Principles of Business Final Study Set

One way in which many businesses demonstrate their social responsibility toward employees is by providing them with

A safe working environment. Most businesses feel this is one of their most important responsibilities toward employees. Few businesses provide free meals or free entertainment on a regular basis. It is impossible to provide a stress-free atmosphere. SOURCE: EC:070

A popular product is said to be

In demand. A popular product is said to be in demand. It is usually in style, not out of style. Both popular and unpopular products may be available. Late is not a word typically describing a popular product. SOURCE: EC:010

Which of the following is a true statement about business ethics and the law:

The two are not the same thing, but they do overlap. Business ethics and law are not the same thing—they are like two overlapping circles. Where they overlap, there are actions that are both legal and ethical. However, there are also actions that are ethical yet illegal and actions that are unethical yet legal. The two concepts are often closely related. SOURCE: EC:106

Why does the government set and collect taxes?

To help pay the expenses of government. Some of these taxes are set and collected on products sold by businesses. Increasing technology, providing economic security, and helping businesses grow and prosper can be goals of a political party or government administration but are not reasons that government sets and collects taxes. SOURCE: EC:008

Contractual agreements such as guarantees, surety bonds, and leases are examples of handling business risks through

Transfer. Contractual agreements that pass part or all of a risk to someone else are examples of transferring the risk. Management transfers risk by signing a contract. Avoidance involves completely eliminating the risk. Prevention or control involves attempting to reduce the risk. SOURCE: EC:011

What determines whether an economic product is an industrial product or a consumer product?

Who buys and uses the product. Industrial products are purchased by producers for resale, to use in making other goods and services, or for use in their operations. Consumer goods and services are purchased and used by the ultimate consumer. Price, origin, and producer have no bearing on whether a product is a consumer or an industrial item. SOURCE: EC:002

In order for an accounting system to be useful to the business, the accounting information it contains must be

Accurate and up-to-date. Accounting records show the financial health of a business. If its accounting records are inaccurate or out of date, a business cannot be sure what its financial situation is. Posting is transferring accounting information from a daily journal to the appropriate ledger, and it can be done by bookkeepers or clerical staff. The chief executive officer of a business would not have time to approve all the accounting information the system contains. A business may use either the cash accounting method or the accrual method. In the cash accounting method, income and expenditures are recorded at the time the money changes hands. In the accrual method, transactions are recorded at the time they occur even if no money changes hands. SOURCE: FI:085

Management decides to hold its annual meeting in one U.S. city rather than another because of crime in that city. This is an example of __________ the risk.

Avoiding. The business is avoiding the dangers of criminal activity by eliminating the risk. To retain risk is to keep it. Preventing or controlling risk is taking measures to prevent or reduce the risk, which would not be possible in this case. Transferring risk is passing the risk to someone else. SOURCE: EC:011

Businesses that successfully adapt to current market situations often realize that

Change is an opportunity. Markets change over time, and today's market is different than the market that existed several years ago. To be successful, businesses need to adapt to current market situations. Those that are able to do this realize that change is an opportunity, a favorable means to meet an objective. Many businesses respond to new market situations by improving products or developing new ones, or by revising the way they serve customers. It is not always necessary to obtain more financing, diversify, or cut costs. However, these may be ways that businesses adapt to new markets. SOURCE: EC:107

The law that requires businesses to hire, train, transfer, and promote employees without regard to race, color, gender, religion, or national origin is the __________ Act.

Civil Rights. The Civil Rights Act requires businesses to hire, train, transfer, and promote employees without regard to race, color, gender, religion, or national origin. The Robinson-Patman Act deals primarily with pricing practices. The Sherman Antitrust Act deals with monopolies and competition. The Federal Reserve Act created the Federal Reserve. SOURCE: BL:001

Jaron, the district technology coordinator for Abington City Schools, is responsible for purchasing new computers for the district. He recently sent out a request for price quotes to five different computer companies, and he is waiting to hear what the various suppliers' proposed prices will be. Jaron is conducting

Competitive bidding. Jaron is conducting competitive bidding, which involves sending out a request for bids, reviewing proposed prices (bids), and selecting the best supplier for the job, based on cost and/or quality. Purchasing specialists sometimes conduct negotiations in addition to or instead of competitive bidding. A make-or-buy decision is the act of determining whether to produce a needed part or purchase it from a supplier. Jaron is not a retail buyer. He is not purchasing the computers to resell to consumers. SOURCE: OP:015

A student purchased a laptop to use for homework assignments. In economic terms, this computer would be classified as a(n) __________ good.

Consumer. Consumer goods and services are those that are purchased and used by consumers. Manufactured or constructed items that are used to produce goods and services are known as capital goods. Industrial goods and services are purchased by producers for resale, to make other goods and services, and/or to use in business operations. There is no such thing as an "ultimate" good. SOURCE: EC:002

The ultimate goal of all economic activity is

Consumption. The ultimate goal of all economic activity is consumption, which is the economic process or activity of using goods and services. For consumption to occur, goods and services must be produced, or made. Producers, consumers, and resource owners exchange money payments for the use of their goods, services, and resources. Distribution examines how money payments are divided between producers and resource owners. SOURCE: EC:001

One reason an existing business might develop a company web site is to

Create a new revenue source. By selling its products from an additional location or source (the web site), the business creates an opportunity to reach more customers, which might result in more sales. Developing a web site does not necessarily reduce marketing expenses or lower taxes for the business. Product mix refers to the particular assortment of products that a business offers in order to meet the needs of its markets and its company goals. SOURCE: NF:003

Which of the following factors affects society's basic values and behaviors that influence their buying decisions:

Cultural. Businesses are affected by the culture of the people who buy from them. They want to meet the needs and wants of their customers. To do this effectively, they must be sensitive to their customers' values, preferences, beliefs, etc., so that they do not offend their customer base. Economic factors relate to how people generate revenue to obtain the desired goods and services. Government stability and laws are political factors that operate in the business environment. Access to raw materials, availability of natural resources, amount of pollution, and a business's location are examples of environmental factors affecting the business environment. SOURCE: EC:105

Which of the following is a factor that would encourage businesses to start a business at a particular location:

Easy access to natural resources. Many factors affect businesses' location choices. Having easy access to natural resources would encourage a business to open in a specific location. Strict government regulations, high unemployment rates, and easy access to competitors' products would discourage businesses from opening in a certain location. SOURCE: EC:105

Changes in the market that cause prices to go up or down, products to change, and businesses to succeed or fail are examples of __________ risks.

Economic. Changes in the market, whether they cause a lowering of prices, a change of product, or a business failure, are brought about by economic factors. Competition is an economic risk. Human risks are those caused by human weakness and unpredictability. Natural risks are those that result from natural causes such as floods. SOURCE: EC:011

Operations managers have two main goals in mind—efficiency (keeping costs low) and

Effectiveness (keeping customers satisfied). Operations managers oversee all the processes involved with converting inputs into outputs. They complete this job with two goals in mind—efficiency (keeping costs low) and effectiveness (keeping customers satisfied). When the operations function is performed well, it adds value to the company's product. While operations managers certainly care about legality, productivity, and reputation, their main goals are to maintain efficiency and effectiveness. SOURCE: OP:189

Which of the following is a potential problem in market economies?

Financial loss. In market economies, people are free to go into business or to make any legal product. They also run the risk of financial loss if the company or product is not a success. Government control is limited. In fact, government will not step in to help a business in financial trouble unless the situation is a threat to the whole economic system. Competition exists between businesses for scarce customer dollars. Production quotas are set by the government in communist command economies. SOURCE: EC:007

Wendy's sells the right to operate its restaurants to individuals who meet the company's criteria. The arrangement between Wendy's and these individuals is an example of

Franchising. Franchising is a method of distributing goods and services through a licensing arrangement between the franchisor and the franchisee. Multi-level marketing businesses pay commissions to sales representatives at two or more levels. Licensing refers to an owner's authorization for another entity to use trademarked, copyrighted, or patented material for a specific activity, during a specific time period, for the profit of both parties. A partnership agreement is a written document that specifies the terms of a partnership. SOURCE: BL:003

In a communist command economy who decides how the economic questions will be answered?

