company values the importance of building long-term customer relationships. In this context, which dimension of the business environment is affected the most?

the competitive environment

Moat & Meet, a travel agency, wants to widen its customer base. It adopts a strategy that allows customers to visit their favorite destinations through a virtual reality (VR) machine before visiting the place in person. In this context, which dimension of the business environment is affected the most?

the technological environment

In the context of career choices, less-routine abilities tend to be more rewarding for most people than routine skills.

true

In the context of franchises, t he term accounts receivable refers to money owed to a parent company by franchisees who bought its goods on credit.

true

Planned obsolescence represents a clear violation of social responsibility.

true

T he balance of trade plays a central role in determining the balance of payments.

true

When entrepreneurs develop new products that we didn't even know we needed until we had them, they are showing the entrepreneurial characteristic of vision.

true

When people view ethics as relative, their ethical standards shift depending on the situation.

true

Ginnie's, a candy manufacturing company, sees a sudden rise in the consumption of its kiwi-flavored candies. Thus, the company hires more labor and buys additional supplies to increase the production of these candies. In this scenario, the costs incurred by the company for purchasing these supplies and hiring more labor exemplify the company's _____.

variable costs

Ethan is in the process of launching his new business venture that specializes in electronic waste recycling. During this period, he has been in constant touch with Lois Inc., who has seen success in this niche market. In this scenario, which of the following entrepreneurial development strategies is Ethan utilizing?

learning from others

Runion Bank is well-known for providing funds to start-ups. The bank lends money to an entrepreneur at an interest rate of 5%, which is to be repaid only after the business earns a sizable profit. If the business fails, then only the primary amount needs to be returned. In the given scenario, which of the following statements is true of Runion Bank?

it provides loans for entrepreneurs

Charles wants to start a décor business and takes a loan of $35,000 from the bank to set up the business. Once the business is up and running, Charles will have full control of the business and its profits. However, he will also be responsible for any losses that the business incurs. In this scenario, which of the following forms of business ownership is Charles planning to start?

a sole proprietorship

Krempe Foods, a fast-food chain in Dallas, gives paramount importance to consumer feedback and has a well-established consumer feedback system. Given this information, it can be said that Krempe Foods supports _____.

consumerism

The basic rules governing how a corporation is organized and how it conducts its business are known as _____.

corporate bylaws

In the late 1970s, LarceCo, a tea manufacturing company, entered the market of a developing country called Fantesnia. As there was a lack of hard currency in Fantesnia, LarceCo was involved in a barter system. It exchanged its tea-based products for the local vodka of Fantesnia. This scenario illustrates that LarceCo had engaged in _____.

countertrade

In the context of the history of American business, the _____ emerged in the second half of the 1800s, by building on the foundation of the industrial revolution.

entrepreneurship era

People with an external locus of control are:

feel buffeted by forces such as random luck

David, a financial accountant at a multinational company, is asked to study the comparative financial statements of a prospective partner firm. He uses comparative income statements to determine the changes in the assets and liabilities of the firm and whether the net income of the firm has increased or decreased over the past five years. In this scenario, David is most likely using _____.

horizontal analysis

In the context of the legal and ethical dimensions of business conduct, providing rock-bottom prices only to distributors in underserved areas is _____.

illegal but ethical

Maude worked as a lead animator in an animation company. However, she could not exercise her freedom while working on projects because she was bound by the decisions made by the company. Fed up with this, Maude quit her job and started an independent animation firm where she accepts only those projects that allow her a free rein in terms of creativity. In the given scenario, Maude most likely started her own firm because it offered _____.

independence

IFGI Life Insurance, an insurance company, is one of the stockholders of a pharmaceutical company. Given this information, IFGI Life Insurance is most likely a(n) _____.

institutional investor

In the context of the strategies for reaching global markets, which of the following is a key risk of foreign outsourcing?

involvement of social responsibility

In the context of the legal and ethical dimensions of business conduct, rewarding integrity is an example of _____.

legal and ethical behavior

Michael is a middle-aged professional who lost his job five months ago when his former employer downsized. He has actively been looking for work ever since but has not been able to find a job that utilizes his abilities or offers an income similar to his previous position. He is beginning to realize that the only way for him to survive his current situation is to start his own business. In this scenario, Michael will most likely become a(n) _____.

necessity entrepreneur

Tasmeen owns a retail business along with four other people. Like the other owners, Tasmeen is not personally responsible for the debts of the company. Her personal assets are thus protected in case the company incurs losses. Given this information, it can be assumed that Tasmeen _____.

owns a corporation

Ruben owns an astronomy-themed restaurant. The entire restaurant resembles a planetarium. He has also installed a projector that transforms the ceiling into a night sky. Ruben used most of his savings to fund this venture and also borrowed funds from his friends and family. In the given scenario, Ruben used _____ to fund his business.

personal resources

Despite having a small population and severely limited natural resources, Hong Kong has consistently ranked among the richest regions in Asia. The prime reason behind this is:

the active encouragement of entrepreneurship by the government

The total value of the goods exported by Maulini, a South American country, in the last fiscal year was lower in comparison to the total value of the goods imported by it. Given this information, Maulini had a _____ in the last fiscal year.

trade deficit

Administrative costs for small health plans are much higher for large firms making it tougher for small firms to offer coverage to their employees.

true

Capital, one of the factors of production, includes machines, tools, buildings, information, and technology.

true

Each year, the Federal Open Market Committee holds eight regularly scheduled meetings to make decisions about open market operations.

true