Government. In communist command economies, the government is responsible for determining what will be produced, how the products will be produced, and how the products will be allocated. In market economies, individuals and businesses decide how these economic questions will be answered. A venture team is a group involved in product development. SOURCE: EC:007

Which of the following occurs when the supply of individuals who are able and willing to work diminishes:

Human resources become limited. The supply of people who are willing to work diminishes; therefore, human resources become limited. Capital goods remain unchanged. SOURCE: EC:003

Which of the following are qualities of monopolies:

High prices and low production. Monopolies are usually not allowed to exist in a private enterprise system because they can cause many problems, including high prices and low production. When a monopoly exists, there is no competition. SOURCE: EC:012

Which of the following economic resources is responsible for combining the other resources to produce goods and services:

Human resources. Human resources, which are often considered to be the most economic resource, are responsible for combining natural resources and capital goods to produce goods and services. Human resources are required, to some extent, in the production of all goods and services. Nonrenewable resources are a type of natural resource. SOURCE: EC:003

Which of the following would be done first in an environmental scan:

Identifying participants and responsibilities. The first step in conducting an environmental scan is to identify participants and their responsibilities. Every employee should participate, although some employees may have more formal duties than others. After this step has been completed, businesses can move on to carrying out scanning activities, identifying and analyzing important trends and issues, and selecting trends and issues to act on. SOURCE: NF:015

Managing information regarding copyrights and trademarks helps a company to preserve its

Identity. Managing information regarding copyrights and trademarks helps a company to preserve its identity. If a competitor tries to infringe upon this protected material, the company will be ready to stake its claim quickly. Copyrights and trademarks do not necessarily relate to inventory, correspondence, or customers. SOURCE: NF:110

Which of the following is a trend in information management:

Increased compliance laws and regulations. Now, more than ever, the government is cracking down on corporate dishonesty. Companies must adhere to an increased number of compliance laws and regulations, and an appropriate information management program is a big part of that. Other trends in information management include increased competition, an increased number of electronic documents, and a decreased number of workers in the office. SOURCE: NF:110

How does the finance function relate to company spending?

It plans and controls spending. The finance function plans and controls spending throughout the company, making sure that it stays within the budget. The accounting function produces financial reports. Finance does not refer to spending on investments only. SOURCE: FI:354

What is one way that the trend towards protecting the environment has a negative effect on many businesses?

Increases costs. Many businesses are spending large sums of money to repair the damage their operating techniques did to the environment. The trend towards protecting the environment is forcing many businesses to correct the problem and find ways of operating that will not be destructive. This trend is expensive for businesses that must now pay for past mistakes. Protecting the environment often involves reducing pollution. Promoting growth would be a positive effect. Many businesses increase prices in order to generate additional funds to use for developing ways of protecting the environment. SOURCE: NF:013

Producers respond to consumers' positive economic votes by

Increasing production. If a certain product is wanted by consumers, its production will be increased; however, if the item is not popular, its production will be stopped. Producers would not increase their production of industrial products in response to consumers' needs since industrial products are used by businesses. Classifying goods and services helps marketers select appropriate marketing activities for the particular good or service. SOURCE: EC:002

Which activities are likely to increase a firm's profit?

Increasing sales and decreasing expenses. Increasing sales and decreasing expenses are two activities likely to increase a firm's profit. Supplies are materials needed to produce a product—not an activity for increasing profit. Production is the process of producing the product. Increasing production may help to increase profit, but only if sales of the product increase. SOURCE: EC:010

Private enterprise is based on the idea that everyone is better served when

Individuals are free to set their own goals. A private enterprise system is based on the belief that when people are free to make economic choices and to set economic goals, they work harder to achieve those goals. These citizens also believe in limited government control and freedom of employment. Regular increases in prices do not necessarily mean that everyone will be better served. SOURCE: EC:009

Which of the following is a public good that is provided by the government:

Interstate highways. Public goods are goods and services that are used by all people and cannot be withheld from those who don't help to pay for them. Marketing research, automobiles, and private schools are goods and services provided by private businesses. SOURCE: EC:008

Why is a good accounting system important to a business?

It shows the business how it is doing. Accounting records provide managers with such important information as whether the business is earning a profit, what its sales revenues are, the amount of operating expenses, the cost of goods sold, return on investments, and the firm's net worth or total value. This helps managers to know when changes are necessary in order to improve the business's financial position. Keeping good accounting records can point out financial problem areas and show the rate of return on investment but cannot prevent all losses from occurring or increase the return. The accounting system does not usually contribute to the business's image. SOURCE: FI:085

Because operations managers control so much of a business's money, they must focus on

Keeping costs low. Because operations managers control so much of a business's money, they must focus on keeping costs low. Operations managers are not responsible for hiring employees, creating advertising campaigns, or generating publicity. SOURCE: OP:189

Computer database programs make it easier for businesses to manage

Large amounts of related data. Database programs are computer software applications that are used to collect and sort many types of information. Information stored in databases help businesses to organize customer lists and financial information, track products and shipments, and catalog various records, such as personnel files. Internet search engines are software programs that automatically crawl the Web looking for information pertaining to specified search terms and display a list of results. Problem-solving skills refer to a person's ability to find alternatives to achieve a desired outcome. Skills are not managed through a computer program. Databases can track customers' buying habits but cannot manage what customers will purchase. SOURCE: NF:003

ABC Specialty Wear is the only company that has written permission to use a national football team's logo on its sportswear. This is an example of a

Licensing agreement. ABC Specialty Wear's agreement with the football team is a licensing agreement. Licensing refers to an owner's authorization for another entity to use trademarked, copyrighted, or patented material for a specific activity, during a specific time period, for the profit of both parties. Product trade-name (also called dealership or exclusive distributorship) refers to a franchise arrangement based on an independent sales relationship between a franchisor and franchisee to stock and sell a specific line of goods. A sole proprietorship is a business that is owned by one person. A joint venture is an arrangement that involves two or more businesses combining complementary resources for the benefit of all parties

Overall, what does marketing allow us to do?

Live our daily lives. Overall, marketing allows us to live our daily lives since marketing is involved in almost everything we do. Limiting our spending and not buying online anymore are negative responses that may or may not have anything to do with marketing. Feeling better about shopping could be a positive side effect of marketing. SOURCE: MK:001

Running out of inventory can result in

Lost sales. Running out of inventory can result in lost sales, lowered productivity, unhappy customers, and a decrease in profits. These are known as stockout costs, and businesses try to avoid them as much as possible. Running out of inventory should not increase a business's taxes. SOURCE: OP:189

One reason that some U.S. businesses have moved some of their operations to foreign countries is to

Lower their labor costs. Globalization, which is the rapid and unimpeded flow of capital, labor, and ideas across national borders, has had both positive and negative effects on world trade. Because many developing countries have less stringent labor laws than the U.S., some U.S. based businesses have moved some of their operations (e.g., call centers) to other countries. This practice is often called outsourcing. By moving operations to developing countries, the businesses save money because they can pay laborers lower wages. A negative effect of outsourcing is that domestic workers lose jobs or job opportunities, which creates domestic discord. Currency fluctuations are a normal occurrence, and are not a primary factor when a business decides to move its operations to another country. Communication standards are a primary reason for moving business operations to another country. SOURCE: EC:104

Which of the following government actions is most likely to stimulate the economy:

Lowering tax rates. This will probably stimulate the economy because disposable income, the money people have left after paying taxes, will increase. Raising the prime interest rate, printing less money, and borrowing more money tend to depress the economy. SOURCE: EC:008

Appropriate information management saves businesses time and money by

Maintaining higher levels of productivity. Appropriate information management saves businesses time and money by maintaining higher levels of productivity. Employees can be more productive when good information management decreases information overload and "paper trails." Information management will not necessarily maintain yearly raises for employees. SOURCE: NF:110

Information management can be a challenge because

Many people don't understand what it is. Information management can be a challenge because many people don't understand what it is or what role they should play in it. Many people may want to participate in information management but just do not know how. There is often too much information to manage, something known as information overload. There is no one "right" way to approach information management. SOURCE: NF:110

A business that fails to protect its employees from unnecessary risk or health hazards on the job may be sued for

Negligence. A business might be sued for negligence if it does not take reasonable precautions to protect workers from risks or health hazards on the job. The basis of negligence is that the problems could have been easily avoided if the business had made some minor adjustments. Consequently, businesses usually try to make the workplace as safe as possible in order to avoid being sued for negligence. Misrepresentation involves making unrealistic claims about products. Libel is making false statements that harm an individual's reputation. Incompetence involves not having the skills or abilities necessary to perform satisfactorily. SOURCE: BL:001

When meeting with businesspeople from other countries, it is important to understand social differences, such as bowing, handshaking, and spatial comfort, which are often called

Non-verbal cues. Non-verbal communication (body language) involves gestures or facial expressions rather than the use of words. Because different countries have unique cultural and social behaviors, it is important for businesspeople to understand these differences when doing business in other nations. For example, a hand gesture may mean a sign of friendship in one country, but may be a sign of disrespect in another country. One country might bow as a greeting while another country uses a short handshake. In some countries, people tend to stand several feet away from each other when they are speaking, but in other countries they stand very close together when speaking with one another. By not understanding these non-verbal cues, a businessperson can send mixed messages to the person with whom s/he is meeting. Language barriers are problems related to word usage. Non-verbal cues are one element of many human behaviors. Human behaviors also encompass the use of language. SOURCE: EC:045

Offering high quality, large assortments, and free shipping are examples of

Nonprice competition. These are all examples of a business's attempting to compete on a basis other than price. Rebates are part of price competition, while price fixing is an illegal practice that results in high prices. Price competition is a type of rivalry between or among businesses that focuses on the use of price to attract scarce customer dollars. SOURCE: EC:012

With Rosita's pizza shop, financial analysis is used to

Obtain funding for supplies. With Rosita's pizza shop, financial analysis is used to obtain funding for supplies. Attracting customers is part of marketing. Overseeing a process is likely to take place within operations management, not financial analysis. And, developing recipes is part of operations management. SOURCE: EC:071

John, Robert, and Charles were college friends who wanted to start a business. John has creative ability, Robert's expertise is selling, and Charles' expertise is management. However, each has limited capital. The ideal business ownership for these young men is a

Partnership. A partnership is a form of business ownership in which the business is owned by two or more persons. Often, the purpose of forming a partnership is to combine the capital, the experience, and the abilities of the partners. A corporation is a form of business ownership owned by stockholders who have purchased stock. A franchise is an agreement between a parent company and a franchisee to distribute goods and services. A merger is the absorption of one company by another. SOURCE: BL:003

Which of the following is a disadvantage of private enterprise:

Periods of unemployment. In the United States, production levels can drop due to decreased sales. When this happens, companies may have to lay off workers and/or go out of business. Other disadvantages of private enterprise are poverty, unequal distribution of income and property, and careless use of resources. SOURCE: EC:009

Which of the following is an environmental factor that affects the performance of businesses that market products on a global level:

Political risk. The environment in which businesses operate have an effect on their performance. Many businesses market products on a global level so the political situation in different countries is an important environmental factor. Businesses often evaluate the risk of operating in certain countries based on the political stability of the government. If the government is unstable, it may be too risky for a business to operate in that country. Storage space, health coverage, and land formation are not environmental factors that affect the performance of businesses that market products on a global level. SOURCE: EC:104

A main reason that environmental scanning is important is so that businesses can be aware of

Potential threats. A main reason that environmental scanning is important is so that businesses can be aware of potential threats and opportunities. These are all too easy to miss if a business isn't aware of its surroundings. An environmental scan might include information on new products or foreign markets, but these are not the main reasons for conducting it. Most information about a competitor's internal environment would not be available to a competing business. SOURCE: NF:015

Which of the following situations involves finding an alternative resource to use in place of a nonrenewable natural resource:

Powering a motor vehicle with biodiesel instead of gasoline. A nonrenewable natural resource has the potential to become entirely depleted, and once gone, it cannot be replenished. Oil, which is used to produce gasoline, is an example of a nonrenewable natural resource. One way to conserve nonrenewable natural resources is to find alternative resources to use in their place. To conserve oil, automobile manufacturers offer vehicles that are powered by biodiesel, electricity, ethanol, or hydrogen instead of gasoline. While passing legislation to prevent the killing of endangered animals protects limited wildlife from being overused, it does not involve finding an alternative resource to use in place of a nonrenewable natural resource. Wind and the sun are both renewable natural resources. Searching for oil in new locations involves finding another source for the nonrenewable resource rather than finding an alternative resource to use in its place. SOURCE: EC:003

Alex owns a guitar, several books, a car, and a telescope. Alex's possessions are examples of

Private property. Private property is anything of value that people own. It can be business or personal property. Other examples of private property include land, jewelry, buildings, and clothing. Economic resources are the human and natural resources and capital goods used to produce goods and services. Capital goods are manufactured or constructed items that are used to produce goods and services. Equal distribution of goods and services is not possible, even in economic systems set up for that purpose. SOURCE: EC:009

Identify the term that best represents marketing's role in society.

Problem solver. Of the options given, "problem solver" is the term that best represents marketing's role in society. Marketing connects producers to customers by solving customers' problems. Pioneers lead and peacemakers make peace — with or without being involved in marketing or its role in society. SOURCE: MK:001

During the Industrial Revolution, the factory system caused

Production costs to decrease. During the Industrial Revolution, the mass production of standardized goods (usually in factories) became common. In a factory, the three types of economic resources—human resources, natural resources, and capital goods—could be combined to produce larger volumes of more standardized products in less time and less expensively than would be possible in multiple locations. As a result, production costs decreased, production levels increased, the nation's focus shifted from farming to industry, and raw materials were purchased in bulk at lower costs. SOURCE: EC:108

One reason why many small businesses develop an organizational design that requires a board of directors is because a board usually

Provides experience that increases the business's credibility. Some businesses, such as corporations that sell stock to the public, are required to have a board of directors. However, many small businesses also design the organization to require a board of directors that can provide the business with additional experience and knowledge. Board members have expertise in a variety of areas and can help the business analyze problems and make decisions. This increases the business's credibility in the community because an outside group is monitoring what the business does and providing guidance. Board members usually assume some, but not all, of the legal responsibility for the business's actions. The board does not help with the day-to-day operations of the business or evaluate the performance of the business's employees. SOURCE: EC:103

Which of the following is an example of a business using technology to improve the efficiency of its salespeople:

Providing laptop computers. Laptop computers allow salespeople to have instant access to company databases. This enables them to update information quickly and place orders on the spot. The laptop computer contains the software that generates a purchase order and forwards the order information to manufacturing, purchasing, and accounting. The salesperson does not need to return to the office to prepare paperwork but can go on to another appointment. Debit transactions, video catalogs, and ATM machines are not types of technology that improve the efficiency of salespeople. SOURCE: NF:003

Businesses can show their social responsibility by contributing to

Public interests. Social responsibility is the duty of business to contribute to the well-being of society. These contributions in the public interest may include donations to support the arts, the environment, community centers, etc. Businesses do contribute to private causes, but this is not required by social responsibility. Contributions to promotion would benefit the company, not society, and contributing to pollution would not be socially responsible. SOURCE: EC:070

Accounting is distinct from finance because its main focus is on

Record-keeping activities. Accounting is distinct from finance because its main focus is on record-keeping activities. Finance, in contrast, focuses on money management decisions. The two main decisions finance focuses on are the administration of assets and the acquisition of funds.

Government can prevent unqualified persons from operating a business by

Refusing to grant them a license. In some types of businesses, owners/operators must meet certain standards to obtain a license to operate the business. The government can refuse to grant a license to unqualified applicants. The government cannot use unfair practices such as helping competitors or raising individual taxes. The holder of a bank account has control of the account. SOURCE: EC:008

One reason why it is important for businesses to identify and respond to current business trends is to

Remain competitive. Current business trends, such as computerization and mass marketing, are constantly changing the way that companies do business. Businesses continually monitor these trends to develop new and better ways of producing products and serving customers. Businesses that fail to identify and respond to current trends may be unable to remain competitive because they are doing business the old-fashioned way when customers expect innovative techniques. Businesses do not identify and respond to current trends to control performance, encourage feedback, or improve motivation. SOURCE: NF:013

An advantage to a business of filing Chapter 11 bankruptcy is that the process allows the business to

Reorganize. There are several forms of bankruptcy and one is Chapter 11. The advantage to a business of filing Chapter 11 bankruptcy is that the process allows the business to reorganize in an attempt to keep operating. Businesses that are unable to pay their debts but think that they can become solvent by reorganizing often file Chapter 11. As a result, they have time to restructure or find additional financing to pay creditors. A business liquidates when it files Chapter 7 bankruptcy. Filing bankruptcy does not eliminate the obligation to pay taxes. As part of reorganizing, a business might sell certain assets to generate income to pay creditors. However, selling assets is not usually considered an advantage.

A business should conduct environmental scans on a continuous basis so that it can

Respond to opportunities and threats quickly. A business should conduct environmental scans on a continuous basis so that it can respond to opportunities and threats quickly. Scanning on a continuous basis will not change customers' attitudes, save money, or allow a business to control the external environment. SOURCE: NF:015

Which of the following is a measure of how well a business generates cash flow:

Return on capital. Return on capital is a measure of how well a business generates cash flow. It is a key component of managing working capital. Accounts receivable refers to money owed to the business by others. Capital structure refers to a business's mix of financing. Accounts payable refers to the money the business owes to others. SOURCE: FI:354

Which of the following is an example of nonverbal communication that might have a different meaning to business people in other parts of the world:

Shaking hands when greeting a customer. Nonverbal communication is communication that uses body language instead of words, or to support words. Body language, such as shaking hands, is not used the same way in all countries. In some cultures, shaking hands is the accepted way of greeting a customer or a friend. In other cultures, businesspeople greet each other in different ways such as bowing or nodding. Business people need to be aware of the meaning of nonverbal communication in other cultures in order to avoid being insulting or rude. Writing letters is written communication. Inviting customers to a social function and preparing an audiovisual presentation are not examples of nonverbal communication. SOURCE: EC:045

Online chats, forums, and communities that enable businesses to learn about the wants and needs of their worldwide target market have created a new form of

Social relationships. These groups are usually centered on a topic of interest to all members and make friendships possible among people who live on opposite sides of the world. They allow businesses to communicate with, and understand, people from diverse cultures. Groups are open to anyone with a computer and Internet connection, regardless of gender, culture, or class. Class systems relate to grouping people according to some standard. Gender roles refer to activities assigned to either men or women. Cultural values define the various behaviors and activities based on the beliefs of a given culture. SOURCE: EC:045

Which of the following is a situation that might make businesspeople from other countries feel uncomfortable and impact their ability to conduct business:

Standing very close to others during conversations. In some countries, it is socially accepted and appropriate for businesspeople to stand very close together when conversing. However, people from other cultures often prefer to keep more distance and feel uncomfortable when someone stands very close. These types of cultural differences often create problems for people who do business in foreign countries if they are not aware of the differences. Their reactions to certain situations, such as moving away from a customer who is standing very close, may unintentionally offend the customer and have a negative impact on business. Offering to take others to lunch or dinner, calling to schedule appointments, or wearing business-type clothing usually do not make businesspeople from other countries feel uncomfortable. SOURCE: EC:045

A manager who helps an employee count the money in a cash drawer and prepare a bank deposit is demonstrating

Technical skills. Although many managers don't perform the specific tasks, they need to understand the technical aspects of the business. They need to be able to answer questions, give directions, and solve problems. If managers have the necessary technical skills, they will be able to help employees with their jobs, such as counting money. Natural talents are aptitudes. Creativity is the ability to generate unique ideas, approaches, and solutions. Aggressive behavior is conduct based on a willingness to ignore the rights of others in order to achieve personal goals. SOURCE: SM:001

Human resources management is demonstrated in which of the following statements:

The business takes care of the responsibilities associated with having employees. Human resources management involves taking care of the responsibilities associated with having employees. Giving preferred customers a special discount is part of marketing. Including top-level managers in long-term planning is part of strategic management. And, acting on new information about a competitor can be marketing and/or operations management. SOURCE: EC:071

Which of the following examples illustrates how environmental factors are interrelated:

The economy affects what competitors are doing. The economy's effect on the competition is an example of how environmental factors are interrelated, or affecting each other. The economy's effect on banking institutions and low investor confidence's effect on financial planners are examples of how certain environmental factors impact some businesses and industries more than others. New legislation being written is an example of how environmental factors are dynamic. SOURCE: NF:015

Annika, the purchasing specialist for Dottie's Donut Shop, just located a new, less expensive sugar supplier. Dottie does not plan to lower donut prices. If Annika buys the shop's sugar from this cheaper supplier, what is likely to happen?

The profit margin for donuts will increase. If Annika reduces the materials' cost of Dottie's donuts, the profit margin for the donuts will increase, not decrease. As long as Dottie does not lower the price of donuts, using less expensive sugar will not have an impact on donut sales. SOURCE: OP:015

Which of the following is a reason that the role of human-resources management is changing:

There is greater diversity in the workforce. Greater diversity now exists in the workforce, in terms of gender, age, culture, and ability. The average employee is no longer a white male—a greater variety of backgrounds, perspectives, and needs are represented. Human-resources managers must take this diversity into account when performing their job tasks. The workforce is older than ever before. Business costs are constantly rising, and employees now place a greater emphasis on finding balance between their work and personal lives. SOURCE: HR:410

Human resources are a company's most important resources because

They control all other company resources. Human resources are a company's most important resource because they control all other company resources. That's why it's so vital to have appropriate human resources in place at all times. Human resources are not necessarily a company's most expensive or least expensive resource. SOURCE: HR:410

Why are entrepreneurs important in a private enterprise system?

They encourage the development of new products. Entrepreneurs are people who take all the risks and receive the profits from starting their own businesses. Because of entrepreneurs, the private enterprise system changes, has more new products, and uses resources more efficiently. Government keeps businesses from using deceptive advertising and from limiting competition. SOURCE: EC:009

What is one reason why the federal government awards patents to businesses that have invented new products or manufacturing processes?

To encourage research. A patent is legal protection of an invention or a process granted by government to its owners for a certain number of years. A patent gives a business the sole right to make, use, or sell its invention within that period of time. One of the reasons why the federal government awards patents is to encourage businesses to do research and continue to develop new ideas and products. If businesses have the sole right to profit from their inventions, they are more likely to continue investing money in research and development. Patents protect the business that invented the product rather than the consumer. A patent actually gives a business a monopoly on the invention for a number of years. Patents are not a method of monitoring advertising. SOURCE: BL:001

Which of the following is a reason that a U.S. company would decide to offer its products in other countries:

To expand to new, untapped markets. By offering their products in other countries, businesses are able to reach new markets to which they have not previously been able to sell their products. Using international markets as a dumping ground for obsolete, outdated products would be a short-term strategy that would eventually create a negative company image. Governments may subsidize developing countries; businesses do not. Although people in other countries may gain employment, that is not a reason for a company to offer its products in other countries. SOURCE: EC:104

A nation that exports more than it imports maintains a

Trade surplus. A trade surplus exists when a nation's exports are greater than its imports. A trade surplus increases the gross domestic product and can lead to a higher standard of living and more job opportunities. A balance of trade is the difference between the exports and imports of a nation. A trade deficit exists when imports are greater than exports. SOURCE: EC:016

Each purchase strengthens the economy by encouraging

Trade. Each purchase strengthens the economy by encouraging trade. Purchases do not necessarily encourage expansion, investment, or competition. Expansion is an action an individual firm might take to increase sales—or purchases. Either individuals or firms may invest at any time, whether or not customers buy products. In the struggle to lead a market, competition can encourage customers to buy products. SOURCE: EC:010

Lack of economic growth is a major problem for __________ economic systems.

Traditional. Members of traditional economies consume everything that they produce, so they are never able to save anything. Without any savings, they cannot invest in greater production. As a result, they are unable to raise their economic standards. Although communist economies are often behind socialist and market economies in terms of economic development, none of those three types of economies suffer as much economically as traditional systems. SOURCE: EC:007

Efficient production enables businesses to

Turn out the most products at the least cost. Producing efficiently enables businesses to be competitive by keeping their prices at or below those of competitors. This is likely to increase sales. Many businesses try to obtain advance orders for goods and services in order to make their production as efficient as possible. An accurate sales forecast helps in planning efficient production, not the reverse. SOURCE: OP:017

A manufacturer is a type of business that

Turns raw goods into useful products. The manufacturer changes the shapes or forms of raw goods so that they will be useful to consumers. Manufacturers buy raw goods from their producers and sell finished products. SOURCE: EC:070

Which one of the following groups of words best describes wants:

Unlimited, changing, and competing. Wants are considered unlimited because people always have them. People's desires change with different situations or circumstances. Wants are considered competing because people must choose which wants to satisfy at any one time. SOURCE: EC:001

A characteristic of human wants is that they are

Unlimited. In other words, when one want is satisfied, there are other wants waiting to take its place. Wants are not consistent but vary from person to person and from age group to age group. This means that your wants will change, not remain the same. Your wants are also competing. In other words, you might want more than one thing at the same time. SOURCE: EC:002

What is the government doing when it buys wheat to keep the price high enough for farmers to make a profit?

Using price supports. Price supports are assistance by government to maintain the price of a good or service to enable producers to earn a profit. Maintaining and protecting individual businesses is more important than producing more wheat. This does not industrialize the economy or help to conserve energy. SOURCE: EC:008

What are the three basic economic questions?

What products will be produced; how will products be produced; and how will products be allocated. These are questions which all economies must answer. Societies must determine what and how many goods and services to produce. They must determine the best, most efficient ways of producing goods and services, and they must decide how the goods and services will be divided among the members of their societies. SOURCE: EC:001

One of the freedoms provided to individuals by the private enterprise system is the freedom to choose

Where they will work. U.S. citizens are free to choose the kind of work they would like to do in order to make a living. They are limited by their own interests, abilities, and training. They are not, however, free to choose which taxes to pay, which laws to obey, or how their employers pay them (e.g., weekly or monthly). SOURCE: EC:009

In an overall sense, where does marketing occur?

Wherever customers are. In an overall sense, marketing occurs wherever customers are. Advertisements, stores, and trucks are part of marketing and can be present when marketing occurs. But marketing occurs where customers live, work, study, recreate, etc. SOURCE: MK:001

Over the next few years, members of Generation X and Generation Y are expected to fill many job positions vacated by retiring Baby Boomers. This is an example of a change in

Workforce demographics. As the Baby Boomers exit the workforce and members of Generation X and Generation Y fill many of the Boomers' old jobs, the makeup of the workforce will change. Since demographics consist of information used to describe a population, we can say that workforce demographics will change when the Baby Boomer Generation retires. Nonrenewable resources are natural resources that may become entirely depleted and cannot be replenished after use. Automated processes are activities that are completed by machines versus humans. Capital goods are manufactured or constructed items that are used in the production of goods and services.

Which of the following factors has aided the most in creating a global business environment:

Technology. Technologies of all types have enabled global markets to function effectively. As examples, refrigeration has enabled perishable products to be transported between countries; and computers have facilitated communication and exchange of payments. Government, culture, and exchange rates have both facilitated and hampered global trade. SOURCE: EC:104

An American businessperson in London was offered a "cuppa" by the company's receptionist. The businessperson did not know that the receptionist was offering a cup of tea. This is an example of

A language barrier. Culture influences verbal communication, even in countries that basically speak the same language. In those countries, different words for objects and different modes of expressing ideas cause misunderstandings and may be language barriers. Economic differences are differences in economic status. A business subculture refers to a group of people who share similar characteristics within a larger business context. Business people who do not understand certain language terms are uninformed rather than uneducated. SOURCE: EC:045

What role does utility play in the implementation of the marketing concept?

A satisfaction gauge. Both utility and the marketing concept consider the consumer's point of view about a product. In the implementation of the marketing concept, utility functions as a gauge of the consumer's satisfaction. Utility is used as a measurement tool—not as a payment method, a cost-saving tool, or a delivery process.

The U.S. produces widgets faster and cheaper than Switzerland. In this example, the U.S. has a(n) __________ advantage.

Absolute. The uneven distribution of productive resources enables one country to be able to produce a good or service more cheaply than another country can. For example, efficient factories and skilled labor may enable the United States to produce office machines more cheaply than they can be produced in Malaysia. A comparative advantage is the benefit that a country obtains from specializing in and producing goods and services at which it is relatively most efficient. Advantages usually are not predictable. Constructive advantage is not a widely used term to describe concepts related to international trade. SOURCE: EC:016

TeJuan's Fishing Shack demonstrates effective information management by

Accessing a list of fishing equipment appropriate for a particular customer. When TeJuan's Fishing Shack accesses a list of fishing equipment appropriate for a particular customer, the business is demonstrating effective information management. Removing wasted materials from a process is part of operations management. Promoting new fishing equipment is part of marketing. Hiring fishing experts to explain how to use the goods offered is part of marketing and/or human resources management. SOURCE: EC:071

Changing a good's form involves which of the following:

Adding a new feature to the good. Changing a good's form involves adding a new feature to the good. Getting the good to the retailer is part of place utility. Making sure the good is available early is part of time utility. And, providing an easy way to buy the good is part of possession utility. SOURCE: EC:004

Why should a business practice good ethics?

An ethical business contributes toward its own success. Businesses that practice good ethics usually build positive public images and attract long-term customers; therefore, a business that invests in practicing good ethics is making an important investment into itself. An unethical business, however, will not necessarily go bankrupt or be fined by the government. An ethical business will not necessarily make more money than all its competitors. SOURCE: EC:106

Which of the following is a benefit of international trade:

An improved standard of living. International trade provides important consumer goods to countries where these products are not available or are in short supply. Making these goods available to all countries improves the standard of living throughout the world. An increased trade deficit, higher prices for goods and services, and stronger trade restrictions are not benefits of international trade. SOURCE: EC:016

Three primary factors that affect the organizational structure of a business include interpersonal relationships, tasks, and

Authority. The organizational structure is the way the business is set up (designed) to carry out its work. Many factors influence the way that the business carries out its work—the way it functions. The ways in which the employees relate to or communicate with one another (interpersonal relationships) and the type of work (tasks) that needs to be done affects the organizational structure. Authority, which also influences the organizational structure, is the power a person has to influence or control other people's behavior. Some organizational structures have centralized authority in which one person or a few people make business decisions. Other businesses have decentralized authority, a situation in which employees have the authority to make decisions and hold a high degree of control over their work. An injunction is a court order forbidding an action. Initiative is a personal trait that involves a willingness to act without being told to do so. Attrition is the natural reduction in numbers of employees due to job changes, death, etc. SOURCE: EC:103

A bank denies a business owner's application for credit saying, "We feel that you would be unable to make the monthly payments because of your other debts." What financial report did the bank review?

Balance sheet. A balance sheet is a financial statement that captures the financial condition of the business at that particular moment. This includes the liabilities, or debts, that the business owes. The bank found that the owner's current liabilities were too high to be extended. Budgets show estimated income and expenses but not what is currently owed. Income statements would include the income and expenses for a specific period of time but would not include outstanding debts. SOURCE: FI:085

In economics, the term capital goods includes

Buildings and equipment. Capital goods include all materials used in the production of goods and services. In fact, any manufactured or constructed item that is used to produce goods and services is considered a capital good. Labor and management are considered human resources. Mental and physical work are the types of work done by human resources. Trees and water are examples of natural resources. SOURCE: EC:001

The growth of e-commerce is changing the way companies do business by allowing them to

Be accessible to customers at all times. E-commerce is a business trend that is expanding rapidly because of the Internet and the World Wide Web. E-commerce is changing the way companies do business because it allows them to be accessible to customers at all times. Customers who have access to a computer and the Internet can visit a business's web site and obtain information or shop online at any time of the day or night. As a result, more and more businesses are adding web sites to make their services and products available to customers at all times. The benefit to a business is often increased sales. The growth of e-commerce is increasing competition, which means that businesses often reduce prices and offer additional services to attract customers. Businesses do not use e-commerce to communicate with similar organizations. SOURCE: NF:013

Jake wanted to run his own business but was unsure that he had adequate business skills to be successful. Which type of business would give Jake the help he needs?

Business-format franchise. A business-format franchise is a franchise agreement in which the franchisee must operate under the trade name of the parent company that provides continuous assistance in setting up and operating the business. This kind of business arrangement would give Jake more assistance than any of the other alternatives. A sole proprietorship is a form of business ownership in which the business is owned by one person who takes all of the risk and responsibility. A private corporation is a type of corporation owned by a few people that does not offer its shares for sale to the public. A product trade-name franchise is based on an independent sales relationship between a franchisor and a franchisee to stock and sell a specific line of goods. SOURCE: BL:003

How does appropriate information management affect a business's relationship with its customers?

Businesses serve customers more effectively. Managing information appropriately helps businesses focus on the important task of serving customers more effectively which, in turn, may help lead to higher profits, although it is not a guarantee. A business's financial decisions may or may not have to do with serving customers. SOURCE: NF:110

When marketers provide information about an available product, consumers are more likely to

Buy the product. When marketers provide information about an available product, consumers are more likely to buy the product. Providing information doesn't directly increase the number of questions asked during the buying/purchasing experience. And, providing information doesn't make payment plans and layaway requests more likely. SOURCE: EC:004

How does marketing-research data help a business's production planning?

By identifying consumers' needs and wants. A wide variety of marketing-research data is available from libraries, government agencies, and trade publications. Or, the business can conduct its own research. The data can help the business to produce products that consumers need or want and are willing to buy. Determining how products will be produced is a planning step that involves deciding what equipment will be needed, the number of workers, and the time required. Identifying the resources needed in production is part of the purchasing function. Setting the timetable to be used in production is part of scheduling. SOURCE: OP:017

Which of the following is a key component of managing working capital:

Cash conversion cycle. The cash conversion cycle is a key component of managing working capital. It refers to how long a business's money is "tied up" between purchasing raw materials and receiving cash from sales. Financing is funding a business activity or project through debt, equity, or venture capital. Capital budgeting is determining which projects a business should invest in. Capital structure refers to a business's mix of financing. SOURCE: FI:354

To maintain its current customer base and attract new markets, the KMV Company lowered the prices of some of its products. What external factor most likely influenced this action?

Changes in consumer spending. Phases of the business cycle affect consumers' spending habits. During the contraction phase, unemployment tends to increase, so consumers have less money to spend on goods and services. Under the right conditions, a business might be able to lower its prices on some of its popular items, if operating costs do not increase and the business can maintain a reasonable profit. By lowering prices, the business may be able to keep it customers and attract new price-oriented markets. Production line improvements are internal factors that may prompt a business to lower its selling prices. As production becomes more efficient, production costs tend to decrease, making it possible to lower selling prices and still earn a profit. Providing employees with effective training helps to improve productivity. SOURCE: EC:107

A business's philanthropic responsibility involves its contributions to

Charity. A business's philanthropic responsibility involves its contributions to charity. Philanthropic responsibility is part of a business's overall social responsibility. It does not relate to political campaigns, scientific research, or the economy. SOURCE: EC:106

Levels of inflation and unemployment are factors that affect __________ in the world market.

Competition. International competition is the rivalry between nations to attract a share of the world market. Levels of inflation and unemployment are factors that make the products of nations more or less competitive with each other. Communication between countries is not affected by inflation and unemployment. Specialization is making the best use of resources in the production of goods and services. Satisfaction is a state of contentment. SOURCE: EC:016

The overall purpose of accounting is to

Control the finances of the business. An accounting system provides a business with accurate financial information with which it can maintain control of its finances. Keeping track of sales, compiling expenses, and creating reports are all activities of the accounting system that help a business to control its finances. SOURCE: FI:085

Carefully selecting goods or services to sell is an example of handling business risks by __________ the risk.

Controlling. Making careful, wise choices of goods or services to sell is one way management can prevent or control risks. Avoiding risk means not being exposed to risk at all. Transferring risk is passing the risk to someone else. Unfortunately, risks are part of doing business and cannot be bypassed. SOURCE: EC:011

One of the benefits of production to consumers is that production

Creates form utility. One of the benefits of production is that it creates form utility—usefulness created by altering or changing the form or shape of a good to make it more useful to the consumer or user. Without production, many resources would be of little use to consumers. All of the other alternatives are benefits of production to businesses. SOURCE: OP:017

One way that competition helps to build a prosperous society is by

Creating new jobs. Competition helps to create new businesses which make jobs available to a lot of people. Every year, more and more businesses open and employ thousands of people. This leads to a prosperous society in which people have jobs, earn an income, and spend money for more goods and services. Although small businesses may be replaced by large ones as a result of competition, such changes in the marketplace don't necessarily lead to a prosperous society. Government legislation has been created to regulate competition, but it does not necessarily lead to a prosperous society, either. Increasing the money supply is unrelated to competition. SOURCE: EC:012

A wholesale distributor would like to track its customers geographically. Which software application would be most effective?

Database. A database is a collection (or file) of related information about a specific topic. Many businesses collect information about their customers and store this information in computer databases. Then, businesses can access this information at any time for a variety of reasons, such as tracking customers geographically. Spreadsheet software is used to organize, calculate, and analyze numerical data. Word-processing software is used to create text documents. The Internet is not a software application program. SOURCE: NF:003

A country with a weak currency value tends to

Decrease its imports and increase its exports. A country with a weak currency must pay more to countries with strong currency values to purchase necessary goods and services. Because it is more expensive to import goods, a country with a weak currency tends to decrease its imports and increase its exports. Exports increase because nations possessing a strong currency can obtain more products at a cheaper price from the country with the weak currency. Trade centers are offices and display rooms set up by a government in foreign cities and are used to encourage international trade. Governments do not depend only on trade centers to promote international trade and do not necessarily use the centers to manage the flow of goods. When certain economic and political events occur, a country's currency value can drop dramatically. When this happens, consumer confidence is often reduced (e.g., fewer tourists, less investment). SOURCE: EC:016

Which of the following is an example of increased financial risk for a company with poor business ethics:

Decreased company value. An increased financial risk for a company with poor business ethics is decreased company value. An unethical company loses sales, and its stock decreases in value. This causes a decrease in the overall company value. Unethical companies also suffer from decreased productivity. A company with poor business ethics does not have decreased labor costs. SOURCE: EC:106

Which of the following is a characteristic of the organic organizational business structure:

Delegation emphasis. The organizational business structure is the way a company sets up its workflow. Primary characteristics of the organic organizational business structure include sharing (decentralized) authority; delegating responsibility among employees; and cultivating a broad range of job skills and knowledge (de-specialization) among workers. The advantage of the organic organizational business structure is that it provides the company with a great deal of flexibility. SOURCE: EC:103

What type of trend are businesses considering when they analyze where customers live and their ethnic backgrounds?

Demographic. Demographic trends refer to the physical and social characteristics of a population. Where people live and their ethnic backgrounds are demographic characteristics. For example, there is a growing trend towards urbanization, which means that more and more people are living in cities rather than in rural areas. Also, the population of many areas is becoming more multicultural, or made up of many different ethnic groups. Businesses consider demographic trends because they realize that changes in the population have an effect on how they market their goods and services to customers. Although where customers live may affect the environment, it's not an environmental trend. Likewise, where customers live can affect their access to technology; however, it is not a technical trend. Cultural trends would involve long-term changes to people's values and beliefs. They do not relate to the ages of people.

In what way might a human resources manager be involved in employee benefits?

Determining eligibility and costs of benefits. A human resources manager might be involved in employee benefits by developing a benefits plan and determining eligibility and costs for employees. An HR manager would not be responsible for selecting an employee's personal plan options, collecting insurance payments from employees, or choosing an employee's vacation days. SOURCE: HR:410

After a company's training needs are determined, what is the next step in training and development?

Determining what training resources are available. After a company's training needs are determined, HR or other managers will determine what training resources are available, such as who will conduct the training and what materials will be used. HR management may also manage employee performances, keep records for personnel files, and dismiss employees who are not up to standard, but none of these is the next step after determining training needs. SOURCE: HR:410

Which management function is described in the following situation: James Crane has created a team atmosphere among the members of his sales department. When the team exceeded their monthly sales goal, James rewarded them with a celebratory dinner out and a five-percent bonus.

Directing. Directing is the management function of providing guidance to workers and work projects. Part of directing involves motivating and leading workers to accomplish the business's goals. Managers use their skills to develop a team spirit among employees, and they motivate employees by rewarding them for their hard work. Controlling is the management function that monitors the work effort. Planning is the management function of deciding what will be done and how it will be accomplished. Organizing is the management function of setting up the way the business's work will be done. SOURCE: SM:001

Which of the following are examples of middle-management job titles:

District manager, department head, and regional sales manager. Middle-level management is made up of managers who report to top-level management and who have supervisors who report to them. President, senior vice president, and chief executive officer are examples of top-level management positions. Collections supervisor, crew chief, production supervisor, floor supervisor, area supervisor, and section manager are examples of first-line, or supervisory, management positions. SOURCE: SM:001

Companies that operate at the international level should be aware of political factors that affect trade, such as civil unrest or

Embargoes. An embargo is an action that suspends all import-export trade with another country. Most government-imposed embargoes are used for political reasons or during hostilities. Currency (exchange) rates, business cycles, and competitors are economic factors, which are often affected by political factors. SOURCE: EC:104

Labor-union negotiations are part of which HR management activity?

Employee relations. Labor-union relations and negotiations are part of the HR management activity of employee relations. Staffing involves making sure human resources needs are filled. Training and development involves making sure employees are productive and knowledgeable. Compensation and benefits involves making sure employees get paid. SOURCE: HR:410

Which of the following factors affecting the business environment is represented by the business's location:

Environmental. Access to raw materials, availability of natural resources, amount of pollution, and a business's location are examples of environmental factors affecting the business environment. Cultural factors involve customers' values, preferences, beliefs, etc. Economic factors relate to how people generate revenue to obtain desired goods and services. Government stability and laws are political factors that operate in the business environment. SOURCE: EC:105

According to the marketing concept, which option demonstrates customer orientation?

Finding out what a buyer wants. According to the marketing concept, customer orientation is finding out what a buyer wants and providing it for him/her. Convincing a buyer to buy could be part of the selling process. Researching a firm's competitors could be part of the planning process. Advertising the features of a product could be part of promotion. SOURCE: MK:001

The way in which an economic system answers the basic economic questions depends upon the country's

Government. Each economic system must operate within the laws of the country. In some countries, government not only runs the country but also makes economic decisions. In other countries, government runs the country and allows the people to make their own economic decisions. Supply, demand, and resources aid in determining the answers to economic questions but only within the laws of the country. SOURCE: EC:007

Which of the following is the best action for businesses to take in order to adapt to changing markets:

Implement innovative strategies and ideas. Businesses need to be proactive when markets are changing. Sticking with the way things have always been done and protecting core products will hamper a business's ability to grow and succeed. When markets are changing, businesses need to increase their research and development investments to help them make needed changes. By focusing its efforts on the business's product with the highest profit is questionable when markets are changing since what the market currently likes may change. If that happens, the business's success is in doubt. SOURCE: EC:107

A manager studies the business's previous sales statistics as well as the sales forecast before making purchasing decisions. What type of resource is the manager using?

Information. Information is knowledge, facts, or data, and it is an important resource for a business. Sales statistics are a type of information. A sales forecast is a prediction of what a firm's sales will be during a specific future time period using a certain marketing plan. Financial resources are all the sources of money available to the business. Material resources are equipment and supplies used by businesses in their operation. Human resources are people who work to produce goods or services. SOURCE: SM:001

A clothing manufacturer checks one pair of pants out of every shipment to ensure the quality of its product. This process is known as quality

Inspection. Checking a sample item for defects after it has already been produced is part of a process known as quality inspection. Quality assurance is a process businesses use to prevent defective products from being created, not just to eliminate or correct them after they've already been produced. Quality guarantee and quality delivery are not traditional terms used in operations or quality control. SOURCE: OP:189

What type of property is a business protecting when it registers its trademark?

Intellectual. Many businesses own both tangible and intangible property. Intellectual is a type of intangible property because it is not capable of being detected through the senses. Examples of intellectual property include trademarks and trade names such as Xerox and M&M's. Businesses usually register their trademarks in order to legally protect them from being used or copied by other businesses. Tangible property is capable of being touched, smelled, tasted, seen, or heard, such as office equipment. Statutory and administrative are not types of property.

Which of the following financial institutions was established after World War II to facilitate global economic growth:

International Monetary Fund (IMF). The IMF was established after World War II to stabilize exchange rates and facilitate the flow of money among countries. By doing so, countries around the world could trade and invest in other nations without worrying quite so much about the value of their currencies. The United Nations (UN), the Federal Trade Commission (FTC), and multinational corporations (MNCs) are not financial institutions. Also established after World War II, the UN facilitates international cooperation, social progress, human rights, and world peace. The FTC is a government regulatory agency that administers and enforces antitrust laws to prevent price fixing and to prohibit unfair competitive practices. MNCs are businesses that have factories and/or businesses located abroad. SOURCE: EC:108

A business suddenly moves its operations to a new town, leaving its current employees jobless. Its reason for taking this action, which some consider unethical, might be that the action

Is not illegal. The business's reason for taking this action would most likely be that the action is not illegal. In addition, it probably cuts costs and benefits the company. It does not, however, benefit the community where the jobs are lost—it hurts that community and those employees. The business would not defend itself by saying the action was taken by unethical employees—in doing so, it would admit it made a mistake. SOURCE: EC:106

Why is production important to businesses?

It creates goods and services businesses can sell. Production is important to businesses because without production, businesses would have nothing to sell. All businesses must have products to sell in order to remain in business. Businesses must control production costs so that they do not have to charge higher prices than competitors. Marketing research, not production, informs businesses about consumers' wants and needs. Only if production is efficient does it prevent businesses from wasting resources. SOURCE: OP:017

In recent years, the employment of __________ workers has significantly increased.

Knowledge. A knowledge worker is typically an individual who obtains formal and/or advanced schooling in a specialized subject and then uses his/her understanding of this subject area in the workplace. Knowledge workers are valued for their ability to interpret and use specialized information on the job. Examples of knowledge workers include doctors, nurses, engineers, scientists, and information technology professionals. The number of knowledge workers in our economy has significantly increased in recent years and is expected to continue rising in the future. The number of agricultural, manufacturing, and assembly line workers has declined in recent years. SOURCE: EC:108

One internal factor that affects the business environment is

Management style. The business culture is influenced by attitudes and actions of all employees, including the managers. Management style, which is how an individual approaches the task of supervising, affects the internal business environment and the way employees work and interact with one another. For example, authoritarian managers prefer to exercise a high degree of control over their subordinates. This often has a negative effect on the work environment because the employees do not feel they have control over their work. On the other hand, democratic managers tend to exercise a moderate degree of control over employees. Democratic managers tend to involve employees in the decision-making and problem-solving processes. This management style tends to foster mutual respect among managers and staff members, a sense of pride and control over the work effort, and creativity in the work environment. The business cycle, industry trends, and exchange rates are external factors that affect the business environment. SOURCE: EC:105

Formal relationships and a distinctive chain of command are characteristics of the _________ organizational business structure.

Mechanistic. The organizational business structure is the way that a company establishes its workflow. When the company requires employees to follow specific procedures to complete all its business activities, it is using the mechanistic organizational business structure. The characteristics of the mechanistic organizational business structure include formal interpersonal relationships, specialization of labor, and a centralized authority with a distinctive chain of command. The organic model is a decentralized, informal organizational business structure. Imperial is a fictitious term. SOURCE: EC:103

Using a stream to supply water to a field in order to grow crops is an example of using

Natural resources. Natural resources are found in nature and are used to produce goods and services. Human resources are the people who work to produce goods or services. Capital goods are all manufactured or constructed items that are used to produce goods or services. Nonrenewable resources are natural resources that may become entirely depleted. Nonrenewable resources cannot be replenished after use. Water is not a nonrenewable resource. SOURCE: EC:003

The finance function would definitely be involved in a decision regarding

New business projects and strategies. The finance function would definitely be involved in a decision regarding new business projects and strategies. It is important for a business's financial managers to help top management with planning. Marketing involves decisions about public relations, publicity, and personal selling. The human resources department aids in the hiring process. SOURCE: FI:354

One way that competition benefits business is by encouraging the creation of

New companies. Competition encourages new businesses to enter the marketplace. When a product is popular and successful, others recognize the demand and develop similar products in order to compete. The ongoing competition leads to the creation of new products and new companies. Businesses do not benefit from more regulations. Competition usually encourages the creation of businesses that are similar or related to successful, existing firms. Many resources are limited, which means that more cannot be created. SOURCE: EC:012

Which of the following demonstrates the interrelationship among primary business activities:

One business activity changes, so the others must adjust in response. Since the primary business activities are interrelated, when one business activity changes, the others must adjust in response. Changes in the products introduced, changes in specific employee roles, and changes in business strategies/tactics do not represent the interrelationship of business activities overall. They represent smaller changes that take place within specific business activities. SOURCE: EC:071

What management function is being described in the following situation: David Thomas, a top-level manager, identifies jobs to be performed, assigns responsibility for them, establishes departments to handle the jobs, and determines how many and which employees mid-level managers will supervise.

Organizing. Organizing is the management function of setting up the way the business's work will be done. Directing is the management function of providing guidance to workers and work projects. Controlling is the management function that monitors the work effort. Planning is the management function of deciding what will be done and how it will be accomplished. SOURCE: SM:001

One way that technological innovation has changed business is by decreasing the use of

Paper forms. Technological innovation is greatly reducing the need for paper forms because much of the information that previously was stored and transmitted on paper is now being sent by computer. Businesses often send e-mails rather than letters or printed documents. Various types of disks store vast amounts of data that once were housed in file cabinets. Computerized invoices enable businesses to send bills and receive payment without the need for printed forms. As technology continues to advance, the need for paper forms will continue to decrease. Technological innovation has increased the use of skilled workers. Technological innovation has not decreased the use of phone systems and fax machines for all businesses. SOURCE: NF:003

In the late 1800s, market domination by a small number of extremely large, powerful companies led to the

Passage of antitrust laws. In the late 1800s (during the Railroad Era), the nation followed a laissez-faire system of governance. This means that the government did not interfere with the economy. Instead, it allowed businesses to do what they wanted and needed to do. As a result, a small number of extremely large, powerful companies took over the market—controlling product prices and preventing other businesses from competing with them. Consumers and smaller businesses protested against the laissez-faire system that allowed these monopolies to develop. In response, the government passed antitrust laws to prevent people and companies from taking any actions to restrain free trade and competition in the marketplace. The specialization of labor developed during the Industrial Revolution. Labor unions developed during the Assembly Line Era. SOURCE: EC:108

Which of the following will foster a business's ability to adapt to changing markets:

Proactive management. To thrive and grow, businesses must be willing to accept and adapt to changes in the marketplace. This requires a proactive attitude by management, which involves looking for new market opportunities and taking quick action to accommodate trends. Reactive management involves taking action after an occurrence. Authoritarian management (rather than leadership) is a management style in which managers prefer to exercise a high degree of control over their subordinates. Conservative leaders tend to favor tradition and shy away from drastic change. SOURCE: EC:107

Franco's Bread Shop is introducing a new type of sandwich bread to the community this week. Which of the following describes the business activity the bread shop is likely involved in:

Promoting the new bread through advertising. Since Franco's Bread Shop is introducing a new type of sandwich bread to the community this week, the bread shop is now performing the business activity of marketing by promoting the new bread through advertising. Collecting information and developing a system for storing information are both part of information management. (Collecting information can be part of marketing, too.) Planning for long-term results can be part of marketing and/or strategic management. SOURCE: EC:071

Which of the following is a marketing activity:

Promoting. Promoting is a marketing activity, along with planning, pricing, and distributing. Leading could be a person's customary inclination. Balancing could be used during pricing to weigh the customer's view of value with the firm's objectives. Committing could describe what a company should do to make sure that everyone is part of marketing, from the top down. SOURCE: MK:001

One reason a physicians' practice might form a partnership as an LLP is to

Protect innocent partners from the malpractice of another partner. LLPs are used primarily by professionals such as doctors, lawyers, and accountants. Because they provide limited liability, innocent partners are protected from loss if another partner is sued. Most LLPs are required to pay the state government annual fees, and each partner (member) must carry malpractice insurance. An LLP does not offer stock and, therefore, cannot pay dividends. Licensing rights are not sold by LLPs to the general public. Members of LLPs have limited liability, not unlimited liability. SOURCE: BL:003

Businesses can protect themselves from the risk associated with lost shipments by

Purchasing transportation insurance. A business can buy transportation insurance to cover the risk of loss or damage while goods are in transit or being stored. Selecting resale items carefully helps to protect the business from economic risks such as changes in customer demand. Training receiving personnel and inspecting shipments of goods can help prevent losses after shipments have been delivered. SOURCE: EC:011

Which of the following is a way to evaluate supplier performance after the purchased goods or services have been delivered:

Review the invoice. One way to evaluate supplier performance after the purchased goods or services have been delivered is to review the invoice. By reviewing the invoice, a purchasing specialist can determine whether the supplier charged the agreed upon price. A purchasing specialist should contact the supplier's references, visit the supplier's plant, and/or check the supplier's credentials before doing business with that supplier. SOURCE: OP:015

If expenses are greater than income, there's no

Reward. If expenses are greater than income, there's no reward because profit is what's left over after subtracting expenses from income. Sales, risks, and guarantees are not directly affected by expenses that are greater than income. SOURCE: EC:010

As the use of information-management systems continues to grow, it is important for businesses to be concerned with their customers'

Rights to privacy. More and more businesses are using information-management systems to collect personal information about customers. What businesses do with this information is important because they risk violating their customers' rights to privacy. Businesses need to protect their customers' rights to privacy because customers who feel that businesses have misused their private information may stop buying from those businesses or go so far as to take legal action. Customers' access to credit, level of service, or need for information are not affected by a business's use of a marketing information system.

Why is routing an important production activity?

Routing establishes the production path of inputs. Routing is the production activity that determines the sequence for the steps in the production process. It establishes the path that inputs take as they move through the conversion process to become salable products. Scheduling is the production activity that establishes a timetable for production. Dispatching is the production activity that issues orders for production to start. Follow-up makes sure production was carried out according to plan and that the products produced met company standards. SOURCE: OP:017

Complying with environmental laws is part of which operations activity?

Safety and security. Complying with environmental laws is part of safety and security. Operations managers are responsible for keeping employees and customers safe, as well as for protecting the environment. Logistics refers to managing the flow of goods and services from production to consumption. Purchasing is the buying of goods and services for a business. Inventory control is tracking the amount, the kind, and the value of inventory that a business has on hand. SOURCE: OP:189

A business is planning a sale and needs to know what sales were for a particular weekend in the previous year. Which of the following accounting records would provide this information:

Sales journal. The sales journal—either a special book or computer software—records daily receipts and would provide the daily sales figures the business needs. A disbursement journal records daily expenditures. Income statements and bank statements would show total revenues but not accurate figures for specific days. SOURCE: FI:085

Consumers are typically most willing to pay more for goods and services that bring them greater

Satisfaction. Consumers are typically most willing to pay more for goods and services that bring them greater satisfaction. On the other hand, goods and services that give consumers less satisfaction are usually less expensive. While some consumers are willing to pay more for goods and services that will make them popular, the amount of satisfaction that the good or service brings usually has a greater impact on the good's or service's purchase price. Consumers look for ways to minimize their opportunity costs and trade-offs, not maximize them. SOURCE: EC:001

To discover a product's level of utility, marketers measure the consumer's

Satisfaction. To discover a product's level of utility, marketers measure the consumer's satisfaction. The consumer's perspective, attitude, or desire may affect his/her purchase decision—but marketers measure the satisfaction actually received. SOURCE: EC:004

One reason that businesses use a matrix organizational design is to

Share human resources. The matrix organizational structure involves integrated departmental functions with product or project orientation. For example, a technology specialist, a marketing researcher, a financial advisor, and a manufacturing line supervisor are members of different departments but often work together to develop a product or improve a process. The advantage to businesses of using this organizational structure is that the business is applying its resources efficiently because a representative from each of the major departments provides a unique set of skills and knowledge to achieve the business's goals. Often, workers have two or more supervisors in the matrix organizational design. The matrix organizational design may improve the business's overall efficiency, but it does not always improve an individual's productivity. Departmental organizational design segments employees by their areas of expertise (e.g., accounting, sales, and production). Policies and procedures are developed to standardize various business activities and tasks in all types of organizational designs. SOURCE: EC:103

Government owns the basic means of production but there is some private ownership of businesses under

Socialism. Socialism is an economy in which the government owns part of the means of production, but there is some private ownership of business as well. Communism is a command economic system in which the government is in control of the economic system, and there is no private ownership of the means of production and distribution. Capitalism is a free market economic system in which individuals and groups, rather than government, own the means of production and distribution. An entrepreneur is a person who owns and operates his/her own business. SOURCE: EC:007

Retailing takes place whenever goods are

Sold to the ultimate consumer. Retailing is not simply the exchange of goods or offering goods for sale. Retailing occurs only when goods are sold to those who will use them, and it may occur in the consumer's home, over the telephone, or in a variety of ways other than in a retail establishment. SOURCE: EC:070

Gross profit shows business owners the difference between what they've

Spent and received. Gross profit shows business owners the difference between what they've spent (in the cost of goods) and received (from selling the good). It does not show the difference between what they've paid and risked, received and billed, or estimated and invoiced. Money paid is an expense, while money risked is an investment. There is no applicable term for the difference between the two. In a firm's accounting department, money received is compared to the money billed. If receivables don't match billings, the accounting department must figure out why. Accounting departments also handle invoicing for work completed. Estimates are guesses given before work takes place. SOURCE: EC:010

Which change provides the most time utility for a consumer?

Staying open for business on the weekend. Staying open for business on the weekend provides the most time utility for a consumer because the consumer can shop at a convenient time. Of course, a consumer may decide to shop for a product in the morning, if s/he so chooses. Also, consumers receive no direct time utility from a marketer's arrival time at a trade show—nor from a marketer's (or consumer's) request for early delivery of a product. SOURCE: EC:004

An important factor that has a significant effect on the general business environment is

Technology. The general business environment is the overall environment that has an impact on most businesses. An important factor that has a significant effect on the general business environment is technology. Advances in technology change the way most companies do business, regardless of size and industry. To remain competitive and successful, businesses usually need to keep up with new technology. Geography, reputation, and organization are not factors that have a significant effect on the general business environment.

Which of the following is an example of a demographic trend:

The aging of the population. The aging of the population is a demographic trend since it refers to demographic data (age). Shifting political climates is a governmental or political trend. Rising interest rates is an economic trend. A concern for fitness and health is a social/cultural attitude. SOURCE: NF:015

To reduce the time, effort, and cost needed to produce its Model T cars, the Ford Motor Company developed

The assembly line. The assembly line system of production, which was developed by the Ford Motor Company in 1913, is a production method in which the product moves past workers who each do one assigned production task. By bringing the product on an assembly line to workers who each perform one specific task, Ford was able to reduce the time, effort, and cost needed to produce its cars. Although labor unions formed during the Assembly Line Era, Ford did not develop them. The factory system was developed during the Industrial Revolution—long before the Ford Motor Company was established. Economic utilities include form utility, place utility, time utility, and possession utility. Although Ford created utility (usefulness) for its customers, it did not create these economic utilities to reduce the time, effort, and cost needed to produce its products. SOURCE: EC:108

A socially responsible business will attempt to give customers

The best products at the best prices. A socially responsible business will attempt to operate in such a way as to make this possible. Producing lower quality products to sell at reduced prices may harm the image of the business. Producing high-quality products to sell at high prices will limit the business's market. Producing the best products without regard to their cost will eventually lead to financial ruin. SOURCE: EC:070

Which of the following situations would most likely indicate the need to adapt to changes in the business environment:

The supply of materials used in manufacturing a product has decreased. Businesses must be alert to changes occurring in their environments so that they can be proactive in making changes rather than being reactive once changes have taken place. A reduction in the supply of materials used in manufacturing the business's products indicates that the business will be paying higher prices for the materials, or the business should find substitute materials to replace those currently used. Stable demand and little employee turnover indicate stability and would not require changes. The business may or may not need to make adjustments if the number of their competitors decreases. SOURCE: EC:107

Which of the following is a detail that a buyer should know prior to placing an order for raw materials?

Whether the company has storage space for the raw materials. A buyer needs to know whether the company has storage space for the raw materials. If the company does not have space, then either the buyer needs to postpone her/his purchase or locate space to store the materials. The purchasing specialist doesn't need to know how the finished product will be marketed, which employees will be converting the raw materials into finished products, or who will be purchasing the finished products. SOURCE: OP:015

Jeremiah purchases sterling silver necklaces and bracelets from Native American artisans and sells the items to jewelry stores and gift shops. What kind of buyer is Jeremiah?

Wholesale. Jeremiah is a wholesale buyer, because he purchases goods from manufacturers to resell to retailers. Retail buyers purchase goods from wholesalers or manufacturers to resell to customers. Industrial buyers purchase raw materials or components for transformation and sophisticated machinery and equipment for business use. Purchasing specialists who buy for business use, buy goods and services for internal use by her/his own company. SOURCE: OP:015

If a good or service is scarce, consumers will usually be

Willing to pay money to get it. A good or service is considered scarce when not everyone can have as much of it as desired. This makes consumers willing to pay for the item to obtain it. Since scarce items may be hard to locate, consumers may be more interested in owning them and willing to buy them. SOURCE: EC:002

Most businesses put their greatest competitive efforts into competing

With direct competitors. Direct competition is competition between or among businesses that offer similar types of goods or services. They are the easiest for a firm to identify. Whether a business puts most of its efforts into competing locally or nationally would depend on the particular business. SOURCE: EC:012